New Construction Pitfalls

What are the major pitfalls to avoid when having a new home constructed?

The bad news is the pitfalls are plenty and there’s not quite enough space here to chronicle them all. The good news is I can give you a few of the major ones, and assure you that your own diligence can help keep you from dangling over the precipice of a potential money pit.

Let’s first assume you don’t want to be your own general contractor in building your new home and that you’ll leave that up to a pro. Even industry veterans have regretted the decision to be their own GCs because there are so many moving parts in the process and so much can go wrong.

Depending on the custom features you want, you might opt for a home in a subdivision controlled by a volume builder. Many of the major builders are now offering a wider variety of floor plans with customization options for doors, cabinets, energy features and building materials, but generally within the constraints of their standard lot sizes.

Regular custom lots are a little more costly, but give greater flexibility. (If you want to build on a vacant lot in a mature neighborhood, you’ll probably have to deal with a seller’s agent and may want to get an agent of your own for negotiating power.) Also know that the more built-out your new neighborhood is, the less clatter and construction you’ll have to endure. Find out if your home builder will include closing costs as part of the price. It’s worth asking.

Before you start, though, research builders thoroughly. Check with the Better Business Bureau and scroll the Internet. See how your builder has resolved problems and has stuck to completion dates. There are numerous sites on the Web initiated by angry consumers who feel they were cheated or mistreated, even by some of the higher-profile builders. You’ll also want to visit some of the houses these companies have built.

Warning: Some builders set up limited liability corporations to buffer themselves from claims. Make certain you are dealing directly with a builder who has a substantial net worth and is not set up as some no-asset subsidiary. Ask questions.

And Kathy, avoid giving builders upfront money, particularly less-established ones. If they sink into oblivion, so will your down payment. A good real estate attorney will walk you through the details and perils of the home-building process — at a price, of course. And an agent can help you coordinate financing, payment and construction scheduling, although you and your lender can usually work these details out yourselves.

New homes generally come with at least a one-year warranty for repair of some problems that develop as it settles into its foundation. But know what your warranty covers beforehand and ask questions about it. Some warranty wording can be intentionally deceptive.

When construction starts, visit the site frequently. Contractors will be less apt to cut corners or bury their blunders if they know you will be inspecting the place during major phases of construction. Make sure everything you paid for is being installed, that all the outlets are located where they’re supposed to be and that the cabinetry, flooring, custom wiring and appliances you specified (and paid extra for) are going in as planned.

If you’re selling a house before moving to your new one, make the closing date on the old house contingent on completion of the new one, if possible. How many people do you know have regaled you with tales of how their new homes were finished well ahead of time? Probably not many. Bad weather, contractor delays, overly optimistic completion projections from aggressive sales people, material shortages — the excuses are endless.

Finally, several contemporary books on the subject are available, including Everything You Need to Know About Building the Custom Home: How to Be Your Own General Contractor by John Folds and Roy Hoopes, The Brand-New House Book by Katherine Salant, Houses are Designed by Geniuses and Built by Gorillas by Bob Johnson and The Complete Idiot’s Guide to Building Your Own Home by Dan Ramsey