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Started By
Message
House Construction Agreement and Deposit
Posted on 1/27/14 at 11:53 am
Posted on 1/27/14 at 11:53 am
I am about to start building a house. The contractor that we selected has a stellar reputation in the area and just completed a house for a friend in the neighborhood. I know that he is very honest and competent.
One thing has me concerned. He is asking for a deposit of $30k and in the agreement, he states that this is non-refundable.
Does this mean that by no means will he ever have to refund the money? What is he dies or goes nuts or doesn't build the house correctly? Shouldn't there be some language in the contract that allows me to get my money back?
I have looked at sample agreements online and there is nothing specific. It just says if you have a dispute, you go to arbitration.
Does anyone have any advice of how I can protect myself here?
Thanks in advance.
One thing has me concerned. He is asking for a deposit of $30k and in the agreement, he states that this is non-refundable.
Does this mean that by no means will he ever have to refund the money? What is he dies or goes nuts or doesn't build the house correctly? Shouldn't there be some language in the contract that allows me to get my money back?
I have looked at sample agreements online and there is nothing specific. It just says if you have a dispute, you go to arbitration.
Does anyone have any advice of how I can protect myself here?
Thanks in advance.
7
Posted on 1/27/14 at 12:10 pm to tiger114
Must be hurting for money. Mine wanted $5k to secure permits and get started.
Posted on 1/27/14 at 12:13 pm to tiger114
quote:
He is asking for a deposit of $30k and in the agreement, he states that this is non-refundable.
I don't care what his reputation is, for 30k I'm having a lawyer go through the agreement before I sign.
Even if you have recourse to get the money back if something goes wrong, you are going to have to engage an attorney to actually retrieve the money.
If he is unwilling to offer some protection for your deposit, this should be a big warning flag.
Posted on 1/27/14 at 12:26 pm to tiger114
quote:
He is asking for a deposit of $30k and in the agreement, he states that this is non-refundable.
I don't care if my brother was the contractor there is no way in hell I am giving him a 30K non refundable deposit. Something on the line of 5-7500K is reasonable even then I would never agree to non refundable. What if the guy gets picked up for child porn or has a heart attack the day after you give him the check?
Posted on 1/27/14 at 1:46 pm to lsufan1971
No way I would put a deposit that big down without the guy doing any actual work at that time
Posted on 1/27/14 at 1:50 pm to tiger114
Tell the guy thanks but no thanks. Stay away from him because something bad in his personal or professional life is about to happen.
Posted on 1/27/14 at 3:20 pm to tiger114
I appreciate all of the input, guys. I am having a real estate attorney review the contract and suggest more standard language.
Posted on 1/27/14 at 3:22 pm to tiger114
Never I repeat NEVER give any contractor or sub contractor money before the job is done. There are enough quality builders and subs out there that you can find someone else. You're just asking to get burned. Even if he is honest and does the work it sounds like a situation where you are getting setup to be nickled and dimed for everything.
I'm not saying you cant work with people as the project progresses and pay them as work, but an up front deposit of that much. HELL NO.
I'm not saying you cant work with people as the project progresses and pay them as work, but an up front deposit of that much. HELL NO.
Posted on 1/27/14 at 3:37 pm to tiger114
Did your friend in the neighborhood have to put up a deposit for a similar amount?
If so, how did it work out?
If so, how did it work out?
Posted on 1/27/14 at 5:59 pm to Booyow
He had to put a smaller deposit, but he had to get a construction loan and he bought the lot.
I do not own the lot until we close and he is using his line of credit during the build. So, it's a different deal.
But, my friend was very pleased with the contractor and his house.
I spoke to a real estate attorney and he said that given that we are using his money during the build, this is not a bad deal, provided I have recourse to get the $30k back if there is a breach.
I do not own the lot until we close and he is using his line of credit during the build. So, it's a different deal.
But, my friend was very pleased with the contractor and his house.
I spoke to a real estate attorney and he said that given that we are using his money during the build, this is not a bad deal, provided I have recourse to get the $30k back if there is a breach.
Posted on 1/27/14 at 9:35 pm to guttata
quote:
He is asking for a deposit of $30k and in the agreement, he states that this is non-refundable.
This is a stop sign . Back up and ask questions. Get a lawyer involved and get the wording to your liking.
He is asking for a deposit of $30k and in the agreement, he states that this is non-refundable.
This is a stop sign . Back up and ask questions. Get a lawyer involved and get the wording to your liking.
Posted on 1/28/14 at 12:19 am to tiger114
quote:
I do not own the lot until we close and he is using his line of credit during the build. So, it's a different deal.
Did he buy this lot specifically for you or was it a lot in his inventory?
If he bought it for you and is giving you a turn key deal I don't think 30K is that much to ask.
This is exactly how I built my house and I gave him 30K and didn't think twice about it bc he bought a 75K lot just for me.
With that being said the contract was several pages long to protect the both of us. Have an attorney go over the contract so you know exactly what you are agreeing to.
Posted on 1/28/14 at 1:06 am to MikeBRLA
i'm in the same situation but with 10k DEPOSIT, and a few weeks from closing. I'm planning on using the 10k for closing cost and made him repeat to my face several times when I handed him the check that I would get the check back at closing. (DEPOSIT not a DOWN PAYMENT). By the way he has lied about everything promised that wasn't in writing...Well he obviously spent the money and is taking 10k off house cost and is saying now that NON REFUNDABLE DEPOSIT means I never see it again even at closing. Deciding now if i'm gonna get a lawyer involved, but it's not a deal breaker.. but 30k?? jeez
Posted on 1/28/14 at 8:42 am to tiger114
This is not uncommon if the builder bought the lot and is supplying the loan until closing. Many times the builder had to be protected incase through no fault of their own the buyer decides to pull out after the start. There should be language where you get money back after the homes sell if you breach. It would be X for contractor and anything minus X comes out your 30K. Is he charging you interest on the construction loan, or is he footing that costs?
Posted on 1/28/14 at 10:00 am to youwantit
quote:Umm you need to get out of this situation if you are dealing with this much crap already.
By the way he has lied about everything promised that wasn't in writing...Well he obviously spent the money and is taking 10k off house cost and is saying now that NON REFUNDABLE DEPOSIT means I never see it again even at closing.
Posted on 1/28/14 at 11:30 am to Libertariantiger
Great input everyone. I sincerely appreciate it.
He did not buy the lot specifically for me, but he said that he only will own 1 lot at a time that isn't sold to someone. When he sells it, he bids on another lot to build the next place.
I spoke with a couple of attorneys and another contractor. All of them said that as long as there is a way to get the $30k back if there is a default, then I should be fine.
And, yes, it is a DEPOSIT. It is them used as the down-payment. (Well, now what you mention it, let me double check that.)
And, no, he is not charging me any interest or fees to use his money. I figure that is probably close to $10k in savings between closing costs on a const. loan, monthly payments, appraisals, etc.
I emailed with the lawyer last night and he said that he would put language in the agreement that allowed for a full refund if there is a default.
Looks like we are getting close to moving on this. Thanks for the advice.
He did not buy the lot specifically for me, but he said that he only will own 1 lot at a time that isn't sold to someone. When he sells it, he bids on another lot to build the next place.
I spoke with a couple of attorneys and another contractor. All of them said that as long as there is a way to get the $30k back if there is a default, then I should be fine.
And, yes, it is a DEPOSIT. It is them used as the down-payment. (Well, now what you mention it, let me double check that.)
And, no, he is not charging me any interest or fees to use his money. I figure that is probably close to $10k in savings between closing costs on a const. loan, monthly payments, appraisals, etc.
I emailed with the lawyer last night and he said that he would put language in the agreement that allowed for a full refund if there is a default.
Looks like we are getting close to moving on this. Thanks for the advice.
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