Deposits

When you sign a building agreement it may be necessary to provided an earnest deposit in order "lock in" the agreed upon price and terms. This is not a construction draw and should not be confused as one. Generally the deposit should be about $1,000 to $2,000 dollars.

If you are paying cash allow at least a week before releasing the first construction draw to the builder. This allows you more control then if you simply handed over a full draw at the time you signed the agreement.
If you are getting a bank loan do not give the builder the first draw until the loan closes with the bank (even if you have been "approved" with the bank). This helps to ensure that you are not put into a compromising situation with the builder if he has already begun construction and there is a problem with the loan. In addition, the bank generally requires you to put all of the monies you are contributing to the building in their bank at closing and the bank will provide the builder with the draw payments beginning with your money and then using the banks' money.

Resource Links

Why Are There So Many Deposits When Building a New Home?

Last Updated: March 01, 2005 10:40 PM