We owned the land and the construction loan was in our name not the Builders. What happens if you back out? Now they have a (semi completed) house on land they don't own. For us the Builder had to have us sign off on the checks before he could pay the subs and I saw all of the amounts. I assume your guy doesn't want to bother with that.

The plan thing seems odd. You'd think they'd give you something even if it had their name plastered all over it so it was clear it's only a copy.

Aziline, we understand why they would want to own it, but those weren't the reasons that they gave. He pretty much said that's the only way to build a house with financing. And I know that a lot of other builders in the area do things the same way. I just thought it was rather disingenuous and it just made me wonder what else he didn't want us to know.

Some builder do that... Personally I would not agree unless you must. If a builder goes belly up - you may not be in the first tier to collect. You will lose your property. Some builder claim 30 years in a business - but what they are not saying is that countless companies under them filed chapters. It is hard business to be in. Get your own financing and deduct a finance charge from the total, sine you will be paying it.

We actually bought the land from the builder as a separate entity. Only once we closed on the land did we commence building. We owned the land free and clear while he built and got our construction loan from the bank.

What the builder you saw does, sounds a bit fishy to me. What happens if you have a dispute with the builder? He now owns the land you paid for?

Is he buying back the land from you and then raising the price of the land so he makes a profit on the land? Or?

As for releasing the plans, we worked with the builder and his draftsman to create plans and I held a builder's copy the whole time we built and before. Ours was fully custom. (Of course knowing what I know now, I would have hired my own architect to draw up plans but eventually my house design did come out well.)

I can't say what's normal, only speak to my own experience. For the initial builders I was working with, we did most of the plan by email. They would send me the current working version, and then I'd send back adjustments to it, then they'd send me another. So I always had a draft of the plans. They wouldn't give me an official set of plans until I paid for them, though.

As far as owning the land, I've talked with three builders now, and not one of them would take possession of the land during the build. None even suggested it. I will be getting a construction loan through a bank & trust, though, so not sure if that makes any difference. There's no way I'd give up title to my lot during construction, I can envision too many ways that might go wrong.

So I don't know what's typical or unusual - but I at least know it's possible to do it different from how your builder is. Maybe worth interviewing a few others to see how they handle things?

We owned our land. We worked with our builder on a plan. He had many plans and we choose one and rearranged it to fit our needs. We were always emailed a copy of the plans after we met with the builder and made changes. We didn't even have any kind of signed contract. He even emailed me plans for someone else he built a house for that used the same base plan but changed it to fit their needs. He took us through this house and he also allowed us to go into 2 other houses he was building at the time. The construction loan was in our name. Once we signed a contract we were given a real set of plans.

So the builder is doing this work so far, for you, for free? If that is true, it may be why they are not giving you the plans.

You are not their client unless you have a contract with them for the design services they are providing. Have you signed a design-build contract? Have you paid them anything yet?

I'm thinking the same as the two previous posts, have you paid any money for plans? If not you don't own them and have no right to take them.

I've never heard of a builder taking possession of land but I've only built full custom with a separate architect and then hired a GC.

In any case, the builder will retain the copyright and ownership of the design drawings but a client will have the right to build one house using that design when there is an agreement that contains compensation.

I would be curious to see the contract if the builder owns the land and the house until its finished. I would think the future owner would want more control over the project. It seems like a poor approach.

RES and ulisdone, yes when you put it that way, yes he was doing work for free. But not out of our expectations, that seems to be the way they work. At the end of the second meeting we weren’t handed a design services contract, or even a design-build contract, but a “contract to build house” with a purchase price, and a fairly basic six page specification. The next step was to put down an earnest money deposit to begin fthe financing process and to start assembling construction/permit drawings.

The builder said that we were much quicker and decisive in coming to an agreed upon design than most. Most requiring many consultations to determine what they like and what to include. And this not even including most of the finish selections which I guess for them come after initiating the contract. And per the contract cost increases for any changes are due immediately upon the change being made.

And so I’m clear, by not releasing any plans, I don’t mean complete CDs, the pre-contract plans were just the sort of black poche‘d clean plans with room dimensions posted under the room name with a front elevation like you might see in a book of plans. Even their standard plans like this were not available to look at without scheduling an appointment and couldn’t leave the room. I just don’t see how anyone can come up with a plan that suits them without taking it home to study and reflect upon. Just like I couldn’t imagine starting the house construction without being able to review a full set of plans. And it had me wondering if they were burned in the past with plan plagiarism, generally defensive of their work, or if there was something else going on.

This post was less about me expecting things or Getting them for free as it was just kind of wondering about the whole process.

When we started the process of building a new house, we were checking out all sorts of options. We talked to one builder whose spec houses we had seen, and his company had the same process as what you were told - we would have to sell our lot (which we had already bought) to his company. He gave the reason that they used the lot to be financing for the build. We walked away from that arrangement; I wasn't about to give control of that lot to another person, for the reasons already stated.

He gave the reason that they used the lot to be financing for the build.

A reputable building company shouldn't need your land to finance your build. That just sounds wrong.

On a lot you own you finace your build. Some builders aren't set up to work as custom builders. You found one.

They do seem to have enough capital to finance a build to sell to you.

Do you need plans if you are duplicating an existing model you're familiar with? Doubtful.

You wont be successful trying to make them bend to your wishes. They know how to do it their way.... apparently 30+ years. They have an expedient solution.

Move on & you've spent nothing.

This transaction is more like a consumer purchase than a professional service so its understandable that they would want to control the design process and limit the design services to modifications to a stock plan. You don't get the collaborative creative service you would get from your own architect but you're not paying for that service either.

It appears you will also give up control of the construction drawing and construction phases too.

You say this is not a tract builder but that appears to be a distinction without a difference.

Just a word of warning from what I ran into with the first builder I talked to, and have seen from others posting here -- you said your contract doesn't include finishing selections until after initiating the contract - how is the cost of those items accounted for in the bid, then? Is he doing it with allowances?

If he's doing allowances, don't trust the "we'll decide later" line they give you. Decide NOW and see if those allowances are enough. Builders are notorious for making low allowances, which maybe you could get everything you needed - if you wanted the cheapest Home Depot cabinets, and basic flooring that'll have to be replaced in 5 years, and cheap faucets, etc. Make sure you know what YOU want, and what it will cost you. Then make sure the contract will allow you to buy that. Otherwise you will have three unpleasant choices later: trying to change the contract (your bank especially won't like this one if you have a construction loan), paying out of pocket, or getting finishings you don't really like.

There is zero chance I'd sign over a lot I owned to the builder. Zero.

I've had 2 new homes built for me on land I owned. I had no problems finding financing for such an arrangement.

During my last build, things got dicey with the GC. I can't even begin to fathom how much more stressful it would have been if he owned my land.

If you spend any time here at all, you will find countless threads of disputes with builders. I understand why too. It's a very complicated process so problems are guaranteed to happen, and it's wicked stressful when you see yourself forking over hundreds of thousands of dollars for something which isn't turning out exactly as you had hoped. My second build was one of the most stressful things I've ever endured.

I'm open to hearing from others who are smarter than me if this is a good idea, but my first reaction was there is no way on God's green earth I'd sign over land to the guy I hired to build my house. :-/

Just no. There’s way too much that can go wrong in a homeowner-builder relationship over the course of several months and the building process is WAY too stressful to possibly end up with nothing in the end when the relationship goes south and the builder claims YOU breached the contract.

Playing devil's advocate, but what in the contract doesn't give him the ability to sell the completed house for a higher price to someone else if he now owns the house and land?

It's interesting that this has turned into more of a discussion about the implications of the builder owning your build.

At the moment we are not headed down this path, if anything because at $535k the house was already a little over our budget and we knew we weren't done adding to the costs. Which to that end, we got the information that we were looking for. For instance the house as priced has no windows on it's side elevations or in the bathrooms or laundry room. only included a set of wood steps down to a 10'x10' patio, no utility sink anywhere, flat builder grade paint in one color on the walls, meaning the drywall finish level would probably also need to be upgraded, plus the inevitable finish upgrades when we finally got into the details. With all of those things I wouldn't be surprised if we were getting closer to 600k when we were done, and similar 10 year old houses in the development have only managed to sell in the $450-500k range.

As far as pricing and selection later, it appears from the specification sheets and based on our meeting that the builder is not using allowances, but has based the pricing on actual materials (their base standards). In some instances Anderson 100 series windows, HardiePlank siding, solid six panel oak doors, are listed, at the meetings we had flashed in front of us what lighting and appliance packages had been included, and their standard cabinet manufacturer. Unfortunately none of that detail was in the actual specification, so I could see where there could be quite a bit of room for increases when we get into the actual selection. If we had chosen to go forward, I would have definitely wanted to have a meeting and go through the specification line by line, what has been assumed, and make sure our expectations get into the actual document before finalizing the contract.

RES, I know there are quite a few here that categorize builders into tract and custom with pretty much nothing in between, and I get what you are saying that this is still closer to purchasing a home than crafting one in process. But I used the term "semi-custom" to separate them from the extreme of the actual tract builders that we have visited. Others might have 5 plans with 4 facades, 4 exterior material packages to choose from, 4 lighting packages, a checklist of upgrades, etc and no room to make any changes to the plans. They were also cheaper than this, but you get what you pay for. In this case they had 40 standard plans plus some of their previous customized plans to select from and we were able to make some significant alterations, such as increasing the width and depth of the house, turning the master closet into a second floor laundry, turning the bonus room into a master closet, moving two bedroom closets so the upstairs hallway and stair could have a window, and expanding the kitchen. It's a step or two improved over the one-size fits all tract plans. Plus they supposedly will build plans brought to them if they fit the parameters and traditional look of the community, which is definitely a path I would consider if we ever decided to use them.

But back to the subject of plans, Jeffrey unlike your typical tract builder this isn't a house that is a model, or already exists in the development. I would have to ask if they had even built this particular plan before and that doesn't account for any of the revisions. Reading through the contract again, there is a spot in the opening where it lists that the house will be built according to "___ plans." I guess a number or model name is meant to go there? The specifications also list several times that things will be built according to plan, but the plans themselves are never explicitly referenced as being part of the contract, nor does it say that a full set will be furnished to the client.

I wondered the same thing, cpartist. What if the builder intentionally creates an untenable situation with the OP in which he then asserts the OP has breached contract in some way or hopes the OP will claim he breached the contract because he has another party interested in the house at a higher price? It seems to me that there is no motivation for the buyer to “make things right” if wrong finishes or structural methods are used.

For anyone interested, I parsed through the contract and paraphrased some of the important terms below. It's definitely favors the contractor, and there's some uncomfortable terms included in it. But then they also don't have poor reputation with their past builds, and there have been at least 100 of those.

But also the idea of having an earnest money deposit that would probably be in the magnitude of at least $108k and could be much higher than that depending on finish selections and changes and risking losing all of that if the relationship goes south isn't very assuring. They currently have a $700k house for sale where the client failed to get financing to close at the end of the build and the builder ended up with the house. They must have lost a ton of money to that and the builder probably only has to sell for 80% of the original construction cost to still make their profit.

To RES's point the correct term per the contract is "Purchaser" which frames this more like the tract build process. To shead's and cpartist's points, I don't see anything that would prevent the builder from doing something as you described, but it might take an attorney's review of the contract to confirm.

My understanding is that a deposit is put down to begin creating the drawings for permit and during the selection process, so I suppose that if at the end of that we were unhappy with the results or the actual price, we could walk having only spent a few thousand.

The pertinent terms:

• Deposit is due to hold lot at contract signing, prior to compiling drawings and making selections.
• Earnest money equal to the construction loan down payment is due process to start of construction.
• Selections are completed in a six to seven week period following commencement of the contract. Contractor will make selections for anything not selected in this time. Increase in purchase price will be paid at time of selection.
• Increases to purchase price for changes made during construction shall be paid for immediately. Contractor reserves right to agree to changes.
• Purchaser will pay property taxes and loan interest during construction.
• Contractor shall have the right to substitute materials of equivalent of quality, utility or color without change to purchase price or approval.
• Contractor reserves right to make minor changes to plan, specifications, and selections to accommodate structure and mechanical, comply with codes, ordinances, or inspections, or to beautify the community.
• Purchasers are allowed to inspect the property during construction at their own risk.
• Punch list is to be compiled by Purchaser just prior to closing. Contractor has 30 days after closing to make a reasonable effort to correct punch list items. No money shall be held back for punch list items.
• If the purchaser defaults of the agreement they forfeit earnest money and all costs paid to date.
• If the contractor defaults on agreement, purchaser shall repair and replace the defects without rights to collect damages in excess of the costs of construction.

For a builder those are great terms.

For a consumer those aren't great terms. I doubt any attorney would let his or her client sign an agreement with such terms. Certainly no architect would recommend them to their client.

Cpartist nailed it. I was going to ask the same questions. Those contract terms are so vague that basically the builder can get away with anything and you either have to accept that or lose your down payment, all the interest on the construction loan, property taxes, and all other monies paid. I see no arbitration clauses in any of that. Seriously? He can say you breached the contract for even daring to question the materials, finishes, or construction techniques?

You have no leverage because YOUR lot is now HIS lot and the months of time and energy spent by you in making your selections and living through the process can be for naught if this builder suddenly decides that he no longer wants to deal with you, has another interested party, or goes bankrupt.

RUN, RUN, RUN! There's no way in h-e-double hockey sticks I'd ever agree to that.

That is not necessarily a typical construction contract. In CA, one can take large deposits for a real estate contract but not for a construction contract. That builder is delivering a finished product to sell to you in the future. More of a real estate purchase agreement. I don't recommend it either since you already own the property.

Production builders typically can deliver a basic no frills home for less than a custom builder. Once higher level finishes are added, its questionable once they start paying vendors for upgrades and have to manage it, most of their efficiency goes away and most would rather focus on their subdivisions. Some of their vendors bid baseline finishes at cost or at a slight loss for a "buy in" and charge large for upgrades.

Example: Just completed a custom uphill from a national luxury builder's tract. Their view models are selling for $1.6 as are their top of the hill premiums. My client has better views, higher level finishes & is in for about the same or less. Fewer people in my food chain.

Always vet builders as well as any vendor (including architects) before getting to the contract stage. I do with clients also. Got to have a good match to "live with" someone for a year. "No" is a good word sometimes.

Don't expect the ability to build new in an older neighborhood and match the comps of 10+ year old homes. New is more, lots in older neighborhoods command a premium that doesn't let this happen (mostly).

They may be a great builder and delivered countless houses. But all it takes is misconstrued sentence, mistake, bad bad sub, screw up for this relationship to go sour.

It is not unusual for contractor to ask for quick deed. I personally would not agree.

Contractor has 30 days after closing to make a reasonable effort to correct punch list items. No money shall be held back for punch list items.

Notice the wording "reasonable effort". And what happens if they do not: If the contractor defaults on agreement, purchaser shall repair and replace the defects without rights to collect damages in excess of the costs of construction.

Pass.

Ignore anything this builder is saying. Find the name and address of the previous owners ... county records. Call and ask. This builder makes it easy. Find properties that they own, they will be listed as the owner in the county database. Look at prior owner. Immediately contact them.

Ask those questions:

1) <Start from bs and butter up. How great this <builder><architect> is, etc>, was he really easy to work with them at the preconstruction meetings / pre architect phase.. etc.

1a) Are you by any chance personally related: , have you had a business relationship prior or after the build with this <builder>/<architect> .

1b) Did this individual served in more than one capacity, could you had a different KD for example instead of services provided by this builder.

2) Was there any line items that <?> exceeded the contract... Was there items that he "mistakenly" failed to include. Have you had any disagreements. Who paid for them in the end. Were the issues resolved amicable...

3) How often builder notified you about the progress.

Agree with the consensus here: don't give up your lot to the builder with the expectation that he will build and complete the house for you to close on with end loan financing. If you go in this direction (please don't), then if the builder gets into trouble you have absolutely no claim to your lot because you have already deeded it to him. I'm not an attorney, but have seen this before where the builder went out of business and each of the buyers lost their deposits and the lots/houses. It is far riskier to you than it is for the builder to have your lot during the construction process. Re-read Cpartist's post again. This is method doesn't make any sense especially when you are retaining the property tax and interest expense on the construction loan!

When you own the lot already, it is far better for you to get a construction perm loan and work with a builder that is familiar with that type of financing. You retain ownership of the lot. The construction loan or construction-perm loan is a lien on the property. If the builder runs into financial problems you can bring in another builder to complete the house and still retain ownership of the lot and the house. It's a much better, less risky position for you as the lot owner.

That sounds 'very' fishy to me. If you own the land outright, the builder does NOT have to own the land to build the house!! That GC is trying to rip you off!!!!!! AND NOT letting you get a copy of the plans???????? IMO.....I would walk away.

For once I agree 100% with robin.