Standard Operating Procedures for Agents Regarding Brown Develpment Deals Under Construction

1.     Sample Purchase Contract language for home under construction
a.     Agent should write up the deal on the state Purchase Contract form.
b.     Specifically, the language in section Q is pertinent in this sample agreement.
           i.    What Q says is that the buyers and seller will agree on all specs and a construction contract during the J-1 inspection period. If we do not, buyer may cancel and receive full refund. We often extend J-1 if the buyers need more time.
                ii.    Language should be very similar to what is shown on the Sample Purchase Contract below.
c.    See SAMPLE PURCHASE CONTRACT

2.  Sample Addendum for purchase under construction
a.     Specifically, the language in this addendum that related to changing the purchase price to the amount of work that is completed at the home at time of closing.
       i.    Agents receive their commission on the full acceptance price, not the reduced price and further the full price is listed at closing in MLS.        
ii.    This is required so that the purchase contract and construction agreement are in sync for legal and tax purposes.    
iii.    This addendum would be created and signed simultaneous with the construction contract.
b.    See  SAMPLE ADDENDUM

3.     Construction contract
a.     This is the contract that the buyer will have with Brown Development (the construction company) at closing. Agent is paid all commission and is no longer involved in transaction other than assisting off island owners with photos or follow up if they choose to.
b.     A couple of important things to point out:
               i.    This is a process that Brown Development has been using for 20 years. We have built over 100 spec homes and 95% or more of them have sold this way.
ii.    Can a buyer get a loan? Potentially, but most of these deals are cash deals. It can be hard to get a construction loan with a home under construction.
1.     On certain deals, I have kept my loan in place until the homes are done, but I am reluctant to do that unless the homes are close to completion.                   
iii.    Architect of record will inspect the home and write a letter confirming the amount of work required to be completed in the construction agreement prior to the buyer releasing milestone payments.
c.     We like to recommend to outside agents that they use Clay Sutherland to review the buyer’s contract. He has represented many of our clients and understands how this all works.

REALTOR’S NOTE ON COMMISSIONS:
Homes under construction usually close in 60 days, at which time realtor commissions are paid, and per the sample Construction Contract below, Brown Development finishes the home for the client. Brown Development has done close to 100 transactions like this and 98% of all the homes we build sell under construction.