Be On The Lookout For Water Problems During Home Inspection

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A home inspection involves hiring a professional home inspector to examine the house’s major systems — including heating and central air conditioning, interior plumbing, electrical systems, the roof, attic, visible insulation, walls, ceilings, floors, windows, foundations, and basements — to let you know if there are any problems or defects.

Water, even a constant drip gone unnoticed, can cause thousands of dollars worth of damage behind walls, on structural beams, and in the foundation.

“Sometimes, particularly with first-time homebuyers, the more obvious cosmetic home concerns, such as landscaping, painting and flooring overshadow the more critical issues, such as water damage, which can have serious consequences and cost quite a bit to correct or repair,” said Kathleen Kuhn, CEO and president of HouseMaster, a home inspection company with more than 380 offices throughout the United States and Canada. The company has performed more than 1 million home inspections since 1979.

HouseMaster’s Resale Home Deficiencies Survey found structural damage, plumbing systems and water seepage are three of the most commonly found defects in older homes for sale.

Some of the water problems you and your inspector should keep an eye out for during the inspection include:

  • Water seepage and wet basements. If you have small cracks in the foundation and porous walls, heavy rains can potentially build up against the foundation and ultimately leak into your basement and could eventually cause serious and costly structural concerns. How do you alleviate the problem? Make sure those foundation cracks are sealed. Also, surface water run-off should drain away from the house. Direct gutter downspouts away from the foundation.
  • Roof leaks. The biggest problem area is the flashing, the areas where the roof plane changes, like at a chimney or plumbing vent. Regularly check your flashings. Check the interior of your roof at least once a season. If you have constant leaks in the attic, damage or mold growth in the insulation can occur.
  • Poor water pressure. This can be a sign of water service supply deficiencies or costly piping upgrades. First you should determine if the problem might be caused by blocked faucet aerators, partially closed or defective faucets. If you have old galvanized piping in your house, the issue might be interior corrosion or deposit build-up. The best thing you can do is replace the blocked sections of pipe. And perhaps the biggest water issue these days is mold, which can cause panic in homeowners and is prompting the number of insurance claims and amount of jury awards that are on the rise.”Mold has been around for years and is commonly found in homes,” said Mike Casey, president of the American Society of Home Inspectors, the largest professional society for home inspectors in North America. “But while often harmless, too much of certain kinds of mold in a home can be dangerous. Mold always indicates excessive moisture and the source should be corrected immediately.”

Once you have found the house of your dreams, the ASHI says the following steps should be taken to prevent mold growth:

  • Wash mold off hard surfaces and then dry them completely. Absorbent materials, such as ceiling tiles and carpet, may have to be replaced.
  • Keep drip pans in your air conditioner, refrigerator and dehumidifier clean and dry.
  • Use exhaust fans or open windows in kitchens and bathrooms when showering, cooking or using the dishwasher.
  • Place vents for clothes dryers and bathroom exhaust fans outside the home.
  • Remove and replace flooded carpets and drywall.
  • Maintain low indoor humidity, ideally between 30-50 percent relative humidity. Humidity levels can be measured by hygrometers, which can often be found at local hardware stores.
  • Clean bathrooms with mold-killing products.
  • When painting the home, add mold inhibitors to paint.
  • Do not carpet bathrooms.
  • If the problem persists, or if anyone in the house is susceptible to mold and mildew, have the problem evaluated by an expert in mold/moisture intrusion.

Written by Michele Dawson

Should You Wait For The Market To Cool Before Buying?

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In a market where prices are continually rising, should a potential buyer or seller/buyer ever wait for home prices to drop before diving in?

I would first refer you to your local economic outlook. Home prices are driven by supply and demand — straight and simple. One of the myths about real estate is that interest rates drive sales and prices. History shows us differently. During the 1990s, the average mortgage interest rate was at 8.11 percent. Only one year (1998) did the average interest rate for the year fall below seven percent. In the beginning of the aught decade (that’s where we are now, the ’00s), we have seen average rates linger in the five to seven percent range during this recessionary period with mortgages on fixed rates as low as five percent. During both of these markets it was the overall economic growth that drove sales. Once the economy heated up the interest rates edged up.

Waiting for prices to drop may not save you as much money as you think. In fact, a lower priced house could cost more than a higher priced home by virtue of the interest rate. Here’s an example:

A $300,000 mortgage financed at 5.75 percent on a 30-year note would result in a monthly payment of about $1,751. Take a $275,000 mortgage with the same terms, but change the interest rate to 7.5 percent and your monthly payment jumps to $1,922.

So, do you really want to wait for the market to drop and possibly get a higher interest rate, too? When you are considering that move up, what you must look at is the monthly payment in today’s home buying environment. Buyers really don’t qualify for a home price these days, instead they are qualifying for the monthly payment.

If you must sell your house first before moving up, then you have to remember that the move up home you feel is inflated in price also pertains to your current house. If a homeowner waits until his targeted house price drops — then he’s also at a depressed state on his own house.

For instance, let’s say you want to buy a larger home and currently it’s priced at $350,000 — too much, you fear. Meanwhile, your house is worth $275,000 and you have $125,000 equity in the house with a mortgage balance of $150,000.

If you wait, hoping the market will drop the house down 10 percent to $315,000 — your current home has headed the same direction more than likely. Now, your $275,000 property is only worth $247,500. Your equity has deteriorated by $27,500. By waiting, you’ve lost the extra cash for a larger down payment, plus, now you’re not in the driver’s seat as the seller — if home prices are dropping, it’s a buyers market.

The numbers speak for themselves. (The assumptions here are the cost of sale equaling points, closing costs and selling commission. The payments are for principal and interest only using the above mentioned home prices of $350,000 and $315,000.)

Appreciated Market Samples:

Current Home Sales Price: $275,000
Cost of sale: $27,500 (10%)
Equity for down payment: $97,500
Mortgage on New Home: $252,500
Payment on 6%: $1,513
Payment on 7%: $1,679

Depreciated Market Samples:

Current Home Sales Price: $247,500
Cost of sale: $24,750 (10%)
Equity for down payment: $72,750
Mortgage on New Home: $242,250
Payment on 6%: $1,452
Payment on 7%: $1,611

As you can see — waiting for the price to drop $35,000 is going to save you roughly $60 per month.

Now here’s the final part of this scenario — when the market turns — which home do you want to be in when the annual appreciation of 5 percent kicks in again — your $247,500 home or your new $315,000 home? Your current home’s cash appreciation will now be $12,375 per year, while the more expensive home would increase at $15,750 per year.

If you’re looking for the long-term investment — meaning more than 10 or 15 years — then don’t wait. Throughout the years real estate has proven to be a safe investment.

Written by M. Anthony Carr

Do You Need Title Insurance?

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Question: We will be refinancing our mortgage in the next few weeks. We purchased our home six years ago, and at that time purchased both owner’s and lender’s title insurance. Our new lender is also requiring title insurance. We have made very little by way of improvements, and do not believe there have been any events which would impact our title. Why do we need to purchase title insurance again? This seems to be just another hidden expense involved in the settlement process.

Answer: Although you should be able to obtain what is known as a “reissue rate,” you will still have to obtain — and pay for — a lender’s title insurance policy.

Oversimplified, title insurance insures a homebuyer — and a mortgage lender — against loss resulting from title defects, whether these defects are known or unknown at the time of the sale or the refinance. In the language of the title industry, the insurance covers both “on record” and “off record” problems.

For example:

 

  • A person in bankruptcy who has no authority to sign the deed conveys property to a third party.
  • A grandson forges his grandmother’s name to a deed and conveys her property to a third party, or to himself.
  • A mortgage (deed of trust) is properly recorded on the land records, but there is no legal description identifying the property which is subject to the mortgage. As a result, creditors are not put on notice of the existence of this mortgage lien.
  • A deed (or other legal document) is improperly recorded with the wrong legal description.The list, unfortunately, can go on and on. There are numerous instances where title to real estate has been found to be defective — either based on substantive grounds or technical, legal procedural reasons (such as improper indexing, misfiling or failure to comply with local recording requirements).

    Title insurance is designed to protect the lender — and the homeowner — against these risks. Unlike other types of insurance policies, however, title insurance does not cover future risks; its coverage is limited to risks (defects) that are already in existence at the time the policy is issued. According to one Judge:

    Insurers in other lines cannot control the risk beyond being careful in the selection of insureds. However, title companies do control the risk; they attempt to eliminate it by the work they do in determining the state of title. Title insurance is not so much the assumption of an uncontrollable risk as it is a guarantee that the title company’s work is accurate and therefore free of risk.

    Thus, when you purchased your house several years ago, your title insurance policy covered you — and your lender — for all risks (defects) which existed at time you took title; the policy did not cover future defects.

    Several years have passed since you first purchased your home. You believe that your title is clear, subject only to the mortgage which you plan to refinance. However, are you really sure that there are no title problems affecting your title? Did a mechanic place a mechanic’s lien against your property? Did a creditor obtain a judgment against you and have that judgment recorded against your home? Did the home get sold at a tax sale, without your knowledge? Did someone forge your name to a deed and sell the property to a third party?

    Or did someone accidentally place a lien against your property (lot 657) when they really meant to place the lien on lot 567?

    Strange as it may sound, these things do happen. Your lender wants assurances that should you not be able to make the monthly mortgage payment, and the lender has to foreclose on your property, that you have clear title. Keep in mind that when you obtain a mortgage, you will sign a Deed of Trust. This is a legal document whereby the borrower (homeowner) signs a deed conveying the property to a trustee selected by the lender. That trustee holds legal title to the property, in trust however, for the benefit of both the borrower and the lender. If and when the mortgage is paid in full, the trustee will release the deed of trust back to the homeowner.

    However, should the borrower go into default, the trustee (because of the language in the deed of trust) has been given authority by the homeowner to sell the property at a foreclosure sale. This is known as a “power of sale.”

    Clearly, the trustee wants to be assured that when he takes title to the property through the deed of trust, he has good, clean title.

    Your new lender probably trusts you, since it is willing to make you a loan. However, since you cannot categorically advise the lender that you have clear title, the lender will insist that you obtain a title insurance policy in favor of the lender.

    There are two basic types of title insurance policies: lender’s and owner’s. The lender’s policy protects only the lender (or any subsequent lender to whom the loan may be sold or assigned). The owner’s policy protects the homeowner from the potential risks which can arise. Unlike other types of insurance, an owner’s title insurance policy is paid only once — when you go to settlement. The homeowner does not have to make quarterly or annual premium payments. Additionally, an owner’s policy covers the owner so long as there may be potential liability for a title defect; this coverage can — and will — last long after the owner has sold the property.

    Here is a real, factual situation: A sold property to B in l982. In l985, B sold to C, who then sold to D in l996. B, C and D all obtained owner’s title insurance. In l997, D’s neighbor sued D, claiming adverse possession of a small strip of land abutting both properties. Since adverse possession in Maryland requires a 20 year vesting period, D’s neighbor had to argue that its right began at least as early as l977. Thus, after D was sued, D brought C into the suit. Needless to say, C filed a claim against B, who in turn brought A into the litigation.

    In this litigation, B advised its title insurance carrier of the claim, and the title insurance company picked up the extensive legal fees which were involved in the lawsuit. B was protected, even though he sold his property many years before the lawsuit was brought.

    Every homeowner must, however, carefully read the insurance policy. There are numerous coverage exclusions contained in an owner’s policy, such as:

  • Taking of the property by a government (called eminent domain);
  • Defects, liens or adverse claims not known to the insurance company but known to the insured and not disclosed in writing to the company prior to inception of the policy, and
  • Any law restricting or relating to the use or occupancy of the property based on environmental protection.There are a number of such exclusions from coverage, and all homeowners should discuss these issues with their attorney before going to closing (or refinancing).

    Finally, you questioned why you have to pay for another full title insurance policy. You don’t have to. As mentioned earlier, the owner’s title insurance policy you initially obtained is still in force and effect. Thus, there is no reason for you to purchase additional owner’s insurance.

    As for the lender’s policy, although you will be obligated to obtain such a policy if you want the refinance loan, you may be eligible for a “reissue rate.” This means that if you had a previous policy and no more than ten years have elapsed since you first obtained that policy, you will be charged at a much lower rate than what the title charge would normally be.

    It should also be noted that if you are purchasing another property, while you will have to obtain — and pay for — lender’s title insurance if you are getting a mortgage loan, you have the right to reject purchasing the additional owner’s title insurance. You must discuss this option with your settlement attorney at settlement, to get the pros and cons for this decision.

    Title insurance is a complex issue. However, it does give some peace of mind to homeowners, especially since we live in a litigious society and property values have risen dramatically in recent years.

    Written by Benny L. Kass

 

Five Ways to Wow Buyers

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These days, tax credits and high housing inventory make it a buyers’ market. If you’re a seller, don’t despair. There are a variety of renovations that can help make your home stand out. Many buyers look at numerous homes when shopping for a house; so enhancing your home to make it more memorable is vital and increases the chances of a successful sale.

Clearing clutter, taking down personal photos, applying a fresh coat of paint, making minor repairs, and keeping a pleasant aroma are all basic techniques to make your home more appealing. But there are a few other creative enhancements that you can do to wow buyers without emptying your wallet. The results not only attract more attention, but also paint a picture of a well-cared-for home.

While not everyone has the same taste in housing, typically buyers are attracted to larger kitchens, extra storage space, light and bright rooms, and open floor plans. Special finishing touches on a home can be the needed incentive to generate an offer.

Kathy Gerstenberg has owned her home for nearly 20 years. Over the decades she’s made many improvements but now she’s considering selling and wants to make sure she gets top dollar in a down market. So, she’s examining her home the way a buyer would.

“We live in a tract home and I know there are many homes for sale; we don’t want ours to be seen as the same ‘cookie-cutter’ model as the others,” says Gerstenberg.

With that in mind, Gerstenberg has carefully made enhancements that make her home more comfortable and aesthetically pleasing. “I wanted to do improvements that would catch a buyer’s eye and also make it enjoyable for our family,” says Gerstenberg.

As she scouts the market for her next home there are various aspects of a potential home that she notices right away. “I love crown molding and finished doors and windows,” says Gerstenberg. She adds, “So many times builders just don’t complete the look of a home but when you frame a door or window and add some crown molding to a room it gives it a finished look.”

Industry experts agree; Americans are expected to spend $217 billion on remodeling in 2009. Here are five areas where homeowners may spend some of their remodeling money to add the “wow” factor to your home.

1. Go green. Energy efficient products and household goods are attractive to buyers. Renovations or replacements that help make the house more energy efficient are popular. Things such as better insulation, replacing old windows, caulking, and adding skylights can increase value.

2. Crown molding and wider baseboards. Some homeowners are shy to experiment with this, especially if they live in a small home, but it can be very attractive in any size home. Wider baseboard. The measly baseboard that builders often use in tract homes doesn’t draw attention. Adding a wider baseboard and a fresh coat of paint makes the room come to life. Also, framing windows and doors helps complete the look of a room.

3. Textured paint. Faux finishes, accented walls, or even just a little fresh paint on them makes a lasting impression. Choose colors and textures wisely. Don’t get carried away with a color you love (e.g. purple walls—I’ve seen it in a home for sale). Remember, that you want your home to appeal to the masses. You can always paint your new home purple—and then change it when it comes time to sell it!

4. Improved flooring. Wood, tile, and new carpet can be a showstopper. But if the flooring is chipped, torn, or dirty, you’ll get the opposite reaction from buyers. They’ll think your home hasn’t been cared for properly which could result in a lower offer — or no sale at all.

5. Add a deck. Adding a deck can add value to your home. It’s a nice feature in a yard and many buyers are happy to purchase a home that already has a deck so that they don’t have to take on that home improvement project.

Written by Phoebe Chongchua

Don’t Hesitate To Make A Low Bid To A Seller

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Q. I am a first time home buyer, and have been pre-approved for a $255,000 mortgage purchase. In my search, I have seen a number of houses in the $300,000 – $500,000 range in good, move-in condition. The problem I am having is where to start my offer. My realtor is telling me that those houses are priced too high, but that no one there will sell their house for under $300,000. What do you recommend?

A. I have to ask you two preliminary questions first.

Are you approved for a mortgage in the amount of $255,000 or for a home purchase in that amount. If you have been approved for a $255,000 mortgage, that means that you can probably buy a house worth at least 10 percent more. Most lenders will lend you up to 90 percent of the purchase price; some will lend you even more. Check this out with your lender to make sure you understand exactly what you have been qualified to purchase.

Second, you used the words “my realtor.” Is the real estate agent or broker really your agent? Have you signed a “buyer broker” arrangement with him or her? If not, it is important that you keep in mind that the broker (Realtor) really represents the seller. If the realtor knows your mortgage limit, he/she is duty bound to disclose that information to the seller. And you certainly do not want the seller to know exactly how much you are prepared — and able — to obtain a mortgage loan.

And even if the broker claims to represent your interests only, my suggestion is to keep the lender’s information to yourself. If you are able to sign a contract, then you can provide the letter from your lender. Many standard contracts state that “Purchaser will provide seller, within three business days after ratification of the contract, with a letter from a legitimate lending institution indicating purchaser’s ability to obtain a loan.”

This is known in the trade as a “comfort letter”. It is not a formal loan commitment; the lender has to review the sales contract and have the property appraised before such a final commitment can be made. However, it does mean that a lender has reviewed your financial history and based solely on that history, believes that you are qualified for the loan.

Thus, whether or not the realtor is your agent, I strongly suggest that you keep silent on your mortgage availability. You should also not divulge to anyone (other than your family or your lawyer) what your top price will be.

In answer to your question, as this column has suggested on many occasions, everything in real estate is negotiable. Don’t be afraid of making a low offer. The real estate agent is obligated to transmit your offer — regardless of amount — to the seller.

The seller has three choices:

  1. Your offer can be accepted, in which case you have a contract;
  2. Your offer can be rejected in its entirety. In this case, you can either make a new — higher — offer or walk away from this house; or
  3. Your offer can be counter-offered. This means that the seller is rejecting your proposal, but is putting a new offer on the table. Keep in mind that if you receive a counter-offer, you then have the same three alternatives just described.

Let’s look at the following example: the seller is asking $300,000 for the house. You prepare a written offer in the amount of $245,500. The real estate agent submits it to the seller, who in turn counters for $290,000. The ball then goes back to your court.

How much do you really want to pay for your new home? Is this property really worth $290,000? Should you try to make another — lower — offer or should you accept the seller’s proposal? These are questions that only you can answer — even if you can afford the higher price.

However, by reducing the price, the seller has sent you a signal. The price is negotiable. If this is the house you really must have, and clearly if you can afford it, you may want to accept the counteroffer. But, as you know, there are many other houses out there, and if you are prepared to continue shopping around if you lose this house, I recommend that you make yet another counter-offer — this time in the amount of $255,000.

The negotiations will continue until someone takes a hard-line position and “draws a line in the sand.” One of you will ultimately say “this is my final offer; take it or leave it.”

It should also be noted that price is but one of the many items of negotiation in a real estate transaction. Often, a seller may be more interested in the timing of the settlement than in the price. For example, does the seller have to sell immediately and are you prepared to settle quickly. I have negotiated many a deal whereby purchasers received a very favorable sales price because they were prepared to go to settlement just 10 or 15 days after the contract was signed.

On the other hand, some sellers may want to stay in the house for several more months. Are you prepared to wait? Are you prepared to purchase the house now — so as to preserve a favorable mortgage interest rate and begin to get the tax benefits of homeownership — but allow the seller to stay in your new house on a “post occupancy agreement” arrangement? In effect, you purchase the house and the sellers pay you rent until they move out. The rent should be equivalent to the monthly mortgage payments you make (principal, interest, taxes and insurance — also known as PITI).

Another important factor to consider is whether the seller is willing to take back financing — either for the full amount of the purchase price or a small second trust. This is an issue which should be explored with the seller before you make an offer; once a sales contract is entered into, it may be too late to try to renegotiate that contract. You also have to get your lender’s approval if the seller is prepared to take back financing.

In the final analysis, once you have decided to purchase your new home — and have zeroed in on the neighborhood you want — don’t be pressured into buying a home. Shop around, check prices, and negotiate everything.

Realtors — whether they be buyer’s brokers or seller’s agents — will tell you that this is a hot market, and that if you do not put in a contract for the full price, you will lose the house. That may be true. But if you can only afford a lesser-priced house, nothing ventured, nothing gained. The worst case is that your offer will be flatly rejected.

Written by Benny L. Kass

Finding a Good Home Inspector: What You Should Ask

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You’ve found the house, your offer has been accepted, and funding is in place. But before you start packing, be sure you hire a professional home inspector to make sure your house doesn’t have any major defects that could cost you down the road.

A home inspection typically includes an examination of heating and central air conditioning systems, interior plumbing, electrical systems, the roof, attic, visible insulation, walls, ceilings, floors, windows, foundations, and basements. Inspections may also include appliances and outdoor plumbing.

Once the inspector examines the house, he or she will write up a report with findings. If there are any major problems, you’ll need to negotiate with the seller to either lower the sale price of the home, or determine how the problem will be fixed.

When you make an offer it’s wise to have a contingency clause based on the home inspection. In other words, if the inspector finds $10,000 worth of problems and the seller doesn’t want to provide the fix, you can rescind your offer.

In fact, two in five resale houses will have at least one major defect that could cost you from a few hundred dollars to as much as $15,000 to repair, according to the 2000 HouseMaster Resale Home Deficiencies Study.

Spending a few hundred dollars for a home inspection is well worth the peace of mind.

If you don’t know how or where to find a home inspector, be cautious about asking your real estate agent.

“Be careful, though, of inspectors who are popular with agents – that popularity may stem from not killing too many deals by going easy on their inspections,” says Eric Tyson and Ray Brown in their book Home Buying For Dummies (Hungry Minds, Inc., 1999).

Tyson and Brown say the American Society of Home Inspectorsis a good place to start.

“Just because an inspector is an ASHI member doesn’t guarantee that you’ll get a good inspection, but it certainly increases the likelihood that you’ll be working with a qualified professional,” Brown and Tyson write.

All certified members have performed at least 250 inspections have passed two written proficiency exams. They must also adhere to standards of practice, continuing education requirements, and code of ethics.

The authors and the ASHI recommend you interview several inspectors before choosing one. Some of the questions you should ask include:

  • What does the inspection cover? Make sure the inspection and the inspection report meet all applicable requirements and comply with the ASHI Standards of Practice.
  • How long have you been in the profession and how many homes have you inspected? Again, ASHI Members are required to have completed at least 250 paid professional home inspections and passed two written exams that test the inspector’s knowledge.
  • Are you specifically experienced in residential inspection? The answer should be yes. If someone says they have specialized training in something like construction or engineering but not in residential inspection, you may want to move on to the next candidate.
  • Does the inspector’s company offer to do repairs or improvements based on the inspection? The answer should always be no. This is against the ASHI Code of Ethics because it might cause a conflict of interest.
  • How long will the inspection take? The average for a single inspector is two to three hours for a typical single-family house; anything less may not be enough time to do a thorough inspection. Some inspection firms send a team of inspectors and the time frame may be shorter.
  • How much will it cost? Costs vary quite a bid depending on the region, size of the house, scope of services and other factors. A typical range might be $300-500, but consider the value of the home inspection in terms of the investment being made.
  • Does the inspector prepare a written report? Ask to see samples and determine whether you understand the report.
  • Does the inspector encourage the client to attend the inspection? This is a valuable educational opportunity for you to learn about how things work around what could be your house, and the inspector may point out things that don’t quite merit a mention in the report but which you should keep an eye on. An inspector’s refusal to allow you to be present should raise a red flag.Finally, once you’ve found an inspector you like, ask him for references, then follow up and contact those clients. Two key questions – whether they discovered any major defects after the close of escrow that the inspector missed, and whether they’d use the inspector again.

Written by Michele Dawson

Tips for Buying an Unbuilt Home

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As an increasing number of Americans are snatching up new homes at record levels and technology’s role in the home-buying process continues to mount, many homebuyers are thrust into the position of buying their homes site unseen.

The National Association of Home Builders reports that new-home sales in August reached a record 996,000 units on a seasonally adjusted annual basis.

“Very low interest rates and the widely held view that housing is a very good investment are largely responsible for the surge in new home sales,” said NAHB President Gary Garczynski, a builder/developer from Woodbridge, Va.


In addition, many home shoppers are relying on the Internet to conduct virtual tours of new-home plans and research home prices, availability, and options.

The National Association of Realtors recently reported that 62 percent of buyers with Web access surf the Internet to shop for a home; 41 percent use the Web as a tool in searching for a home.

As a result, an increasing number of new-home shoppers are buying their homes site-unseen, usually after viewing models and then selecting a lot. Some buyers know even less about what they’re getting into.

In 2000, California’s largest homebuilder, Kaufman and Broad Home Corporation, held an online auction, selling 18 new homes in just 19 seconds. The homes, which ranged in price from the mid-$90,000s to the mid-$300,000s, are located in Riverside, San Bernardino and Los Angeles counties.

In addition, rising home prices – triggered in many regions by demand outstripping supply – means the competition to buy a new home grows fierce as homes are being sold before they’re built.

While this may cause some level of uneasiness as you wait out weather delays, watch fluctuating mortgage rates, and worry that the builder may be taking shortcuts to get your house built as quickly as possible, there are ways to avoid potential problems. The Better Business Bureau suggests you:

 

  • Investigate land plans. While you may know where your house will be located on the community map, look into what will be happening around you. Go to your local land planning office as well as any current zoning requirements and any proposals that have been submitted to develop land near your home.
  • Visit your builder’s other projects. Check out the quality of the community, landscaping, and other amenities. Talk to residents there about their experience with the builder.
  • Check with your BBB for a reliability report on the developer. BBB branches maintain files on many companies in their service area. These reports, which cover the past three years, will tell you how long the company has been in business, complaint patterns, whether the company is pre-committed to a dispute resolution program, whether the company is a member of the BBB, and whether there has been any enforcement actions taken by a government agency.
  • Find out about the homeowners association, if there is one. Obtain a copy of the rules and ask how much fees are.
  • Scrutinize the contract. You may want to have an attorney review it before you sign it. Make sure upgrades are included. You should also add a statement that allows you to visit the site at several designated times. Keep your deposit check as small as possible.
  • Protect your mortgage rate. When the closing date draws near, you’ll want to lock in your interest rate. If the builder is delayed in delivering your house on time, ask your lender if you can extend your lock-in rate. If that isn’t successful, ask the lender to close the loan and hold some of the money in escrow until the appraiser verifies the home is complete.Most importantly, you’ll want to inspect the house thoroughly when it’s done. You should strongly consider hiring a professional home inspector. Be very thorough in inspecting every aspect of the home – systems, roofing, counters, fixtures, flooring, walls, and landscaping – for potential damage.

    As NAHB says, once you move in it will be difficult to prove whether damage was caused during the building process, especially considering the potential for damage that can occur during move-in.

 

Written by Michele Dawson