There’s something that you may not know about your new home builder contract that I want to share with you today. It’s called an escalation clause, and it’s been a popular topic as of late.

Everybody knows about the crazy price of lumber right now. Since March 2020, lumber has increased in price by 430%. Someone has to pay for that extra, and it’s often buyers who are footing the bill via an escalation clause in their builder contract.

An escalation clause is a provision in a contract that calls for adjustments in fees, wages, or other payments to account for fluctuations in the cost of raw materials or labor. According to the National Association of Home Builders, 47% of builders are incorporating price escalation clauses into their construction and sales contracts due to the rising cost of lumber.

“Buyers are often footing the bill for increased lumber costs in new homes.”

The clause typically states that a buyer is going to be responsible for the volatility in material costs. Every builder’s clause will vary, and most of the time there is an option to void the contract if the home’s price increases by a certain percentage. Make sure you’re educated on the terms of the builder contract before signing it.

This is where having a Realtor represent you and your interests is vital. Our team works with hundreds of home builders a year. We’re very familiar with the contacts, and we’re ready to help you with your home purchase today.

If you have any questions for us, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.