How do I find a good builder

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Insurance-Warranted Homes A different kind of warranty is offered by a large group of builders nationwide. This is a warranty backed not only by the builder but also by an insurance company. Typically under these policies the builder continues to warrant the house, but the insurance company backs up that warranty. In addition, it often offers a plan that changes with the years the house is in existence, offering greater protection in the first years and less in the later ones. Many insurance-backed warranties are transferable. However, there may be limitations and exclusions. Usually under these plans, your first recourse is to seek a solution to the problem from the builder. If the builder does not or is not able to comply, the insurance company picks up the tab for covered items after a deductible is paid.

Should I Get a Home Inspection? Yes, as noted above. Just because it’s a new home, that doesn’t mean it’s built right. You should have it inspected both before you move in, and if possible, several times during the construction phase. Agood builder will not only allow you to do this, but will encourage you to do it. A professional home inspector (see Article 15 on finding one) should be able to give you all sorts of help here. You’ll want someone with strong construction background who can check everything from the pouring of the foundation to electrical, plumbing, roofing, drywall, and finishing. Don’t make the mistake of confusing “new” with “good.” Yes, it may be good work . . . but then, again, it just might not be.

How Do I Find a Good Builder? Most of us simply shop houses. We go from tract to tract trying to find the new home that will be just right for us. It’s also important, however, to shop builders. As should be evident from the discussions on shoddy workmanship and on warranties, a lot depends on the builder. You want a builder who does good work and who has the means to back it up should any unforeseen problems arise. Here’s a checklist to help determine the quality of the builder:

Checklist for Selecting a Good Builder  How long has the builder been constructing new homes? (Longevity is always a good sign.)  Can you get a recommendation (or a condemnation!) from a relative, friend, or associate who’s previously had dealings with the builder?  Check with the Better Business Bureau. This organization normally keeps complaints filed against businesses. Does the builder have many complaints filed?  Check with any consumer groups active in the area. Also check with the local office of the National Association of Home Builders. Your builder may be a member of this group and it may be able to give a recommendation.  Find out where the builder has previously built new homes. Go to the tract and knock on a few doors. Simply say you are going to be buying a home from the same builder and you would like to know if those who bought

before had any difficulties, such as shoddy work or reluctance to fix problems. Don’t be embarrassed. Homeowners love to talk about their builder. Either she’s wonderful and has done a marvelous job. Or he’s been a disaster for them. Just be sure you talk to more than one person to get a balanced viewpoint.

Can I Negotiate Price with the Builder? Now we come to the tricky part for many new home buyers: negotiating with the builder. Here many who purchase a new home are completely lost, signing anything and everything that is placed before them. Just as with purchasing a resale, when buying a new home everything is negotiable. The problem with new homes, however, is that the builder is often tied into financing and labor and materials contracts so that he or she cannot really offer the flexibility that an owner of a resale can. Typically when buying a new home, you are presented with a colorful and expensive-looking brochure that gives the floor plans of the various models that the builder is offering. Along with these is usually a price schedule. For Plan A the price is $185,000 until January 2, when the price goes up to $187,500. For Plan B the price is $235,000. For Plan C it’s $268,000. And so forth. In addition, there are premiums for better lots as well as additional costs for upgrades, as described earlier. Thus the prices are laid out in the same fashion as they are in a grocery store. You certainly can’t bargain with the grocer over the price of a jar of mayonnaise. How do you bargain with a builder over the price list for a new home?

It’s important to understand that builders and developers like to create the impression that nothing is negotiable either you take their price or you don’t get the house. That’s part of the reason for the elaborate brochures. The truth, however, is that builders are real estate sellers just like any other. When builders need to get rid of homes, they will negotiate down to the bare bones, regardless of what the brochures say. The way you negotiate with builders is to say that you would “like to submit an offer on one of the houses.” The tract salesperson should be a licensed real estate agent and he or she, acting as a fiduciary for the builder, should submit all offers (unless the builder has stipulated in writing that no offers be submitted below a specific price an unlikely possibility). Abetter way is to have a buyer’s agent do the negotiating for you. However, here you could be liable for a commission. The easiest way to negotiate is to find a builder who already has houses up. This builder is paying a hefty finance charge each month that the houses remain unsold. This builder is highly motivated to sell the property. However, as noted, builders may not have a lot of wiggle room with regard to price. They usually have enormous flexibility, however, when it comes to upgrades. Yes, you’ll pay their price, but you want an upgrade of carpet at no additional cost to you, and you want a self-cleaning oven instead of the standard oven included with the home, and you want floor-toceiling mirrors in the bathrooms, and so on. Remember, the builder gets the upgrades wholesale. If he or she simply passes them on to you at cost, it probably won’t be a hardship to the builder. And it could save you thousands. On the other hand, don’t expect the builder to budge when the market’s hot or when the houses haven’t yet been constructed. In this case, there’s no leverage on your side. Why should the builder accept a lower offer when there are other buyers willing to pay full price or when the builder hasn’t even put up the houses and isn’t paying interest on them?

Don’t Forget to Bargain on Terms This is often the case when interest rates are higher and it’s difficult for buyers to qualify for mortgages.

The builder may be willing to “pay down” the mortgage by several points. For example, you’ll get the mortgage. However, instead of paying the going rate of, say, 9 percent for the first 3 years, you might pay 7 percent, with the builder paying the other 2 percent. On a $200,000 mortgage, 2 percentage points can save you roughly $4000 a year in interest payments. But beware of builders who pay down the mortgage just to raise the price by an offsetting amount. In the above example, you would save close to $6000 over a three-year buy down. But if the builder raised the price of the property by $6000, where would your savings be? You’d be converting a lower payment into a higher price. And after the first three years, you’d be paying mortgage interest on that higher price. In most cases, a builder won’t buy down an interest rate unless the houses have been sitting around for awhile and interest rates are keeping buyers away.

TIP CHECK FOR THE ORIGINAL

PRICE By talking to those who bought six months ago in the same tract, you should be able to establish what the original pricing was. Thus you can determine if the builder has raised the price to pay for your buy down.