I would like to warn everyone who is looking at or about to build a newly constructed home. This may apply to those of you who have already started the process.
I am a realtor and a consumer. I have had several experiences with builder contracts and warrantees that I feel are very important to share.
I originally come from New York, which is an attorney state when it comes to real estate transactions. Most are not able to ask the correct questions themselves, nor advise clients correctly. It is a matter of being there yourself, or knowing a lot of new construction home buyers.
The following is a brief list of must-ask questions prior to signing a contract for new construction. You can also take the contract prior to signing to have an attorney review it to see if the questions you have are covered in the contract or warrantee document, and what they mean.
Escalation Clause - This means that the builder can increase your price without you knowing what the price will be until the final walkthrough. I have heard of increases as high as $33,000, and that's a lot of money to come up with when you're thinking you will be moving into your new home in the next few days.
Extreme care must be given to this item during the contract process. Some builders will not call it an escalation clause and it may be hidden in the contract so that you may not see it. Be careful when addressing this issue.
Warrantees - Most people ask what is covered and the standard is for sales people to say is a "one full year" builders' warrantee. This would lead me, and most people, to believe that this means everything. Wrong. Most will not cover cracked tile. This is the most common item that I have seen. I guess this would mean "one full year" with exceptions. I find it easier to ask what is not covered and this seems to cut through the smoke screen faster.
Charges and Extras - This is an area of the contract which states the builder can charge for changes and extras made during the construction. Watch for a lot of these items. Builders will charge you an inflated amount for things done after the contract is written.
They have high administration fees and charge more than most attorneys' do for excess phone time. Watch the late fees. Some even state they will have a minimum mark up of 20 percent, which means they can charge any thing from 20 percent and up.
So far there have been several builders in the Treasure Coast area that have been sued, or are in the middle of arbitration in reference to these items. It is hard to find, since most people find it difficult to complain at the state level. Most builders who do not want information tracking will also not sign up for the Better Business Bureau. Therefore, you will not find any information there. You can go to the city, county and state to see if there are any complaints about the builder.
Best of all, you can go to public records in the county you are building in and search for liens and suits filed by and against the builder themselves. In St. Lucie County, you can go to www.stlucieco.gov and search public records and then go to recordings. This will pull an entire history for the builder you are getting ready to spend the next 12 to 18 months of your lives with while they build your dream home.
Good luck out there building your new home. There are a lot of hidden things that may come back to hurt you later on.
If you want to ask any questions in regards to this article, you can contact me (772) 263-3335. I have been a Realtor for nine years and may be able to refer you to the correct entity that may be able to assist you.
Tom Lewis is a licensed realtor for Century 21 in Port St. Lucie. His Web site is www.ronandtom.com.