Understanding Custom Home Construction Contracts: A Builders Guide

The journey of building a custom home is an exciting venture, and at its center lies a crucial document…the construction proposal. Ambition Custom Homes knows the importance of a well-crafted and clearly detailed Contract.

In this blog we will emphasize the importance of truly understanding what your builder is including in their proposal for your new Dream Home and how much it will cost.

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Clear Project Scope / Detailed Cost Breakdown:

A comprehensive and thorough proposal should leave no room for guess work regarding the project scope.

Clearly defining the specifics of the work to be performed, including design details, construction materials, and any customization request by the owner. A precise project scope sets and secures the foundation of a successful partnership.

A detailed cost breakdown will carry all anticipated expenses, from labor and materials to permits and potential contingences. Homeowners will feel at peace knowing they understand where their investment is allocated within the project.

Transparency is key when it comes to the financial aspect of a custom home build.

Timeline and Milestones Directly Affect Payment Structure:

Time is usually the enemy when referring to Custom Home Building. A well-defined contract proposal should include a realistic timeline, outlining key milestones and project phases. This not only helps to keep the builder accountable, but also helps the client to visualize the progression of their dream home.

A clear and fair payment structure is of utmost importance. Here at ACH we will clearly spell out how the payments are to be structured throughout the project, tying them to specific milestones or completions of defined phases during construction. And in many cases we will work with the approved banking instutution to develope a structure that works best for the project.

This allows us at Ambition Custom Homes to have a wonderfully transparent relationship between every single client that we serve. And provides you with a clear view of when payments will be due.

Flexibility for Changes

Custom home builds often do encounter unforeseen changes or circumstances in homeowner preferences. Make sure to look for a contract that addressees how changes (Change Orders or Variances) will be managed, ensuring transparency in cost adjustments, additional builder fees, and timelines for potential delays.

ACH uses a multi-stage contract process that eliminates the fear of budget overruns and allows us the ability to offer our clients a guaranteed fixed price contract. The only situation where the Client would incur more cost would be if they made desired changes to the projects scope.

Quality Standards, Warranties, Insurance and Licensing

Our proposal/contract will explicitly state the quality standards followed by ACH in the construction process.

This also serves to clearly define all work to be covered by our 1, 2 and 5 yr. warranty guarantee by the state of MD. 1 year Cosmetic, 2 years opperating systems, and 5 years on structural aspects of the home.

This assures you, the homeowner that at Ambition Custom Homes we are committed to delivering the highest quality home possible, and that we stand behind our product long after delivery.

To protect both parties involved, a reliable contract should highlight the builder’s insurance coverage and licensing information. This provides the client with the knowledge that they are partnering with a builder who is a qualified and insured professional.

OWNER’S RESPONSIBILITIES

Owners are responsible for purchasing and maintaining the following policies of insurance.  Any attempt by the owner to cancel or modify such insurance coverages, or any failure by the owners to maintain these types of insurances will not protect you as the owner if something happens during the projets timeline.

(1) General Liability Insurance.   The owner is responsible for purchasing and maintaining adequate general liability insurance to protect both you and the builder.

(2) Property Insurance.   The owner is responsible for purchasing and maintaining property insurance in the amount of the Total Contract Price.

Choosing a builder for your custom home project is arguably the most important decision you will ever make in your life when it comes to planning your next project. The proposal/contract is the roadmap for a successful build or could lead down a road of disappointment.

Examining the scope of the project through cost breakdown, draw payment structures, quality standards, included scope, flexibility for changes, and the builders insurance/licensing is a must do for owners. This step is very critical to ensure that your new dream home actually becomes a reality and the process is fun and rewarding.

Remember constructing a well thought out, and detailed proposal/contract is the cornerstone of your build and demands great care and attention.

A client should never sign a contract that consist of only a few pages.  A professional, well planned, and clear construction proposal should include upwards of 20+ pages that clearly describe and detail everything that is included in your projects scope as well as a clear Fixed-Price.

It literally only takes 10 minutes to get the information you need to find out if we’re a good fit for you. Book your call here.

Also, make sure to visit our Learning Center for more valuable tips and information to help you plan your next home project with confidence!