By Bob Lovelace
Professional Real Estate Inspector #384
IRC Code Certified Building Inspector
I'm asked all the time for advice on buying a new home. Questions such as: "Who's the best builder?", "What should I watch out for?", " What upgrades are really worth the money?" are just a few of the most popular ones. I decided to put together this guide to hlep those of you either contemplating building a new home or those who have already started the process. I'm sure even buyers of pre-existing homes will find something they can use in this guide. Our goal is to inform and educate you, the home buying consumer, about the home building process. Along the way I'll try and help you from falling prey to some of the pitfalls that are out there waiting on a new home buyer. This is what we do as Home Inspectors in Houston.
Picking a Builder
Since the vast majority of new home buyers are buying spec homes, this is where I'll start.
There is no "best builder". I'm not aware of any builder in the Houston area who have their own workforce. Builders bid the work on their homes out to the cheapest bidder. It's not uncommon for one sub contractor work on a starter home one week and then the next week you might see them on a high end luxury home. I see it happen all the time.
I have seen a great difference in the quality of homes built by the same builder in different sub-divisions, even homes next to one another. The only difference these homes had was that different sub contractors and/or Superintendents were used!
If you listen to the marketing hype put out by most builders, you'll think there are old world craftsmen carefully cutting and placing each piece of lumber by hand. Nothing could be further from the truth. Don't buy the hype. From my experience, there is no one builder head and shoulders above any other and I've seen most, if not all in the Houston area. The only difference between many starter homes and the larger homes is the size and curb appeal. Look beyond the cosmetics and it's almost impossible to tell one builder from the other.
Whether you're buying a starter home or a high end dream home in a gated community, a bigger price tag does not insure quality. In fact, a larger home usually means far more problems. The problem? The same subs who work on the starter or intermediate homes get the bid to work on the larger homes. Many do not have the experience to handle complex roof lines and other designs that go into these larger homes.
One person who has some control over the quality of your home is the Superintendent. Getting a good Superintendent is like rolling the dice. You'll probably not be allowed to pick the one you want. If you get a Superintendent who really cares about the quality of their work and is easy to get along with, chances are you may come away with a decent home. Get one that could care less whether or not the home gets built correctly or is a pain in the butt to work with, your chances go downhill from there.
Your Superintendent needs to be on the site every day. The problem is, many of them are overworked. They may be saddled with as many as 15 homes to build at one time. Talk to other home owners in the sub division who have had homes built by the builder you are looking at. Ask who the Superintendent was. Don't be alarmed if you find out that the Superintendent does not work with the builder any longer. It's a high pressure and high turn over job and many Supers don't last. I've had clients have as many as 5 different Superintendents on one home. Hopefully you can see now how quality suffers during the building process.
Talk to the Superintendent who will be building your home if you can. You want to get along with the person building your home and you will have to trust him/her. I personally have a problem with builders who do not let you talk to the Superintendents. This is their way of keeping you out of the loop. Don't buy the excuses such as: "We don't let the customers talk to the Superintendents because we want them focused on their work and not be bothered". These type of builders will probably have you dealing with the Salespeople. The job of the sales force is to sell the homes, not build them. Many times when I'm dealing with these type of builders, the builder stipulates that all paperwork must go through the salesperson then to the Superintendent. More times than not it is delayed in getting to the person who really needs it, the Superintendent or it is "lost". Salespeople sell homes, they don't build them. It is in your best interest to have an open line of communication with the Superintendent.
Try looking the builder of your choice up on the Better Business Bureau web site. You'll be surprised at how many have unsettled complaints against them. You will also be surpised at how many are not even members! This should tell you a thing or two. Don't fall for the hype about being listed high in the rankings of some survey company like JD Powers. These rankings mean very little over all. I've had many clients tell me that the builder was willing to do something extra if they would give them good marks on one of these surveys. One client was offered sod for her backyard and another was offered gutters at the sides and back. The outcomes of these surveys and "awards" can be manipulated and are generally worth about as much as the plaque. Never choose a builder simply because they received high "Customer Satisfaction" awards or other gimmicks.
Click Here to read an article on this very subject from HousingZone.com
I'm no expert in the area of builder contracts. This is why it is in your best interest to obtain the services of a real estate agent. Agents cost you nothing and can save you a lot of trouble down the road. Just as you picked your builder carefully, you should also pick your agent wisely. There are still agents out there that believe new homes do not need inspections just because they are new. If your agent tells you that, you need to look for a new agent! This would be the first clue that your agent is uninformed about new homes.
It is also a good idea to have a real estate attorney look over your contract. The simple fact is: Builder contracts are written in favor of the builder! By signing the contract, you are signing away many of your rights as a consumer. More than likely you will also be signing away your rights to sue the builder if you have future problems. A good attorney can tell you everything your signing away.
If something happens during construction that makes you want to walk away from the home, you may lose all of your downpayment and upgrade money. We've had clients lose thousands of dollars because of construction discrepancies that the builder was unwilling to correct. It doesn't matter who's fault it is, if you walk the builder gets to keep your money most of the time. If they tell you different, get it in writing! You should ask your builder out right what happens to your money if you decide to walk. Ask them to point it out in the contract as to what happens. We've had more than one case where the sales people told my clients that it would be easy to walk away with their money. It wasn't until later when problems arose that they found out the contract was written so that the builder keeps any and all money if they walked!
If you have future problems with your home and the builder is uncooperative in correcting these problems, your course of actions may be limited by the contract. The contract may hold you to binding arbitration. Few consumers win in arbitration. You have to foot the bill. Arbitration can be as costly or in some cases, more costly than the courts. Expect to lay out 5 - 10,000 dollars to get started. There is a new law that will be going into effect in Texas. This law was pushed through by the builders and the politicians that the builders control. In the future, or now in the present (depending upon when you read this) you will be required to file a complaint with the Building Commission. Of course, builders control this commission also. You will have to follow certain steps during the complaint procedure. Should you fail to follow all these steps correctly, you case will be thrown out and you'll have to start all over. You may even be fined for not being a good consumer and following all the steps properly! Should you follow all the steps and you make it to the commission, you will find out that the builders liability is limited. The word on the street now is that the limit may be around $5000. I bet they won't tell you this before you sign the contract!
Hiring a consultant/inspector
Okay, I'll admit it. I'm a little biased when it comes to a consumer hiring a consultant or inspector. I think everyone should hire their own inspector. I would love it if everyone hired us to do their inspection for them also! In reality I know we are too busy to serve every consumer and I know our kind of inspections are not for everyone.
The inspector may be the only person in the whole deal who is working for you. Everyone else has something to lose should you decide not to go through with the purchase.
Who ever you choose as your inspector, they should be IRC Code certified. There are several inspectors in the Houston and surrounding areas that have achieved these certifications. Beware of inspectors who say they are code certified by some other agency. The Texas Building Code is the International Residential Code (IRC), The National Electric Code (NEC) and the Energy Code. CABO, SBCCI, IBO and other agencies do not exist any longer and their codes were not adopted by the State of Texas.
The inspector should give you a narrative type report. Checklist type reports tell you very little about what is wrong with your home plus they are vague. Get a sample report from the Inspector you choose. If they will not send you a sample, move on. It's likely they are hiding an inferior report from you. No matter how good the inspector is, if he can not put discrepancies down in writing so that you and builder know what's wrong, it does you little good.
Experienced inspectors with good credentials don't come cheap. Many of us are booked up a week or more in advance. This is why it's very important to give your inspector as much notice as you can before you want the inspection.
Builders realize that it is difficult to schedule an experienced inspector in a day or so. That is why they will want until the last minute to tell you to get your inspector out to the site. This is just another little game they play to keep you out of the loop and un-informed.
Games Builders Play
The above mentioned "wait until the last minute to tell them we're ready" is by far the most popular game builders like to play. Remember, they are selling you the home. They have a lot to lose if you bring in your inspector and find flaws that need fixed. I get a kick out of builders who tell the client that "We don't know when we'll be ready, we don't work on a schedule like that". Really? Builders know exactly when they will pour your foundation. You don't just call up Average Joe's Concrete and tell them you want a pumper and load of concrete out at the home at 5 a.m. You also don't call up the foundation subs to tell them "be out at 123 Main St. in the morning, we're pouring a foundation". All this takes planning. They know, but they don't want you to know. The same is true for the sheetrocking of the home. Subs have to be scheduled, sheetrock has to be ordered to be on site. Don't fall for this game. If they try this with you, simply ask them when have they scheduled delivery of the concrete, drywall, etc. Ask them if they have already scheduled the subs for the work. Let them know up front that you expect a week's notice before they pour the concrete and before hanging the sheetrock. We constantly have builder that move from one phase to another without telling the clients. Their reaction is "Well, we couldn't wait". You have to wonder what was so bad that they would risk upsetting the client over by not telling them. Once it's covered up, we can't see it!
"You don't need an inspection on your home, we have our own quality assurance inspectors" or " You don't need an inspection, the city does if for you" and "You're wasting your money by hiring your own inspector. These Inspectors will find any little thing to justify their fees." The truth is, it's not what a professional inspector finds that justifies their fee, it's their experience, credentials and time. I only wish I could charge by the things I find during an inspection!! I'm the happiest when I find the least amount of flaws. It means a short report for me and a happy client. It seldom happens though.
Builders who try and talk you out of hiring your own inspector by saying they have their own "Quality Assurance" inspectors are like used car salesmen who tell you they you can't take the car to your mechanic to be checked out because they had their own mechanic check it out. Many quality assurance inspectors are not even code certified or licensed. Also, when a builder tells you this, ask to see the complete report generated by the "Quality Assurance" inspector. Also ask to see that Inspectors license number. I doubt you'll ever see it. If you do, compare it to one of V.I.P. Home Inspections reports and see who's report you want to rely on.
There is one builder that tries to require you to have a CABO Code Certified inspector if you wish to have your home inspected. As stated above, CABO does not exist any longer, plus they want your CABO certified inspector to inspect to 1995 Code! Wow, have your home inspected by a code that doesn't exist any longer and is 8 years old. This just goes to show you how much many builders and their sales people really have a grip on quality construction. Heck, they don't even know what standard they're suppose to be building too!
A couple of builders now are trying to make the inspectors jump through hoops to inspect their homes. If the builder tells you that you have to use one of the inspectors from their list of "Preferred" inspectors, watch out! Unfortunately there are several builders who are now recommending my company, V.I.P. Home Inspections. They are using the age old tactic of "reverse psychology". They know most consumers are too smart to use an inspector that is recommended by the builder. This way they are almost assured it isn't us coming out inspecting their homes. You, as the consumer, have the RIGHT to have your home inspected by an Inspector of your choice. When the builder tries to put unrealistic obstacles in your or your inspectors way, it is just another example of them trying to keep you out of the loop and uniformed. Ask before you sign the contract if you can have the inspector of your choice inspect the home at any time. Get it in writing!
The U.S. Government has a "Uniform Commercial Code" that stipulates you have the right to inspect any goods before purchasing. There are several builders now that will try and require you to use an inspector off of their "Preferred" list. The builder "prefers" them for a reason! The Texas Real Estate Commission is the only folks who can decide who may or may not inspect homes, not the Builders.
Upgrades, Change Orders and Profit
Generally when it comes to change orders or upgrades, there are two types of builders. Those who may do it and those who will not at any cost.
Some builders love change orders and upgrades. It's pure profit for them. They know they don't have to put these things into your home and they know you want them. They can ask any amount they want and many times they do.
You will find that if you can wait, you can usually get the same work done far cheaper than what the builder wants to charge you for. There have been many times that my clients have had their yards sodded by the same landscaper their builder used for less than half of what the builders wanted to do it for. All they did was talk to the landscaper on the weekend and make an appointment to have the sod added. As a consumer, you'll find many things are a lot cheaper "by going to the horses mouth".
One upgrade I think is very important is some type of radiant barrier in the attic. TechShield or Polar Ply is an option most builders offer, and according to my clients, it's well worth the cost.
Your Responsibility as a Home Buyer
Before signing a contract to build with a builder you should step back and ask yourself some tough questions. These questions will help you become prepared for situations that may arise during the construction process.
Some questions you should ask are:
1. Will I sign a contract with a builder that may keep all my up front money if I decide to back out of a home?
2. What will I do if serious defects are found during construction and the builder refuses to fix them? Can I walk away, possibly loosing all my upfront money?
3. What things will I not compromise on? When will it be time to draw the line with the builder concerning time tables and construction defects.
4. What upgrades can I live without? Are the upgrades I really want going to increase the value of my home, increase my comfort or both? Will it be worth financing these upgrades over the life of the loan? ( a $1000 upgrade can really add up over time)
5. If it comes down to closing time and my home is still not satisfactory, will I have the will to put off closing? For a week? a month? two months?
6. Do I just have to live in this subdivision? Many times the price of the same model will change depending upon the neighborhood. Perhaps you can save several hundred or thousand dollars by choosing another subdivision.
These are just a few questions you should ask yourself. Hope for the best but be prepared for the worst. I see some of our clients "settle" for a home just because they have their hard earned money invested in the up front money and into upgrades. They either can not afford to walk away from a money pit or don't want to lose their upgrade money. You retain the most control and power over the building process when you can turn around and walk away from a bad home.
You should be diligent in researching the builder you want to build your home. Here a few tips that will help you.
* Be diligent in your research. Look at the BBB and other consumer groups for builders with good records.
* Do not buy more home than you can afford. What if your company downsized or cut your pay? Could you still afford this home?
* Pick several floor plans from the builders on your "preferred" list. Visit the same model in different neighborhoods. You should never settle on a design just because you looked at the model home and think your home will look like it.
* Ask your salesperson if you can communicate with the Superintendent or Site Supervisor. If they say "Yes", ask for the Superintendents/Supervisor's name and number right then and talk to one. If they hesitate or refuse, that should be your first red flag.
* Ask the builder how they handle disputes. Get it in writing.
* Ask to see the warranty. If they refuse to let you see the warranty up front, that should be red flag number two.
* What was the area before the builder started building? A swamp? farm field? toxic dump? car lot? County records or the appraisal district may be able to help you research the area that your interested in.
There are many other groups out there waiting to help potential home buyers. This Guide may seem a little on the negative side. Living in a money pit for 30 years can be a real bummer. I see unhappy homeowners on a regular basis. Many failed to do proper research before building. Contact groups such as Homeowners Against Bad Builders (www.hadd.com), Home Owners for Better Building(www.hobb.org) and others. These are consumer protection groups that can give you more helpful advice before signing you name on a contract with a builder. They also have helpful information in case you ever find yourself in a situation where you need to get the builders attention.
This guide and other information will not guarantee you a defect free home from now to eternity, but it will help you go into the buying process more educated. A more educated consumer is one who typically has fewer problems because they have planned ahead.
Good Luck on building your new home!
(c) 2005 Bob Lovelace