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Don,
Thanks for the email and quick response. I'll address in more detail later, I'm gong out of town again this morning, but I did call Alan Kent and you will have a copy of his standard construction agreement and a copy of the deed restrictions e-mailed today. Also please call Alan directly with any questions on the contract. Larry is his real estate agent for selling homes in this subdivision and i believe he is just helping him. Alan should be able to answer most of your questions for clarifications quickly. I don't need to be an intermediary. In case you don't have his numbers, he can be reached at his office at 281 376-1500 or cell 281 960-3749. We can discuss the other issues you addressed later when i get a chance to review them more carefully. We are comfortable with Alan as the builder and want him to build the house, we just want to have a remedy if things don't go well. Thanks, mike "Cheryl Bach" <cheryl@flex.net< on 02/22/2001 01:47:42 PM To: <mmccontex@aol.com< cc: <mike.mcconnell@enron.com< Subject: Unimproved Property Contract STIRMAN & KENNEDY, P.C. ATTORNEYS AT LAW COMPASS BANK BUILDING 25211 GROGANS MILL ROAD, SUITE 120 THE WOODLANDS, TEXAS 77380-2174 E-MAIL: stirman@flex.net WEB PAGE: www.flex.net/~snk DONALD S. STIRMAN, MEDIATOR CLIFFORD L. PARMLEY, M.D., J.D., OF COUNSEL JOSEPH T. KENNEDY ERIC R. HIRD KEVIN T. SHEA TELEPHONE (281) 367-5955 FAX (281) 292-7905 February 22, 2001 Via e-mail Mr. & Mrs. Mike McConnell 13451 Belhaven Drive Houston, TX 77069 RE: Proposed Unimproved Property Contract by and between Flair Construction Co., Inc., as Seller, and Mike and Chris McConnell, as Buyer Dear Mike: We have read and reviewed the above referenced Contract and your letter to us regarding same dated February 20, 2001. We want to respond to the questions and issues raised in your letter as well as make some suggestions and comments about the proposed Contract itself. First, the Contract being used is the standard type of Contract used for the proposed transaction. The Contract is promulgated by the Texas Real Estate Commission and is to be used by all licensed Real Estate Brokers and Agents. We are interested in knowing, however, if the Contract was filled out by Mr. Larry Williams of Prudential Gary Greene Realtors. If so, does Mr. Williams represent you or Flair Construction Co., Inc.? Please advise us accordingly. As we discussed, we think it is most important that you have the opportunity to read and review the Construction Agreement that Flair Construction Co., Inc. intends on using for the construction of your home. The fact that Flair is both the Developer, as well as the potential Builder, raises some issues. Usually, Builders have agreements with the Developer regarding the purchase of lots and building on same. Often, lots are reserved to certain Builders and if you purchase those lots you are required to use the designated Builders. However, often lots are free to be purchased by potential homeowners who then can choose the Builder they want. We are interested in knowing if the lots you are purchasing are actually reserved to Flair Construction Co. Inc., or is Flair just requiring you to use them to build your home since they are selling you the lots in question? As you point out in your letter, if you sign the Contract as it now reads, you are captive to the Builder and are not free to negotiate with other Builders. It appears to us that you will be one of the first homeowners in this new subdivision. We think it is critically important that you get a copy of the Deed Restrictions even before you sign the Contract to make sure that there are restrictions in place regarding the size of homes to be built, size of lots, etc. We want to make sure that your home is not horribly atypical for the neighborhood. We do not know if The Lakes of Sterling Gate Estates is in the City of Houston or within its extraterritorial jurisdiction. This is something you may want to find out as soon as possible. If it is outside the city limits, is there already a MUD district in place to provide water and sewer services? Since this is a brand new subdivision your concern regarding its future development and tax rate is very legitimate. Usually, until the subdivision is fairly well built out, the Developer controls the Community Association as well as the Architectural Control Committee. Therefore, if this subdivision does not take off you will be under the control of the Developer. We recommend in the strongest terms possible that you talk with recent customers of Flair Construction Co. Inc., to make sure that they were happy with the construction of their homes, as well as warranty work. Some Builders are far better than others as it relates to follow-up warranty work after their customers move into their homes. We normally recommend that homeowners do not move into their homes until all punch list items are completed to the satisfaction of the homeowner. The foregoing was our general comments regarding the proposed Contract. We will now make more specific comments and suggestions in chronological order regarding the Contract: 1. Paragraph 2. PROPERTY. As we previously stated, we think it is important that you acquire copies of the Restrictive Covenants and Deed Restrictions as soon as possible. You will be responsible to pay assessments to the Property Owners Association. Since Flair is both the Builder and Developer, you may want to ask Mr. Kent for an estimate of what your Community Association Fees will be. 2. Paragraph 5. EARNEST MONEY. We suggest that the earnest money be paid to the Title Company and not to Flair Construction Co. Inc. 3. Paragraph 6. TITLE POLICY AND SURVEY. (6) The standard printed exception as to discrepancies, conflicts, shortages in area or boundary lines, encroachments or protrusions or overlapping improvements is in your Owners Policy. In other words, the title policy does not cover these types of discrepancies or conflicts. However, if a survey is completed and an additional fifteen percent (15%) of the policy premium is paid, the title company will probably delete this exception. This is something you may want to consider. However, this cost would be yours to incur. If, however, it is subsequently discovered that there are such discrepancies and conflicts or shortages, then you will have title insurance coverage accordingly. 4. Paragraph 6. TITLE POLICY AND SURVEY, last paragraph. Make sure you are provided a copy of the Commitment for Title Insurance as soon as possible. 5. Paragraph 6. TITLE POLICY AND SURVEY B (3). It appears to us that the only survey you will be provided with by the Seller is one for the new recorded plat of the subdivision. Therefore, the Seller is not providing you a survey of your actual lots. If you were to have the standard printed exception as to discrepancies and conflicts deleted, we believe you would need a survey of your lots. You will have seven (7) days after you receive the Commitment and/or the survey to object in writing to any matters disclosed or you will be deemed to waive such objections accordingly. Therefore, please make sure that we have the opportunity to review the survey and commitment as soon as possible after you receive same. 6. Paragraph 6. TITLE POLICY AND SURVEY (6). We agree that this paragraph relating to the Sellers right to continue to show the property for sale should be deleted. 7. Paragraph 7. PROPERTY CONDITION: B (1). We suggest that this paragraph be checked and utilized rather than paragraph 7B (2) which states that you will be accepting the property in its present condition. Paragraph 7B (1) states that you will pay a fee, usually very small, like $100.00, for the unrestricted right to terminate the contract in the event the property is not suitable for the purposes for which you intend on using it. In other words, you can have whatever inspectors you deem necessary to look at the property to make sure that it is satisfactory for your home construction. We often suggest that an independent inspector be hired by the homeowner to inspect and review the construction of the home as it progresses. In addition, there may be some environmental issues or soil condition questions that an inspector might raise if given the opportunity. As the Contract now reads, you are simply accepting the property as is and have no right to send an inspector out to the property accordingly. 8. Paragraph 8. BROKERS' FEES. You may want an affirmative statement that you as the Buyer will not be responsible for or pay any Brokers' fees. 9. Paragraph 11. SPECIAL PROVISIONS. It is written in that the closing on these lots will be as soon as roads are in place or on March 1, 2001, whichever is later. However, we do not know what roads are being addressed and think that this sentence needs far more specificity. The second sentence regarding your obligation to use Flair Homes has already been addressed earlier. The third sentence regarding when construction must start should be revised to give you more time as you make reference in your letter. However, we also suggest that the Builder be put under an obligation to start construction within thirty (30) days after the date you notify him that you are ready for construction to begin. 10. Paragraph 13. ROLLBACK TAXES. If there was ever an agricultural or timber exemption on this property, you need to know. Otherwise, you will be obligated to pay rollback taxes on the property which may go back five (5) years. 11. Paragraph 18. ESCROW. As we indicated earlier, we believe your earnest money should be paid to the title company. In light of the fact that the earnest money is in excess of $50,000.00 and the closing date on the lots is somewhat uncertain, we suggest that you ask the title company to deposit the earnest money in an interest bearing account and that you receive a credit accordingly. Please call us after you read and review this letter. Very truly yours, Donald S. Stirman DSS/csb
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