New Construction

 

There are several issues that require special attention from those who are considering buying a new home from the builder.

Who is the Builder

You need to make some attempt to evaluate the builder you will be working with. This is particularly important if you are going to work with a builder in the construction of a custom home, but it is still significant if you are buying a completed tract home. You need to have some sense of how easy the builder is to work with, whether they build good homes, and how they deal with warranty issues after the construction and sale of the home is complete.

Home Warranty

You need to evaluate the warranty language itself. Warranties offered by builders in this area vary widely. Some cover the home for a year after closing. Others cover some parts of the home, typically structural elements, for 10 years. Some cover concrete flatwork (e.g., basement floors and driveways) if there is differential movement of a 1/4-inch or more. Some explicitly exclude any coverage of flatwork. I wouldn’t make a buying decision solely on the basis of the warranty, but you need to know what the warranty covers before you sign.

Title Insurance

You should insist that the contract allows you to obtain an “owners extended coverage” or “plain language” title insurance policy with mechanics lien protection, whether you pay for this coverage or the builder does. If material suppliers and subcontractors who helped build the home do not get paid by the contractor, they can record liens on your home and you may have to pay them. Unless you want to pay for your house twice, transfer this responsibility to the title company through an “extended coverage” policy. If the title company refuses to provide this type of policy, they may have doubts about the builder’s financial status. So should you.

Plans vs. Reality

As the construction proceeds, do your best to monitor the correspondence between the house that is specified in the contract and what is actually going up. As busy as builders sometimes are, it is very easy for them to overlook the fact that you wanted a skylight in the living room, an extra 220 outlet in the garage, or even an additional bedroom.

Get an Inspector

Have the home professionally inspected just as you would with a resale home (see Home Inspectors). Most people do not have new homes professionally inspected, relying on the builder’s construction supervisor and the city or county inspector to assure them that their home is done right. This is a mistake. Even  with the best builders, professional inspectors routinely find significant construction defects. We’ve found new homes where a bathtub drain was not connected, where heating ducts were not connected, where ceiling insulation had not been installed, where soffits and siding were not installed, and where floor joists had been sawed through to run heating ducts. At a minimum, have the home inspected before your final walk through with the builder. You should also consider an interim “pre-drywall” inspection when the electrical, plumbing and heating systems are in but the drywall that covers them up is yet to be installed. This allows the  inspector to help the builder correct some mistakes before it becomes prohibitively expensive to do so.