Homeowners
SHOULD YOU BUY EXISTING PRODUCT OR HAVE IT BUILT PER YOUR SPECIFICATIONS?
By
Jan 3, 2006, 05:58

I don't know if you have ever gone through the experience of building a new home for yourself, if you have, you understand what I mean by saying that it is a real pain. If you attempt to build a new home far away from where you live, the problems can only exponentially increase. Inevitably there are going to be problems and inevitably the house will not be built the way you picture it in every detail. I am a big believer in purchasing something that you can see and touch, then you know exactly what you are buying. However, once you have negotiated to purchase an existing product, you should spend a few dollars to have an independent contractor or real estate inspector go over the house thoroughly and give you a report on its condition. When you negotiate to purchase a home, you should put into the contract that you have an inspection period in which you have the right to back out of the deal if the home does not meet with your approval. Then contact the local building association and ask for a referral of a contractor who would come in and do the inspection. Get the report in writing. Insist that the report not only tell you what items are in need of repair, but the expected life of all items.

The builder or developer may tell you that this is really unnecessary since you are purchasing a new home from him and there is a one year warranty. 

However, be careful because often that warranty starts when the home was originally completed and it may have been sitting for a while before you purchased it. Therefore, the warranty may have expired by the time you actually close on it or it may expire soon thereafter.

Know that the warranty more often than not is a collection of warranties. Maybe the developer would stand behind a leak in the roof for a year from the time you purchase the home regardless of when the home was originally completed, but how about the warranty on the appliances, refrigerator, stove, washer/dryer, intercom and security system? Those are warranties that are not coming from the developer to you but from the manufacturer of those items and they take effect usually upon the completion of the building or the installation of the appliances in the building.

In the event you are going to have your property built to your specifications my best advice to you is, whatever is supposed to be in the home should be stated in the contract in writing. You should also, (and it should state this in the contract, as well) have a complete set of plans signed off and approved by you before construction commences.

In addition, it is not a bad idea to bring that complete set of plans to an architect who, for a fee, will go over them and give you any comments about things that you may want. He can point out things that are obviously needed and are not present, such as sufficient insulation, or heating or cooling ductwork, for ex-
ample.

Once the home you have ordered is complete, then find yourself an independent party to inspect the property before you close on it.

Usually a builder or developer becomes immediately nervous after building an existing product. He is always concerned how long he will have to pay for maintenance until somebody purchases it from him.

One of the downsides to buying existing property is that the developer wants you to close on it immediately. You can often get the developer to delay the close longer than he is stating he is willing to wait. In this negotiation, figure that it is costing the developer about one percent per month of his cost of building the home. Remember, that is the cost of building the home, not the cost of carrying the land.

So, if you figure building costs (and for this purpose I will use a general rule of thumb of approximately $35.00 per air conditioned square foot) you will have an idea of what the cost to him carrying the house is. For instance, a two thousand square foot house might have cost him $75,000.00 to build and is costing him $750.00 for each month that he has to wait for you to actually close on it. 

If you get him to walt an additional two or three months, then you have in essence gotten him to reduce the price of the home an additional $1,500.00 to $2,250.00. Of course, that is with the assumption that there is another buyer ready, willing, and able to purchase the home and close immediately which, if that was the case, you would not have the ability to negotiate on this house in the first place.