As with most major purchases, you should expect some repairs or adjustments to a new home once you have taken possession. Sometimes needed repairs are major, and if you have hired a good home inspector, these flaws should be apparent during your home inspection, before you move in.
Some developers and contractors have good reputations for making such repairs and some don’t. You will have better results if you’re an informed buyer with the right expectations.
It’s important to understand what you are buying. There is a tremendous difference between purchasing a single-family home from a group of contractors who have pooled their resources, and buying a condominium in a building where 100 units are for sale. The single-family home may have taken up much of the small contractor’s time and disposable income during the last year as it was developed. Along with his collaborators, the contractor stands to make or lose a significant portion of his income on this single sale.
Some developers of major projects, on the other hand, are most concerned about getting signed commitments for a percentage of the units to be built so that they can get permanent financing from their lenders. A contractor who owns a house being built “on speculation,” or without a designated buyer, is in my experience, usually more flexible in making changes than the big developer.
It is not unheard of for the big developer to promise to make the changes you want and then forget about them once he has permanent financing. All changes and upgrades should be signed and initialed. Get everything from your developer in writing.
If you are interested in a home being built by a small builder, try to hold out for upgrades and changes to be included in the price, which you can finalize once they are complete.
While it’s important to know what you’re buying, it’s just as important to know whom you’re buying from. Some people are genuinely more willing to help than others. From the start, how well does the developer answer your questions and meet your needs? First impressions tend to be lasting impressions.
If your builder promises a custom unit, ask for references and knock on the doors of previous buyers. A simple inquiry can help enormously. If the building is complete, ask your future neighbors how well the developer has met their needs in customizing. Make sure these people aren’t the builder’s relative or investors when you get their take.
Similarly, you should investigate your real estate agent’s reputation and keep watch for behavior that seems strange. Real estate agents are usually paid in Illinois when the property transfers hands, at closing. This means that in some cases it can be in an agent’s best interest to muddy communication between buyers and developers or to stand in the way of information.
On a recent inspection, I asked for the engineering analysis required when converting a building into condominiums. A real estate agent promised that it would be delivered to the buyer the following day. The report is not difficult to get; developers are required to keep it as part of the package given to buyers before closing. In this case, we did not receive the report until the day before closing, two days after the inspection contingency had run out. Only then did we discover that the Illinois Environmental Protection Agency had not issued a certificate of closure for the site as would have been expected. My client, facing a tough choice, purchased the property knowing that he may later be stuck resolving an environmental problem.
Don’t assume in a case like this that your attorney will fix everything. Attorneys are typically paid a flat fee to handle closings. This does not include extensive negotiating with a developer if problems arise. Negotiate a provision with your real estate attorneys that includes an additional hourly fee should more services prove necessary.
Like your attorney, the city isn’t much of a safety net either. Municipalities have a responsibility to insist only upon minimal standards. Their concern, in laymen’s terms, can be boiled down to a simple question: is the building or unit safe to occupy?
It is common in many suburban developments for new homeowners to take possession and then realize they need to spend $10,000 on a paint job.
Approach anyone with whom you are entering into a contract with candor, sincerity and a list of expectations. It is important, however, to determine how the other person is going to respond to your list. The sooner you can find this out, the better.
The basic principles of negotiation are always the same. When there is a lot of money involved, some people will do anything, and in the end, no one can protect your interests better than you.
Thomas Corbett is president of Tomacor, Inc. a professional property consulting company specializing in commercial and residential property inspections and expert witness work.