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10 ways to reduce new-home hassles
Buying a brand new house can mean dealing with shoddy construction. Here's how to protect yourself -- and fight back if need be.
Buying
a brand new home? Be prepared for less than perfection.
About
15% of the 2 million dwellings constructed each year in the United States have
at least one construction defect that demands repair, says Alan Mooney,
president of Criterium Engineers, an engineering firm with offices in 35 states.
Criterium's primary business is new-home inspection.
Buying
a new home is a scary process.
Shoddy
construction, however, is getting a lot of public attention and some people
think the situation is getting better, thanks in part to warranties and other
kinds of insurance that builders must carry.
"It's
an economic issue. The insurance industry is pushing the home-building industry
to adopt quality standards, otherwise the costs are just enormous," says Mooney.
If
you're considering buying a brand new house, here are 10 ways to make sure it
comes closer to being your dream home rather than a repair nightmare.
1. Deal with a
reputable builder.
There's no national rating service, but marketing information firm J.D. Powers
does compile homebuyer opinions on the quality of the nation's largest builders
(35% of all homes are built by the top 10 largest builders). It's also wise to
talk to people who have bought new homes built by the same builder, particularly
those who've lived in houses two or three years. That's when problems are likely
to surface.
But don't be surprised if people aren't very forthcoming about a builder's shortcomings. Out-of-court settlements and arbitration agreements routinely prevent litigants from talking about the outcome of their cases. And in any event, People fear that revealing defects will have an impact on their home's resale value.
2. Check into
warranty coverage.
Ask the
builder if he provides a builder's warranty backed by a third-party insurer. If
he says no, that may be a good reason to look elsewhere.
3. If there is a
warranty, find out who backs it.
Some
large home builders offer their own 10-year warranties. As a rule, this type of
warranty is not as good as an independent warranty because the builder has more
at stake financially. If the builder is faced with multiple defects, a likely
scenario when every house in a development is built the same way, he'll have to
spend a lot of money to make the repairs.
4. Opt for the
expensive policy.
If you
have a choice of policies, choose the more-expensive one if it will replace
faulty equipment, give you a choice of repair people or allow you to transfer
the warranty to someone who purchases your home. These are all
features worth paying extra for.
5. Understand how
disputes will be resolved.
A
contract provision requiring that any disputed claim go to binding arbitration
is common. Arbitration has drawbacks -- it's a process of compromise -- but it
costs much less and takes less time than hiring a lawyer and going to court. If
you are opposed to the arbitration process and the builder or warranty company
won't take the arbitration clause out of the contract, the activist group
Homeowners Against Deficient Dwellings (HADD) suggests you note that on the
contract in case somewhere down the road, you want to appeal an arbitration
decision.
6. Have the home
inspected.
Hire a
knowledgeable third party, preferably an engineer, midway through the
construction process and again just before you go to settlement. If there are
defects, at settlement withhold money that will be paid once they are repaired.
HADD also advises putting all requests for repairs in a separate document and
mailing them to the builder, the warranty company and your lawyer to document
your attempts to purchase a well-built home.
7. Document all
problems.
After
you move in, photograph and document any and all problems. You may need this
evidence later. Be particularly aware of the 11-month anniversary of your
homeownership; at one year, the builder is often out of the picture. Take stock
of any problems and send the warranty company and the home builder written
notification before the first year passes.
8. Read the
warranty policy carefully.
Understand what's covered so you avoid making repair requests that the warranty
company will deny. If you call your warranty company and it sends out an
investigator, there will be a $50 to $75 charge if the problem you called about
is deemed outside the warranty -- and the problem won't be repaired. So you'll
be faced with finding a repair person and paying for both the repair and the
warranty company's fee.
If you
think you're right and the warranty company is wrong, don't be afraid to stand
your ground. First, ask to speak to the supervisor or the underwriter. If you
don't get satisfaction, hire a licensed engineer to analyze the problem. It will
cost you $100 to $150 per hour, but for a major problem, that's small change.
9. Consider going
to court.
If you
don't have a warranty, but you do have problems that the builder won't repair,
Packard suggests that you consider small claims court. He says that's often the
most expedient way to get some satisfaction. Because small claims courts handle
so many of these cases, mediators understand the most common problems and handle
them expertly.
10. File
complaints.
Let
everyone know that you are unhappy with your builder, including state building
and regulatory authorities, the contractor-licensing board, the Better Business
Bureau, state and local consumer-affairs departments and your state attorney
general's office. The squeaky wheel gets the grease.
