From the Ground Up

by Rose Gilbert

Want to be the first on your block…period?  The first to live in the brand-spanking new home of your dreams?  And in a new development, a neighborhood-in-the-making, as well?  Buying into a subdivision is a larger-scale venture, of course, but it can offer the same exhilaration you feel driving off in a brand-new car.  That is, as long as you take the time to plan your route carefully, from the first decision to buy, to that day, some weeks away, when you can step over the threshold onto your very own territory. In between lie some potentially bumpy terrain, a number of important decisions, and myriad opportunities to tone up your skills in negotiating and diplomacy.

Buying a new house in a new subdivision is like commissioning a work of art-in-progress: you choose an artisan whose craftsmanship you admire…you watch as the artwork materializes… and you can suggest certain changes along the way. Overall, however, it is still the artist – or in this case, the developer – who plays the key role in your ultimate satisfaction. This is why everything depends on selecting him wisely in the first place.   Base your selection on personal research, suggests Louis Siegel of the Siegel Organization, a builder/developer in metropolitan Baltimore, MD. “Ask the builder himself for the names of people who have already moved into the area so you can go talk with them in person. A builder may hesitate if he’s worried about invading his clients’ privacy,” Siegel advises. “But just go anyway. Knock on at least 10 percent of the doors in the development and ask the owners’ one question: Do you love your house?”  “If Not,’ Do you like the builder?”  Who cares about that? What you do care about: Are they getting good service? Is the warranty work getting done? Does the builder answer his phone? Do you have an emergency number?...the numbers of the sub-contractor in case something goes wrong?”

Real estate journalist Ellen James Martin would add the sub-contractors themselves to your investigation. It’s easy to find out who they are: “Just drive through the development and take the names and numbers off their trucks. Then call and ask questions like, ‘ Does the builder pay on time?’ “ A happy sub-contractor usually means a good developer, she reasons. “There’s also good reason for you, the buyer, to stay on friendly terms with the developer, once you’re committed to the project,” Ms. Martin points out. A cordial relationship helps you work together smoothly, “And not just while your house is under construction, but well beyond closing day. That’s when the problems will arise – and you always have problems in any new construction.”

There is – and there isn’t always – room for negotiations, the experts point out. For example, Ms. Martian says the base price is usually not negotiable. “Out of fairness to earlier buyers, developers find they have to keep the base price equal,” she points out. “They must play fair with all their ‘children’” Your ability to negotiate changes in the floor plans usually depends on the price tag of the house. As Louis Siegel points out, “Remember, we’re talking about ‘production’ homes. The developer had based his costs on volume, on using penalization – factory-constructed components – to control quality and contain his costs. With a house in the range of &80,000 to $350,000, it’s not always possible to make many changes.” With pricier homes ranging from, say, $350,000 to $500,000, developers may offer what the industry calls “Flex–Plans,” allowing the buyer to make add-ons in predetermined areas. Siegel says that buying a production or tract house is like “buying a loaf of bread. You’re taking it off the shelf as-is for set price. You don’t expect to change white into raisin bread for the same money.” Therefore, you must know in advance exactly what you will be getting for your money. Find out by scrutinizing the developments model home. Just don’t mistake the model for the standard version you will be buying. Take a notepad and make a checklist of all the features you like, then find out which come for the base price and which ones are options. Ask specific questions: “Are real cherry wood cabinet’s standard? Will I get hardwood floors?”

Ms. Martin advises that your preliminary shopping should include a blank copy of the builder’s contract, which should spell out construction details. More homework may be required on your part so you can interpret what you read. For example, it’s not enough for things to be built “to code,” says Louis Siegel.  “What’s important is the size of the joists – bigger is obviously better. Ask the builder for specifics. And be sure you understand the energy package that comes with the house.” Bigger is not always better when it comes to judging the quality of the construction you’re buying, Siegel points out: “Don’t try to equate price with square feet. It’s what’s in those square feet that count.”  The contacts should also indicate how many times you will be allowed to bring inspectors to the construction site. For safety reasons, mainly, builders don’t want “civilians” on site, but a minimum of three visits is desirable: (1) When the framing is up; (2) Before the walls are closed off; (3) When the house is finished. Also well worth considering: Bringing in your own inspectors with special areas of expertise: in landscaping, for example.

Many people are confused about a builder’s responsibilities to complete a home on time. When you buy the land and hire a custom builder, they may submit to a completion date penalty – but expect a lengthy clause that protects them against “forces beyond their control,” such as weather and material shortages. However, builders in subdivisions will not guarantee completion dates. They are already carrying the mortgage on the land and are hiring sub-contractors. They simply will not assume the additional liberty.  You will also want advance information on the builder’s warranty. They vary widely and are only as the builder is reliable, Ms. Martin warns. Large builders with national reputations can offer quite comprehensive warranties; for example, covering everything in the house for the first year, then structural and working components for a total of 10 years.

Along with the sample contract, you should arm yourself with background information on the development itself – is there a homeowners’ association and what are it’s covenants, requirements and restrictions? It might prohibit parking on the street, painting your front door without approval and other details of daily life you want to know about in advance. Get a copy of any association’s credo so you’ve a clear picture of what you’re buying into.  Ditto for local government. Call the town or country Planning and Zoning Board and find out what’s in the works for that area. “You may think you’re buying a beautiful view of unspoiled woods only to find out that another development has already been approves for next door,” Ms. Martin warns. One way to avoid such a rude surprise: Buy when you’re already surrounded by development.

The reverse tactic – being the first on your block – also makes sense, dollars and cents, she says. “The first phase of a development is usually the least expensive. Prices go up as the builder moves into the next phases, so it can pay off if you feel confident enough to pioneer.” Other words from the wise Ms. Martin:

• Get all agreements in writing. If the builder won’t put it on paper, be very cautious.

• Lock your rates. It works to everyone’s advantage because it’s a long time between purchase and possession.

• Close early. You can get a better deal with fewer points. And you get the choice lot.

• Walk your lot with the builder himself, if you can, or with the construction super who knows what will actually happen. Ask specific questions, like “Which trees will you have to take down?” “Will my dinning room windows face into the garage next door?”

• Do any additional work now. If you want to add a deck or finish off the bonus room, have the builder do it now and roll the cost into your first, cheaper mortgage.

• Inquire about “allowances” on interior decorating. You may be able to upgrade carpeting or light fixtures at little extra cost. Or borrow the builder’s catalogs and go to showroom shopping at his wholesale prices.

Now it’s your turn to be the lead artists on this work-in-progress…time to turn a “production” house into a highly personal, warm and individualistic home that was made for you... latterly…from the ground up.