Developer / Builder Contracts – Pitfalls for Buyers
When buying a property from a developer, buyers are typically asked to sign a special contract, prepared by the developer in advance. The vast majority of developers will not accept any of the realtor-prepared forms that are widely used throughout Illinois. Developers are subject to certain Illinois laws and want to use their own contracts to avoid various liabilities.
Prior to signing a developer’s contract, you should look through the contract and familiarize yourself with it. Developers’ contracts are notoriously one-sided, especially with respect to tax credits, property inspections, mortgage contingencies, resale provisions, warranty restrictions, and closing dates. Traditionally developers have been unwilling to negotiate. Because of the changing market conditions, however, more and more developers are working with potential buyers to make the sale.
If the legal jargon in the contract seems like mumbo-jumbo, the buyer shouldn’t fret unnecessarily. Instead, he should make sure that there is at least a five-day attorney review provision in the contract. While most Illinois developers do include an attorney review provision, many do not. Usually, however, they will add an attorney review provision upon your request. As long as that provision exists, the buyer’s attorney can review and negotiate some of the one-sided elements in the contract. This also affords the buyer a few days to make sure he is not experiencing “buyer’s remorse”. If the buyer is uncomfortable with the contract after his attorney explains it to him, the buyer’s attorney can terminate it within the attorney review period.
Don’t be scared to sign a developer’s contract! Just make sure you are taking steps to protect yourself and that you understand the contract and what your risks are.