WHAT TO KNOW BEFORE BUYING FROM A BUILDER

FIVE NEW HOME BUILDER TIPS:

"Caveat Emptor", or Buyer Beware applies whenever you purchase a home.  It can be especially pertinent advice when dealing with new homebuilders.  Although most builders are very reputable and have operate under sound business practice for years, you do not want to find out the hard way which one you should have avoided.  Therefore -

 

TIP 1:

Know whom you are dealing with before selecting a builder.  Review each builder´s qualifications thoroughly before signing a contract with any builder. 

-         Ask your Realtor for input.  Although your broker will not likely degrade any builder, your agent should be able to provide you with a synopsis of experiences that will be helpful to your selection.  Ask you Realtor for a copy of recent "Buyer Satisfaction Reports" from local newspapers.  At least annually, top production homebuilders are ranked for customer service, design and value.

-        Check with city and county building as well as planning departments to review the builder´s license.  Be sure to have the builder to provide qualifications, including examples of previous work and references.

-        Check consumer-advocacy groups like the Better Business Bureaus

-       Visit owners of other homes the builder has built.

-       Ask the builder for a complete list of sub-contractors the will be working on your home and repeat your investigation.

 

TIP 2:

The increased amount of earnest money and pre-paid items typical builders hold results in many thousands of dollars of your money being "at risk" in the event you have a problem with your builder during the eight to ten month construction process. 

 

Most custom builders deposit your earnest money and pre-paid funds into their general business account.  They then use your funds to pay construction invoices along the way.  This business practice is obviously not in your best interest since your funds will be spent along the way.  Therefore, before you select a builder, verify that ALL of your funds will be held in an escrow account maintained by a third party such as a title insurance company or your Realtor´s Brokerage trust account. 

 

Production builders typically work wit larger financing budgets and will readily agree to place your funds into a third party trust account.

 

TIP 3:

Know how to read the swell potential soils report or find someone who does.  Some Realtors know how to read and interpret the soils test graph while others do not.  If your agent is not able to assist you, try contacting the engineering firm that preformed the test.  Remember, the firm was paid to complete the test for your production homebuilder´s benefit and owes you no duty of discussion or interpretation.  The soils test issue becomes much more complex with custom homebuilders.  New home custom builders typically require payment for the soils test outside of their building process, as well as requiring your earnest money deposit to be non-refundable in the event the test results are not acceptable to you. 

 

(It is always far better to walk away from your deposit and the testing fees than to buy a property that has too high of swell potential.)

 

TIP 4:

Know how water will drain on to and off of your property.  The most costly damage you will ever likely incur to your home will be from poor drainage issues.  Even if no visible water enters the basement, homeowners can easily sustain thousands to hundreds of thousands of dollars of damage because of poor drainage.  Foundation damage as well as mold and stucco damage can occur.

(Also see: Mold Mold Mold And You and Help Yourself To A Healthy Home)

- You can eyeball the lot from adjoining lots to get a good idea of how water will drain.  Also, look for pooling water near the foundation.

-  If the lot you are considering does not have naturally drain, find another lot.

- Builders typically do not finish final grading of the lot until the home is complete.  As a part of your final walk-through, be sure your home has been graded to insure at least 1" of drop for every foot of distance travel away from your foundation.  Ideally, a 2" drop for every foot would be even better since loosely compacted soil near the foundation wall will settle in a few years.  The positive grading should extend at least eight to ten feet away form your foundation for best prevention of future problems.

(Also see Your Expansive Soils - Bentonite Guide)

 

TIP 5:                                       

Understand all aspects of the contract before signing.

-        Who can you and your agent communicate with during the construction process?  Some production builders specify your only contact can be with the on site sales person.  This person has no authority to do anything for you be is a wonderful filter for the builder´s benefit.  You may want to delete any such language from the contract.  In the event of problems, you/and or your Realtor should have authority to contact the decision maker for the builder directly.

-        What happens in the event the home is not finished when expected?  Many builders refuse to give you a firm completion date until they think they are within 30 days of completion.  If possible, try to include delay penalty language in your agreement.  

-        Can you have your own inspector conduct independent inspections throughout the construction process?  Ideal times to have your own inspections are before drywall to check electrical, plumbing and structure soundness as well as just before delivery (also see Hiring a Home Inspector)

 

These are just a few important points to consider before buying a new home.  Ask your Realtor as well as an attorney for additional considerations before finalizing any relationship with a new homebuilder.