ᐅ Process: Land Purchase, Bank Financing, General Contractor Agreement – Does This Sound Right?
Created on: 20 Aug 2024 15:44
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Buddy0505
Hello everyone,
Our house building project is about to start.
We had considered it at the end of 2022 but decided against it due to all the uncertainties.
I’m a bit unsure about the process and whether I might have overlooked something important that could cause problems later on.
The plot of land is available – 1300 sqm (14,000 sq ft) in family ownership – according to the notary’s subdivision, my partner already owns the rear half. The land registry entry for 1/2 ownership has been completed.
The surveyor still needs to carry out the subdivision in connection with the building permit/planning permission application.
Subdivision and building permit/planning permission will proceed in parallel in Berlin. Development of the second row is approved – this was personally confirmed with the city planning department. The size complies with the regulations.
Bank financing was approved today.
Now the question: should we sign the construction contract (the offer is acceptable to us) and then start?
Do you have any advice or important points I should consider beforehand?
Thank you very much
Our house building project is about to start.
We had considered it at the end of 2022 but decided against it due to all the uncertainties.
I’m a bit unsure about the process and whether I might have overlooked something important that could cause problems later on.
The plot of land is available – 1300 sqm (14,000 sq ft) in family ownership – according to the notary’s subdivision, my partner already owns the rear half. The land registry entry for 1/2 ownership has been completed.
The surveyor still needs to carry out the subdivision in connection with the building permit/planning permission application.
Subdivision and building permit/planning permission will proceed in parallel in Berlin. Development of the second row is approved – this was personally confirmed with the city planning department. The size complies with the regulations.
Bank financing was approved today.
Now the question: should we sign the construction contract (the offer is acceptable to us) and then start?
Do you have any advice or important points I should consider beforehand?
Thank you very much
Buddy0505 schrieb:
Do you have any other considerations I should definitely keep in mind beforehand? The person who signs the general contractor contract is considered the builder.
The person whose signature is on the financing agreement is considered the debtor.
However, the person registered as the owner in the land register of the property is the legal owner of the house. It doesn’t matter who is or was the builder, or who pays the loan installments – this does not automatically make you the homeowner.
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Buddy050521 Aug 2024 07:35A completion bond only covers around 20% of the total construction cost and costs a few thousand euros. Do you still think it makes sense, considering that payments are made according to the construction phases anyway?
Everything sounds reasonable so far. We also worked with a general contractor (GC), and I would definitely do it that way again, provided it’s a reliable GC. It takes some of the workload off your shoulders, especially since you still have everyday life and work to manage during the construction phase.
However, I would only sign the contract after the planning is complete, and the floor plan should definitely be included in the contract. Make sure that a fixed price is agreed upon. Otherwise, our process was very similar.
I also find the point made by [USER=12491]@ypg important: if you both pay off the house and take out the loan together, you should both be registered as owners in the land registry. Since she is contributing the land, you might need to consider how to handle that. Maybe you have the equity capital? Even if everything seems fine now, no one can predict how things will look in 10 or 20 years. There could be separations, which I certainly hope you won’t face, but that could get complicated. You might end up with nothing while she owns a house you’ve paid off 50% of for half your life. And it doesn’t end there; the loan will still have to be paid. The bank does not care what happens in your personal life.
However, I would only sign the contract after the planning is complete, and the floor plan should definitely be included in the contract. Make sure that a fixed price is agreed upon. Otherwise, our process was very similar.
I also find the point made by [USER=12491]@ypg important: if you both pay off the house and take out the loan together, you should both be registered as owners in the land registry. Since she is contributing the land, you might need to consider how to handle that. Maybe you have the equity capital? Even if everything seems fine now, no one can predict how things will look in 10 or 20 years. There could be separations, which I certainly hope you won’t face, but that could get complicated. You might end up with nothing while she owns a house you’ve paid off 50% of for half your life. And it doesn’t end there; the loan will still have to be paid. The bank does not care what happens in your personal life.
Buddy0505 schrieb:
A completion guarantee only covers about 20% of the total construction cost. And it also costs a few thousand euros. Do you still think it makes sense since payments are made according to construction phases anyway? The completion guarantee protects you against the risks of insolvency and the risk that your general contractor might see abandoning your project as a more attractive option than finishing it (which often happens when insolvency is near). Additionally, in the event of insolvency, the administrator will demand full performance from you in exchange for a depreciated consideration. Insolvency law is even more unfavorable to lower-ranking creditors than real estate agent and developer regulations are consumer-friendly. The final payment is, in a worst-case scenario, a less effective safeguard than one might think—it should therefore be generously sized and additionally secured.
jrth2151 schrieb:
We also built with a general contractor, and I would do it the same way again, provided it is a good GC. It at least reduces some of the workload; after all, you still have everyday life and work to manage during the construction phase.
However, I would only sign after the planning is complete, and the plans—especially the floor plan—should definitely be included in the contract. Make sure a fixed price is agreed upon. I wish all homebuilders that their hope "GC = (largely) the client can relax" is at least partially fulfilled—but honestly, I am skeptical. The specific house—including detailed plans—must absolutely be included in the construction contract. This does not necessarily mean physically attaching all drawings; they just need to be clearly referenced, possibly with thumbnails similar to fax transmission protocols. Fixed price commitments are fundamentally only as reliable as the thoroughness with which their loopholes are sealed.
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MachsSelbst21 Aug 2024 18:14I keep wondering about this as well. What’s wrong with a general contractor when you like a standard floor plan that has been built, tested, and optimized hundreds of times? I saw the floor plan, liked it, and signed the contract. Perfect.
Does anyone go to a Mercedes dealer and customize the legroom, trunk dimensions, and engine bay size individually?
It’s just baffling...
Does anyone go to a Mercedes dealer and customize the legroom, trunk dimensions, and engine bay size individually?
It’s just baffling...