| New Construction vs Existing How to avoid pitfalls when buying a new house. There's something very appealing about a brand new house -- you get to pick out the carpet, drapes and appliances, and have things designed just the way you want them. Too often, though, the advantages of new houses are overshadowed by problems such as shoddy construction and lengthy construction delays. Here are some suggestions on how to avoid problems. Choose the Builder, Then the House In the Twin Cities, there are many builders who can build the same house (your design or theirs) for the same price. Therefore, the most important factor in buying a new house is not what you buy (that is, the particular model), but rather who you buy from. In other words, don't buy a house -- buy its builder. To check out a builder, talk to: » Owners who live in the development you're considering or in a recently completed development by the same builder. If you are considering a development run by a homeowners' association, talk to existing owners -- association members -- and the board of directors. They are especially insightful sources of information. » An experienced contractor or home inspector. Have him look at the house you're considering for the quality of construction. If your house isn't built yet or is already finished, have him look at other houses the developer is in the process of building. When a house is being done, it's easy to see if construction standards are high or not. » County planning or building department staff who deal with local developers. For the best results, ask your questions positively. "Do Brady and Jones finish their projects on time, with few complaints?" will probably be answered candidly, but "Is it true Brady and Jones is a real shlock outfit?" might not be. » Call us, 30-40% of our business is derived from helping people through the new construction process. We are very familiar with most builders and know which ones have performed… and which ones haven’t! » The state or local licensing or consumer protection agency that oversees contractors, and the local Better Business Bureau. Ask about complaints filed against the developer. Keeping Track of Construction If the builder allows it, have your contractor or inspector give the home a once-over at least three times during construction: when the foundation is poured, when the framing is completed and when the home is finished. Have the inspector examine various systems as they are completed, including the walls, roof, plumbing, electrical and insulation systems. Even if the home is finished when you buy it, hire a home inspector to give it a thorough examination. Visit your home site periodically during construction and take the final walk-through to catch last minute cosmetic defects. Don't close escrow on a new home until the work is completed. Otherwise, you could find yourself moving into a mess. Upgrades…Everybody wants them Buying extras lets you semi-custom design your home. But ask yourself what you really need and how much it will cost. Upgrades often add 5%-20% to the cost of a new home. To get the most for your money, follow these steps: 1. Take Care of Essentials First Be practical. Make a list of necessities…. things you have to have in the house. Next add in all the options you would like that you will not be able to add later. For example, if you are trying to decide between 9’ ceilings and a fireplace, remember you can always add the fireplace, but you can’t change the structure without significant additional cost. 2. Investigate Warranties You've probably heard horror stories about new houses that begin to disintegrate soon after the buyer moves in -- the roof leaks, or the basement floods after the first big rain. This shouldn't be a problem if you buy from a reputable developer -- but not all developers are reputable. Your best bet is to buy from a developer who includes a new house warranty from an independent insurance company. Typically, they cover workmanship and materials for one year, plumbing, electrical, heating and air conditioning systems for two years and major structural defects for ten years. You can also buy a warranty on your own, but it probably won't cover major structural defects. A typical warranty begins at the end of the first year you own your new home and runs four years. It costs about $500 for a single family home, with a $50 deductible for each claim. These warranties are often of questionable value because, much like extended warranties on cars and appliances, civil remedies for poor workmanship are already in place. 3. Read the Contract Carefully Many new house contracts contain a clause saying that the model's features, such as carpets and appliances, are not necessarily the same brands you'll receive. You are guaranteed only the functional equivalent of what you see, which is typically different and costs the builder far less. Make a list of the precise features you're concerned about (with makes and models) and include it in your contract. If one developer won't accommodate you, shop elsewhere. 4. Get It In Writing When dealing with a builder's sales representative, get all promises as to what will be done, and when, in writing. Before you sign the purchase contract, make sure it includes all agreed-upon changes. If you've already signed the contract when you negotiate changes, write them down in a separate document. Don't rely on oral commitments, which are notoriously unreliable and almost impossible to enforce. 5. Protect Yourself Against Delays It's always best not to close escrow on a new home until the work is completed, or you could move in on top of late or unfinished construction. Some hot markets don't give you that option. If you agree to buy a house that isn't finished (or even started), you'll be asked to sign a very one-sided contract. You'll be given numerous deadlines (to make deposits, agree to design changes, get loan approval, sell your present house and close escrow), but the builder will have great leeway to deliver the house. Do what you can to negotiate a fairer deal. Most important, you want to establish a reasonable date at which you can cancel the contract and get all of your money back if the developer doesn't deliver the house. Again, get it in writing. Before escrow closes, inspect the house, and don't pay your money (close escrow) unless everything is complete to your satisfaction. |
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