Use of New Construction Addendum With Due Diligence Contract
QUESTION: I represent a buyer who is interested in buying a new “spec” home. The home is completely finished. The builder doesn’t have his own contract form. May I use the Offer to Purchase and Contract (form 2-T) to make the offer? Do I need to include the New Construction Addendum (form 2A3-T) as a part of the offer?
ANSWER: It would be appropriate to use the “due diligence” Contract form to make the offer. It would be important to include the New Construction Addendum as a part of the offer even though construction is complete for a couple of reasons. For one thing, the Addendum includes a one-year builder’s warranty. Although in certain circumstances, the law recognizes the existence of an implied warranty of workmanlike construction and no major structural defects, there is no one-year builder’s warranty required by law as some people believe. The inclusion of an express builder’s warranty in the contract offers important additional protection to the buyer. Another reason to include the Addendum as a part of the offer would be to comply with insulation disclosure required by the Federal Trade Commission for new home sellers, which is also addressed in the Addendum.
Note that the New Construction Addendum may also be used in situations where the seller/builder may agree to make additional minor improvements as a part of the transaction. On the other hand, if extensive additional improvements are to be made, the parties should use the Offer to Purchase and Contract—New Construction (form 800-T) instead of the New Construction Addendum.
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