Texas Quad-Plex... a scam or normal for new construction?

Question

We found a quad- plex in Texas that we are interested in purchasing.  The property is only land now, with plans for completion between November 2018 and January 2019.  My only concern is this part of the contract where our earnest money is released to the seller.

"Earnest Money:  $100,000 is herewith tendered and is to be deposited and Earnest Money with  (title company), upon execution of this contract by both parties.  Upon execution hereof, said Earnest Money shall be released directly to Seller, for purposes of construction and land acquisition for the benefit of Buyer.  The Earnest Money shall be applied against the Purchase Price of the Initial Closing. "

Is this normal for new construction?  How can we make sure the seller doesn't run with our money?  Just curious.....

Maurice D. · Answer

Run!

Guy Gimenez · Answer

Looks like the builder wants to wears the uniform but wasn't quite ready for the big league. Glad you read the contract thoroughly and rejected the absurdities within it.

Wayne Brooks · Answer

Agrred, no way to control what he does with the money.  If you have that much cash, buy the land yourself, hire the contractor, pay him in draws either with your cash or a construction loan.

Ronald Rohde · Answer

This is not normal. Glad you read the contract though!

Jim Cummings · Answer

@Tammy Harper. Run FAST! Sounds like builder owns some land and would like you to finance construction of the buildings.

If after further due diligence - it looks more viable - set it up as a draw schedule based on percentage of work completed.

Tammy Harper · Answer

Thanks for the comments!!  We backed out of the contract and have already found another property.

Texas Quad-Plex... a scam or normal for new construction?

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