Lay groundwork when buying from a builder


March 01, 1992|By ELLEN JAMES MARTIN

Planning to buy into a new home subdivision? Then, literally, do your homework.

You're naive if you think you'll be spared problems from the largely unregulated homebuilding business. A majority of builders are reputable, but the problems a minority cause can be heart-wrenching.

"All you need to get in the business is a pickup truck, a level and a friend at the bank," declares Carol J. Smith, publisher of Home Address, a newsletter focusing on customer-relations issues for the homebuilding industry.

Housing construction is picking up across Maryland. But, Ms. Smith says, too few buyers crowding into model homes these days are asking the tough questions they should when making so large a purchase.

"They get so excited by the newness and the glitziness of the model to worry about those negatives that pop up later," Ms. Smith says.

The most common complaints from new-home buyers involve problems with drainage, grading, landscaping, concrete cracks and exterior paint that cracks, fades or peels, she says.

New-home specialists offer five pointers on making the best new-home purchase:

* No. 1: Check out the builder's financial well-being before you commit.

"Things are looking better for the housing industry, but there's still no guarantee of a builder's stability. You have to be aware of the economic climate in which builders are working," Ms. Smith cautions.

A builder stretched too tight financially may be unable to pay his subcontractors and that could slow work on your home or bring it to a halt. In the worst-case scenario, which is rare, your builder might go bankrupt and abandon your home before it's completed.

Some builders will voluntarily provide you a profit-and-loss statement or other credit information, such as bank references.

Another way to get a sense of your builder's financial situation, Ms. Smith suggests, is to go to the subdivision where he's building and take the names and phone numbers of his subcontractors off their trucks. Then call them.

"The electricians, carpenters, roofers, and concrete people can tell you a lot about the builder -- how he runs his operation and his financial condition. They certainly know if he pays his bills," Ms. Smith says.

* No. 2: Talk to homeowners who have already done business with the builder.

Pick a Saturday, drive to the neighborhood that interests you, park your car, knock on doors and ask people what they think of their builder, Ms. Smith advises.

"I've done this and it's sort of scary at first. But after you've talked to a few people it becomes fun. Anyway, it's the only real way to find out how the builder treats his customers," she says.

New-home purchasers sometimes fail to realize they're buying not only a structure but a set of services, says William Young, director of consumer affairs for the National Association of Home Builders. Even a well-built house will require some minor corrections in the months after completion. Those who have already dealt with the builder will tell you how willingly and quickly he does such fixes.

"People who are happy with the builder will want to give the builder more business and people who are unhappy want to get even," Mr. Young says.

* No. 3: Look for a builder with the best possible home warranty.

Nearly all new homes offer some type of warranty but, as Ms. Smith notes, not all warranties are created equal. She considers warranties backed by insurance companies to be generally superior to builder-backed warranties that are only as reliable as the builder himself.

"The insurance program isn't a guarantee you're going to die and go to heaven with your new house but at least it's a safety net," Ms. Smith says.

* No. 4: Get everything your builder promises in writing.

Many new-home buyers go on oral agreements with their builders because they don't want to seem untrusting, says Mr. Young of the National Association of Home Builders. But the issue involves more than trust. It's also a matter of good communication. You may feel sure your builder's salesperson knows you've ordered the almond-colored kitchen appliances and forest green carpet. But chances are the order for your appliances and carpet will be passed on a time or two before they get to the person who actually does the buying. And the possibility of error increases with each step.

"If you don't have things in writing, you'll be whispering down the lane," Mr. Young says.

* No. 5: Monitor the building process or hire a competent inspector to do so.

One couple who failed to keep an eye on their new home in process wound up with a pinkish brick rather than the burnt red brick they thought they'd ordered. Another couple discovered, too late, that the slab for their garage had been laid at the wrong end of their new home.

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