Ten questions to ask before you sign a builder contract

What should you ask a builder before you sign?

Ask ten questions, and get each answer in writing. This post gives you the list. It rests on three official sources: the Florida statute on contractor payments, the state license database, and the Consumer Financial Protection Bureau (CFPB). This is general information, not legal advice. Ask a Florida attorney to review any contract you plan to sign.

Is the builder licensed for this work?

Question 1 is the license. The Florida Department of Business and Professional Regulation (DBPR) says you can “verify licenses by name or license number” in its records. Look up the person and the company.

Then read the license type. DBPR explains two kinds. A certified contractor holds a certificate of competency and may contract in any jurisdiction in the state. A registered contractor met the competency rules of one local jurisdiction and may contract only there. Occupation codes start with C for certified and R for registered.

Ask which license will be used for your job.

What does Florida law say about the first payment?

Question 2 is about money up front. Section 489.126 of the Florida Statutes covers it. The text says “a contractor who receives, as initial payment, money totaling more than 10 percent of the contract price for repair, restoration, improvement, or construction to residential real property must” do two things:

1. Apply for the permits needed for the work within 30 days after the payment date, unless the work needs no permit.
2. Start the work within 90 days after all necessary permits are issued.

There is an exception. The statute says this applies “unless the contractor has just cause” or the person who paid “agreed, in writing, to a longer period.” The statute also says the term “contractor” covers a person doing the work “without regard to the licensure of the person.”

Ask your builder: What is the first payment? When will you apply for permits? Is any longer period written into the contract?

What are the ten questions?

How is the price set?

Questions 3 to 6 are about price. A fixed-price contract sets one total for a defined scope. A cost-plus contract bills actual costs plus a fee. Neither is better in every case. Ask which one is offered and what each one means for your budget.

An allowance is a placeholder amount for a selection you have not made, such as tile or lighting. Ask for the list of allowances, the amount of each, and what happens if your choice costs more. A change order is a written change to scope, price or schedule. Ask how it is priced and whether you sign before the work starts.

How do payments and loan draws work?

If you borrow to build, the loan shapes the payments. The CFPB says a construction loan “is usually a short-term loan that provides funds to cover the cost of building or rehabilitating a home.” The money is typically provided in a series of advances as construction progresses. Payments sometimes start six to 24 months after the loan is made. You may be able to convert it to a conventional mortgage, but if it does not convert automatically you may have to reapply. The CFPB says your choices depend on the lender and your credit history.

Ask your lender how a draw schedule works and what proof it needs before each advance. Then make sure the contract’s payment schedule matches it. Read more about the construction loan in the glossary, and see our guide to what it costs to build a custom home in Tampa.

What should you do after you get the answers?

Compare the answers across more than one builder. Put every promise in the contract. Keep copies of every payment, change order and permit. If a contractor does not meet the 30 and 90 day periods, the statute describes a written demand sent by certified mail. Talk to an attorney about that step.

What is the next step?

If you want to talk through your project and your questions, call Halo Homes at (813) 956-1972 or write through the contact page.