How do I check a home builder’s backlog before buying?

A home builder will often tell you the year is already full. That may be true, or it may be a hope. A backlog is work you are contractually bound to deliver, not work you expect to win. The glossary entry on revenue backlog gives the term. This page is about how to test it in a builder.

Signed against spoken

Ask for a list of every job with its contract, the date signed, the scope and who the client is. Sort it into three piles: signed and started, signed and not started, and conversations that have no paper. Only the first two are backlog. Ask what happens if a client with a signed contract walks away before breaking ground.

Deposits and work left

For each home under way, ask how much the client has paid and how much work remains. Ask how deposits collected compare with work completed, and ask your lawyer who would be responsible for finishing each job after a sale. Ask where deposits sit, and whether they were spent on other jobs. Your accountant can read the statements with you.

Cost to complete and change orders

A fixed-price home can look healthy on paper and still lose money to finish. Ask for the latest estimate of remaining costs on each job, who prepared it and when. Review change orders approved and those still argued over. Disputed extras are a common source of friction after a sale.

Clients tied to the owner, and the agreement

Ask which clients signed because of the owner personally, and whether they have been told about the sale. The purchase agreement can deal with homes in progress: who finishes them, who answers for earlier work and what happens to deposits. Your lawyer will draft that, so raise the list early.