Q: We had signed a contract with a national builder about three years ago but it fell through. Now we are in the market again and want a builder to build us a specific new home in this subdivision we like.
We’re worrying that the builder’s contract is one-sided. It requires us to use arbitration, which our side would probably never win on most discrepancies.
Most builders will not accept suggested changes. What would you do? How do we know if we can trust our builder?
A: When it comes to real estate, trust is kind of a loaded word. I wouldn’t trust anyone these days, particularly if it comes to buying a single family home on which you’re spending hundreds of thousands of dollars.
If your builder is trustworthy, then he will negotiate in good faith with you and your attorney. That said, you need to hire a good real estate attorney who has experience in new construction contracts and is familiar with your state laws and is familiar with issues that builders are willing to give on – and those that they typically won’t budge on.
Have the attorney review the contract with you and then contact the builder’s attorney to suggest reasonable changes to the contract. The type of changes required for a residential real estate contract may depend on the type of home you are building and the builder you have chosen.
Will the builder accept your suggested changes? You won’t know until your attorney asks. But keep this in mind – if the builder refuses to make any changes to the contract, you should seriously rethink whether you want this builder to construct a property for you.
In my experience of writing this column for the past seventeen years, when a builder is unwilling to budge, you might find him or her to be less than willing to come back should something go wrong with the property.
According to some real estate attorneys I have talked with, some national contracts are so one-sided that you are effectively left with a “take-it-or-leave-it” situation. And, in this real estate market, you have to wonder about a builder that is unable or unwilling to work with you at all on the contract.
To that end, you should spend a serious amount of time knocking on doors in your subdivision of choice and talking to homeowners who are living in homes built by this developer. Ask how they like the product, and how they liked the process of building that home. Then, go knock on some doors in the last subdivision that the builder built, to get an idea of how the builder’s product stands the test of time.
You should also make sure that each of those prior owners was satisfied with the way the builder dealt with problems during the construction process and how they handled each buyer’s questions. If you find that the builder ignored those buyers’ concerns, you may find that the home builder will ignore your issues.
Spend some time online making sure the builder is properly licensed and insured in your state, doesn’t have any pending lawsuits, doesn’t have complaints at the Better Business Bureau Online and doesn’t have a page of complaints pop up when you type the builders name and the word “complaint” into an online search engine.
One last bit of advice: if you see rave reviews about the home builder, you should see when those reviews were posted. During the boom years, people seem to be quite satisfied closing on a home and then turning around and selling it for a sizable profit. When times are good, people generally will give better reviews.
Now that the tables have turned and there is an oversupply of homes out there, buyers tend to be pickier and may judge their builders more harshly than they would in the past. With this information in mind, you can judge for yourself the complaints and compliments given to your builder.