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New Houses 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. New houses are sometimes priced more reasonably than comparable old ones, often come with amenities such as pools and tennis courts, require less immediate fix-up work and are more energy-efficient. 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 Developer, Then
the House 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:
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. Be Wary of Optional Add-Ons Many
developers advertise houses at comparatively low prices to get you to come out
and have a look. Once there, commissioned salespeople show you models loaded
with expensive extras such as spa, fireplace, high quality carpet and big master
bedroom. If you become seriously interested, the advertised price will rise as
the developer tries to sell you the extras. 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:
Be practical. More electrical outlets, a fenced yard (especially if you
have children or pets) and, in many areas, air conditioning, are day-to-day
necessities. A fireplace and hot tub are not.
Some developers are less ethical in pricing extras than others. Steer
clear of those who deliberately use poor-quality materials in highly visible
spots in their models, almost forcing you to upgrade to over-priced substitutes.
Ask for one free extra for every two you buy. For example, if you pay top
dollar for good carpets, tile and kitchen cabinets, ask the developer to throw
in a better stove at no charge. And don't be afraid to ask for the right to buy
and install extras on your own.
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.
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.
When dealing with a developer'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.
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 developer will have great leeway -- sometimes up to a year from the
target date -- 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. If you must close escrow because you need to move in, but significant and costly work remains, insist that the necessary funds be taken out of what you're paying the developer and placed in a trust account after escrow closes. Then ask for a written agreement stating that if the work is performed on time, the money will be released to the developer; but if it isn't, the funds go to you to hire someone else to do the work. If the developer refuses, at least make a list of what needs to be done, assign a completion date to each, and have it signed by the developer. If the developer fails to make a good faith effort to do the work, you may be able to sue in small claims court if you have out-of-pocket losses, such as rent or hotel bills because you could not move in on time. |
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