Custom Home Builder Purchase Contract

Added October 20, 2007 by Ilyce R. Glink and Samuel J. Tamkin

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Summary: Custom home builders all use different contracts which govern the terms of the deal. Your builder might come back to you after closing and claim that more bills came in and you owe him more money. You need to look at your contract and determine if these extra expenses fall under the contract. If it was an honest mistake, you may want to pay the bill anyway in exchange for an extended warranty or some other concession.

Q: I hired a builder to build a custom home. We had ordered some upgrades and two weeks prior to closing I asked the builder for the final price of the home to secure financing. He gave me the number and said we would be fine.

So we closed with that purchase price. Two weeks later, he said some more bills had come in and that we owe him an additional $14,000. Is this my responsibility or is he out of luck because we have already closed?

A: There are multiple variables that would determine whether you owe the builder the amount he now claims. If the builder made an honest mistake and you recognize that he made this mistake, it would seem unfair to deprive him of the money he is owed.

However, your purchase contract should govern the transaction. Some contracts have language in them that would permit the parties to revisit an error like the one you are describing. If the contract has no such language, the builder may be out of luck. The price he set at closing would be the price for the sale.

First, you need to determine whether the builder is right about the numbers and whether he may be entitled to reimbursement. If you think he is, you should sit down, read over the contract, then talk to a real estate attorney and then decide whether you will use the terms of the contract to shield yourself from paying the builder.

If you clearly recognize that the builder is owed the money, you might decide to pay him anyway. It would be a good faith gesture and in so doing you might be able to get the builder to extend the warranty on the home or get something else in return.

Published: Oct 20, 2007

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