My wife and I recently purchased a brand new home on the Northwest Side, thinking that we were smart for choosing to build rather than to buy an existing home. We didn’t want to buy someone else’s problems in a used house. Neither of us had ever owned before, and we believed that a new house in a new development would mean a better investment and fewer headaches.
A couple of years later, we own stock in Excedrin. Trying to avoid headaches by buying a new house is like trying to avoid danger by becoming a cop. We still feel we made the right choice, but we didn’t know that when we bought a house, we also were buying a year-long roller coaster ride of frustrations. I wish that someone had told us the following things before we took that deep breath and signed our contract:
Developers are masters of understatement. No matter what builders tell you during the courtship, your home will cost more and take longer to build than you expect. This is partly a function of the selling process – nobody likes to give bad news, especially when he’s taking your money. Some of the miscalculation also comes from the developer’s willful and unwarranted optimism – assumptions that suppliers won’t disappear or raise their prices, that unexpected labor or material shortages won’t arise, or that contractors won’t give aggressive estimates that lead to scheduling problems, i.e. the things that are a matter of course at any new development.Do yourself a favor and mentally add six months to the estimated closing date, and 5 percent to the projected cost. This will cover unforeseen expenses and save untold aggravation later. We didn’t take this step and were heartsick when we visited the bare foundation on our originally planned “closing” date. The only saving grace was that the late delivery bought us a few months to come up with the extra money for contingencies and upgrades we hadn’t planned.The same principle holds true as construction progresses. Rest assured that any “small?? problem that you’re told about is actually a crisis unfolding behind the scenes. These do get resolved somehow, but generally not as cleanly and quickly as you’ve been led to expect.
Contractors value speed over quality. Most contractors are paid based on the number of jobs they complete, and not how well they do them. In our home, as in many new homes, there were a number of corners cut by contractors who were being pushed to move on to the next job site.
The premium on speed can lead to things that are merely funny. For example, one of the contractors we brought in later found a beer can in our insulation, left behind by a contractor. Sometimes, it causes more troubling results, such as our late discovery that our entire basement and mechanicals were run on a single circuit. The system worked fine as long as you didn’t want to, say, turn on a light while the sump pump was running.
Most of the work done on our house was good, but there were a number of glitches (a non-functioning phone line, bad electrical wiring, holes in the drywall that you could pass a baby through) that we would probably not have had to deal with in a pre-existing home.
The punch list makes good comedy. Our four-page punch list of missing or incorrect items was to “definitely be completed within 90 days of our mid-August 2000 closing date. As of March 2001, we’re still waiting for much of it. This is not to say that we aren’t glad to have a punch list – periodically we take it out and laugh at all of the things that we had been promised before the first snow fell. We have had a good opportunity to review the list during days that we stayed home from work to wait for contractors who fail to show up for appointments.
Upgrades may be based on fuzzy math. One would expect that if a standard item costs $X and the upgraded item costs $Y, the cost of upgrading the item should be ($Y – $X), plus some percentage increase for the developer’s product. For about 90 percent of our upgrades, this was true. For the other 10 percent, the prices were completely out of proportion. At our developer’s asking price for upgraded kitchen appliances, we could have imported their sterling-silver equivalents from Europe and still saved money. The asking price for the “upgraded?? refrigerator was more than double the cost of the same item at the Sears store a few blocks away.
It’s the buyer’s fault. During our final walk-through, we noticed that the master bathroom was missing a showerhead. The workers had forgotten to put one in and simply tiled over the spot where the shower was supposed to be. When I brought this to the attention of the general contractor, he pointed out that nowhere in the contract did I actually specify that we actually wanted a shower in the master bathroom. He did, however, offer to have it taken care of for an additional fee.
We had to refer to the marketing materials distributed to potential buyers, to prove that in fact we were deserving of a shower in our bathroom. In time, we learned that like lawyers, we needed to build a case for what would seem to be obvious items before bringing them to the attention of the general contractor.
Anytime during the construction process that we wanted something that deviated from the basic architectural plan, we were assessed a $250 “change fee.?? Sometimes this seemed reasonable. For example, we had walls and windows relocated, which required some reassessment of how the home’s weight would be distributed, but the same fee applied to any variation, large or small.
We learned, however, that paying the fee was no guarantee that the change would actually be made. Our next-door neighbor paid the change fee in order to not have the developer pour the sidewalk behind his house, and it was poured anyway.
Buyers have no dignity. In time, we became used to hearing white lies about our house and its progress. We were surprised, though, at how little regard the builders, and specifically the sub-contractors, had for us during this process. When we had closed on the house but not yet moved in, we discovered that the on-site security guard – a rather large man who, it turned out, had “done some time?? – had moved into our home with his girlfriend. We learned about our surprise tenant when we visited the house to find him lounging around inside, his beer stored in our refrigerator.
Several times, we came home to find that items had been liberated from our home after we’d closed in order to complete other houses (light bulbs, cabinet hardware and the like). The final straw came when we discovered that contractors had been using our home as an employee lounge. Empty beer cans and cigarette butts littered our kitchen. The soda we stored in the refrigerator had been consumed, and the bathroom had been used several times – with very poor accuracy. Who would have thought that as a new homeowner, one of your first steps should be to change the locks?
All of this is not to say that we regret having built a home. We’re very happy with our house now that it is more-or-less finished. If we had been better prepared and had more realistic expectations going into the process, it would have been a more enjoyable experience. Some of the key things to keep in mind include:
- Get everything in writing, down to the smallest detail, before signing the contract and signing off on choices. Don’t hesitate to keep asking for information until you’re satisfied. It is difficult later on to get items resolved if you only have verbal agreements, assumptions, or common sense on your side.
- Lock in pricing on everything as early as possible. Prices change, partly as a result of demand and partly by design, as the project moves forward. If you can be within the first 20 percent of contracts within a particular development, you are likely to see the greatest profit when you sell. A further advantage of this is that you are likely to be scheduled for an earlier closing, and will be less subject to delays as construction progresses.
- Do your own research, particularly into the cost of upgrades. The developer is likely to take a disproportionate amount of profit from a handful of upgraded items, and you can save quite a bit of money by going with the standard offering and making changes later to suit your wishes.
- Have a good real-estate attorney, particularly if you’re new to home building. They can catch things early on that more than justify the expense.
- Take full advantage of the pre-drywall and final walk-throughs by being as detailed and nitpicky as possible. Bring a home inspector with you on both of these. This costs a bit of money, but they can find errors and omissions that would be costly to correct later. As with attorneys, the errors home inspectors catch more than justify their cost.
- Visit the home periodically during construction. Frequently, mistakes that are caught quickly are easy to correct. By the first walk-through, certain mistakes – things like faulty wiring or insulation – can be more difficult to detect because they are hidden behind floorboards or walls.
- Be sure to negotiate for punch-list items to remain in escrow. In other words, be sure that the value of the work left to be done is withheld at closing. In our development, those with escrowed punch-lists had their needs addressed much earlier than those without.
- Make sure you have housing options if delays prevent you from closing on time. The experience is stressful enough without having to move in with the in-laws while you wait for your house to be finished. Having a Plan B also saves you from feeling pressured into closing before the home is finished just to make sure you have somewhere to live.
- Keep perspective. Chances are you won’t remember most of the aggravation six months after you’ve moved in. By that point, you will be enjoying the new home you’ve built to your own taste, and the escalating value of your investment.
Do you have a new-home horror story or amusing anecdote? Share your experiences of buying new construction with New Homes Magazine’s Tales from the home front. Send a brief description of your story to Editor Barry Pearce, by fax at 773-880-0240, or e-mail, at email@example.com.