New Home Buyers Guide
Protecting "The Biggest Investment of Your Life"
Introduction: The most frequently asked question of HomeOwners for
has been "Who is good builder or what do you think about this builder?" Although we all have our own personal opinions about each builder, it would be irresponsible to single one out and make recommendations. Instead we urge families contemplating buying a new home to research our site and other sources to assist you in making that decision yourself.
The following is a guide that may help you with the most important purchase a family will ever make. Unfortunately, you may come to the conclusion that in many states "The Biggest Investment of Your Life" also comes with the least amount of consumer protection. In Texas
has recently sponsored a New Home Lemon Law.
are also considering a lemon law to protect homebuyers.
Consider this, every state in the nation has a Car Lemon Law that provides a method of getting a complete refund for a vehicle that cannot be fixed, yet not one state has a similar law providing protection for your family for "The Biggest Investment of Your Life".
Because of this, we at
wrote this guide to help you make an informed decision. Please check back on a regular basis to see updates to this page.
Before You Buy: Do NOT agree to mandatory binding arbitration.
Ask your builder if they have a binding arbitration clause in their contract. If they do, this denies your constitutional right to a civil trial by jury for any defects in the home. This includes your constitutional right to small claims court, a very simple and low cost method of resolving a complaint. Although it is hoped you will never have any major defects, if you do, you should be able to have a final method of resolving the problem through a trial. (VA/FHA Loans restrict the use of binding arbitration.)
See: Feature Page Mandatoiry Binding Arbitration and Binding Arbitration latest News for more info.
Have the clause removed from your contract and warranty BEFORE you sign.
Do NOT agree to waive your implied warranty of good workmanship.
Ask your builder if you are required to give up your rights to any implied warranty of good workmanship and habitability. In Texas homeowners have had this protection since 1968. Recently Centex Homes has asked the Texas Supreme Court to relieve them of this implied warranty since they provide an expressed warranty. Report shows that Centex Homes Warranty Expense Only 0.3% See: Texas Supreme Court & Centex.
Have the waiver removed from your contract and warranty BEFORE you sign.
Read your new home warranty BEFORE you buy.
Ask your builder for a copy of the warranty. Take this warranty and READ it! Then READ it again and completely understand what is covered during each timeframe. Ask your builder what is covered during years 3-10 specifically. (Major Structural Damage) Ask what are the requirements for coverage under years 3-10. For more info see: Home Warranties, and Home Warranty FAQ for frequently asked questions about new home warranties.
Research your warranty.
Ask your builder if the warranty is financially stable and how you can research this information. The HOW Warranty was provided to hundred of thousands of homeowners during the 80s and 90s. In about 1994 they went into recivership leaving these homeowners with little if anything. Do not let this happen to you. Research the warranty company. See Builder Warranty and www.howcorp.com for more info.
Have your new home inspected.
Ask your builder if you can have an independent inspector inspect the house during all major phases of construction. You should allow yourself time and money for an independent inspector to verify the construction of the new house. Iowa Supreme Court: 2nd and 3rd Buyers Can Sue Homebulder
Home & Garden: Do a careful walk-through inspection before closing
In today's high-tech world, I recommend a video camera or a digital camera and a tape recorder. Rule No. 1 for any inspection - Do not be embarrassed to be too picky about minor flaws. Your builder should understand this and will hopefully not be offended. Keep in mind that this is the largest investment most family's ever make and you will be paying it off for decades to come. Read More...
Research the builder. Ask your builder if they are a BBB member and inquire what their record is with the BBB? You may find, as we did in Houston, most builders are not BBB members and most have unsatisfactory ratings. Ask your builder if they have any outstanding complaints with the State Attorney General. Request this information via public records from your AG.
A Message from Janet Ahmad, president of Home Owners for Batter Building
One simple way to avoid way to avoid trouble and miimize the risks
Avoiding Builder Contracts that Harm New Home Buyers - If you are thinking of buying a home, you might look at buying a pre-owned home. If the homeowner knows of problems and doesn't disclose them, you can sue them, the realtor, and the builder. You, as the second owner, can sue the builder because you do not have a contract with the builder. Unlike the first buyer, you are not bound to binding arbitration, and in some states a law of implied warranty of good workmanship and habitability may apply to the home itself. Read entire message
Iowa Supreme Court: 2nd and 3rd Buyers can Sue Homebuilder
The Iowa Supreme Court ruled Friday that homeowners who find work-related defects years after the fact can file claims against contractors, even if they are not the original buyers. The 6-0 decision reversed two lower-court rulings against the Speights, the third owners of the house in question, and overturned a similar case in Linn County. Brian Rickert, the attorney for the contractor, said the ruling could "flood the courts with lawsuits" from homeowners and dumps a significant burden on legitimate builders. He fears frivolous claims and costly court battles over damage that might have been caused by previous owners. Read more...
A Recipe for enormous profits, defective homes and foreclosure disaster Shoddy or not, for the past ten years homebuilding has remained the chief indicator holding up the economy, and from the President to Congress no one wanted to disrupt the money flow. The result is the homebuilding industry grew more powerful and confident in building defective homes without consequences. Read more...
Hud Secretary Henry Cisneros Modifications to Deregulate Lending in '93 and '94
Did HUD Ex-Secretary Cisneros Mastermind Predatory Lending? "Henry Cisneros on the hot seatÂ...he blamed the national housing and mortgage crisis on a variety of villains...The trouble is Cisneros failed to include his own name as one of the masterminds of predatory lending practices under his direction at HUD. A predatory lending scheme that many experts predict could eventually lead to the worst recession to hit this county, and possibly the entire financial world...which ultimately compensated him generously... after leaving HUD Cisneros became a KB Home board member as well as a Countrywide board member. He created American City Vista, an affordable housing joint venture with KB Home, as KB Home began construction on the disastrous Mirasol project that cost taxpayers millions, of which $5M is still missing. Read more... Plus: See Express-News article: Henry Cisneros on the hot seat
Understanding Easy Big Money and Kickbacks in Mortgage Lending
A seemingly arcane policy change by mortgage investor Freddie Mac sheds new light on issues of much broader concern for consumers: Do you really understand where the money is flowing -- all the nooks and crannies -- when you take out a mortgage and pay thousands of dollars in fees at settlement? Is anyone required to explain to you what's really going on inside your home loan -- how it works and whether it could morph into something very different? Freddie Mac's policy change announced Feb. 14 affected a dark corner of the mortgage business -- splits of mortgage insurance premiums between lenders and insurers. What? My lender is getting a cut of the premium, you ask -- just as builders and realty brokers are pocketing chunks of my title insurance premiums behind my back? Read more...
A Must Read: Developer, what makes them 'tick'
Why do the bad guys win? A psychiatrist looks for some answers
As a psychiatrist I can perhaps explain something about the psychology of bad people like our developer, what makes them 'tick'... This information may help you avoid the pain we endured. Although we didn't realize what we were up against until it was too late, you may find earlier clues in the people you deal with. Chances are you have run into this type, known in psychiatric jargon as the sociopath or "antisocial personality disorder." A personality disorder is a pathological (not normal) `equilibrium state' in which the individual displays both occupational and interpersonal dysfunction. The antisocial personality maintains his (or her) state of equilibrium by inflicting pain on others, and feels no pain while doing so. Read more...
Other Important Information for New Home Buyers
Helpful articles that will give some understanding why buyers must be more attentive and informed. Things are not always what they seem.
This New House - The American Dream just keeps growing. Since 1970 the size of the average new home has ballooned by 50 percent. ÂGreat rooms,Â Viking ranges, 10-acre lotsÂcan moats and turrets be far behind? See Illustration Chart, PDFs:
MJ026.pdf (7.6 MB)
MJ027.pdf (8.4 MB)
Mortgage Financing: Signs Of Predatory Lending
If you're shopping for a home loan, you can save thousands of dollars by being aware of predatory lending practices, in which you're charged too much for your loan or are forced to buy services you don't really need. You can protect yourself by learning to recognize the signs of predatory lending. The Center for Responsible Lending lists seven specific warning signs that consumers should be aware of when applying for a mortgage.
Recognizing Loan Fraud - The Birth of Mortgage Fraud Scams Deregulation by HUD Â a temptation for the homebuilding industry. Over the past decade homebuilders have established an affiliation with mortgage institutions and created their own mortgage companies. Using unscrupulous appraisers to inflate values and creative financing techniques, mortgage fraud has flourished, causing home foreclosures rates to skyrocket.
FDIC - Looking for the Best Mortgage - Shopping around for a home loan or mortgage will help you to get the best financing deal. A mortgage--whether itÂs a home purchase, a refinancing, or a home equity loan--is a product, just like a car, so the price and terms may be negotiable. YouÂll want to compare all the costs involved in obtaining a mortgage. Shopping, comparing, and negotiating may save you thousands of dollars.
Disposable Housing today, are the Slums and Foreclosures of tomorrow - The home building industry is unregulated and out of control. Homes are not built to even minimum HUD or State standards, warranties give a false sense of security and are unenforceable. In order to buy what use to be the American Dream, one must give up his or her constitutional right of access to the courts and all consumer law. Unilateral builder contracts, with a take it or leave it attitude, promotes predatory business practices.
Worthless Home Warranties: Superior Court Judge Finds New Jersey's Home Owner Warranty Program "A Useless Piece of Paper" - "I'm well aware of the RWC program, the homeowner warranty program, and the election of remedies. It is set up with the specific goal in mind that there is declining coverage for the benefit of the homeowner, it declines. This is a program, even though it is distinguished by the Legislature, as a homeowner warranty, it is basically a safety net for the builder, as opposed to the homeowner.Â
Beware - Checking public sources for builders record of bad performance proving to be unreliable
Unlike 10 years it is it is becoming more and more difficult to find honest or reliable contractors or even to find reliable sources to check out the records of homebuilders and general contractors before signing a contract. Due to take-it or leave-it Binding Mandatory Arbitration (BMA) clauses in new home contracts buyers are giving up their 7th amendment right to sue builders in court. As a result our court system has been privatized, so public records no show if a builder has been sued in the past. Worse yet many state Attorney General's offices have discontinued processing consumer complaints. Even the Better Business Bureau (BBB) records are unreliable and skewed by the influence of the homebuilding industry. When one builder was dropped by the Houston BBB other propionate builders dropped their membership. Further, State and local Home Builders Associations have no complaint process, and appear to have little concern for retaining any records of unethical behavior of their members.
Seven Checks to Not Get Scammed...
Â Get estimates from several licensed, bonded contractors.
Â Ask your neighbors what they're paying for similar work.
Â Inspect contractors' licenses and proof of liability insurance.
Â Get a contract in writing.
Â Avoid paying money up-front. Some reputable contractors will require partial, up-front payment, but these pre-work payments shouldn't exceed the cost of materials or 20 percent of the total estimate.
Â Follow local building codes and inspection procedures.
Â Avoid signing over an insurance settlement check to the contractor.
Smart Money: Ten Things Your Home Builder Won't Tell You
"I'll build your house on marshmallow."
"I'll not only cut corners Â I'll sever them."
"I am barely regulated."
"Public inspectors won't catch my shoddy work."
"You'll never see me once you move in."
"Good luck suing me."
"Your home won't look like the ones we toured."
"I haven't budgeted enough for decent light fixtures."
"You may wind up seeing double."
Smart Money: 10 Things Your Contractor Won't Tell You
"My license is worthless."
"Our contract favors me..."
"...so I can take your money and run."
"Bargains don't exist in my world."
"I'll hold your house hostage."
"Your changes are my retirement fund."
"My best work is on the surface."
"I delegate to novices."
"If I come knocking on your door, don't answer."
"I'm bad for the environment."
Consumer Affairs.com - Housing
Buying or selling a home, dealing with landlords and condo associations is enough to turn anyone into a nomad. Trying to find a good builder? It's not easy. Builders are very aggressive about suing people (and Web sites) who complain about them and they are usually well-connected with the local politicians who run the courts. The best way is to talk to others who've had homes built and see how satisfied they are. Every reputable builder should be willing to give you a list of recent customers.
If not, it's a sign of trouble. See complaints
Homebuilder's Right-to-Repair Illusion
ItÂs a clever scheme that works well for the industry but is devastating to families and the American Dream.
Beware: No Consumer Protection for Texas Homebuyers
If you think the government protects buyers when purchasing the biggest investment most of us will ever make, think again. In early 2003 the building industry contrived convincing tales of woe, along with millions in political action committee contributions, that persuaded some Texas lawmakers to help create the unprecedented experimental state agency. Elected officials not only complied but relied on the wisdom of the industry to write the bill and trusted them to run the agency that mandates homebuyers to pay a fee to complain about their builder, while allowing shoddy construction standards to be written by the industry. 'Homebuyers deserve better protection'
A little insight on the creation of the "Disposible Housing" idea
Written by an unidentified California Contruction Arbitrator
November 29, 2006
"Back in another life in the 60s I was a member of the NAHB, before all of us custom builders found out that it was run by the tract builders, and what they did. We had a speaker one night at one of our soirÃ©es, he told us the problem with our business was that we didn't build obsolescence into our products so we had repeat business.
We were building houses which lasted 40 to 100 years, how many could we expect to sell to people, we should take a page from the car manufacturers, their products were designed to become obsolete within three years so the loyal customer would come back for more.
We now have achieved that goal, we are building houses on floating PT slabs, made of pressed wood chips, we then wrap them with a cheap plastic housewrap and put plastic windows in them, we cover all that with a cheap imitation stucco or imitation wood siding, we then top the whole thing off with tar-paper roofs with little colored granules in them, and all people care about are their Chinese granite countertops!
These throwaway houses are lucky to make it 10 years, any water to hit the pressed wood chips guarantees mold and mold guarantees a teardown and voilÃ !Â, we have a new customer!"