If you are building your own home, you are going to have to familiarize yourself with contracts. If you are acting as your own general contractor, you'll have to draft a contract for every single person working on your home, from the person who prepares the building site to the person who puts the final coat of paint on the walls. If you hire a general contractor, you'll only have to negotiate with him.

What is the purpose of a contract? A contract should button down and spell out all of your terms in case a dispute arises somewhere during the building process. A good contract should put down in writing specifically what you expect from the contractor, as well as the goods and services he is providing.

While many people put the contract away and never need to refer to it again, a contract can be a great reminder of what you and your contractor agreed upon. It ensures that everyone starts off on the right foot when it comes to communication.

In most cases, your contract will have a standard contract. Before you sign a contract read it very carefully, and have your attorney review it. Remember that contracts are legally binding documents. The project's price, payment plan, and the scope of the project should all be clearly spelled out. A good way to figure out if your contract is clear it to imagine a third party reading it. Would it make sense to them?

A contract should always include the following:

• Names and addresses of all the parties involved.

• The contractor's license and type.

• Workers' Compensation info, including policy number.

• Tax ID, or if your contractor doesn't have one, social security number.

• Location where the home is going to be built.

• Job specifications.

• Price and terms.

• When the project will be completed.

• Warranty information.

• How the parties will proceed if a conflict arises.

• Signatures and dates.

Remember, a good contract is an excellent way to open the path of communication, and ensures that conflicts that may arise down the road are more easily resolved.