Building a new home

[FBN2007]

What is the name of your state (only U.S. law)? NC

My wife and I are buying a new home. The lot is in a development and the builder is a custom builder who has built 8 other homes in this development. He told us that we will need to get the construction financing to build the house. My initial plan was to pay cash for the house when completed. If I don't get a loan then how can I protect myself in case the builder were to walk off the job or worse, if he were to be die or become ill before the house was finished? How are deals like this structured when using a small builder who doesn't actually get the construction financing himself?

 

[tranquility]

You can have him get a surety bond. It will add to the cost of construction.

 

[LdiJ]

What is the name of your state (only U.S. law)? NC

My wife and I are buying a new home. The lot is in a development and the builder is a custom builder who has built 8 other homes in this development. He told us that we will need to get the construction financing to build the house. My initial plan was to pay cash for the house when completed. If I don't get a loan then how can I protect myself in case the builder were to walk off the job or worse, if he were to be die or become ill before the house was finished? How are deals like this structured when using a small builder who doesn't actually get the construction financing himself?

Banks release the money to the builder in stages. The release a certain amount once the foundation is done, another amount once the framing is finished, another amount once the roof goes on, etc...That way both you and the bank are protected if anything goes wrong with the builder.