Get What You Pay For

For this week’s Guest Post Friday, Musings welcomes a friend and fellow faculty member at Solo Practice University, Stefanie Devery.  Stefanie owns a Real Estate law firm in Mineola, New York with her husband, Brian Devery.  The Devery Law Group, P.C. concentrates in all residential and commercial real estate matters.  Stefanie writes a blog, New York Real Estate Lawyers Blog, and can be found on Twitter: @StefanieDevery.

New Construction residential real estate sales are at an all time low.  Builders are being forced to liquidate their portfolios or carry the cost of mortgages, taxes, insurance and other ancillary expenses in a market that is no longer built for the rapid expansion in home ownership we saw only a few years ago.  Renting newly constructed homes simply isn’t an option as the rent would not come close to covering expenses incurred so the only viable option remaining is to sell at a reduced price where many builders are losing money hand over fist and giving away incentives to potential buyers.

Throughout the Long Island, New York area we are seeing new construction home prices falling fast and incentives such as a lease on a new luxury car being offered.
Not only does the potential buyer get a new home and a great price, but also a nice new ride to park in the nice new driveway.  But buyer beware!

Whereas the construction process and ‘building on spec” is no longer profitable, at least not like it used to be, many builders are cutting corners, installing standard fixtures, floors, kitchens etc. in an anything but standard home.  When you are paying upwards of $1M for a home, at least in Long Island, you expect that the flooring is exceptional, that the appliances are top of the line an that the heating system is everything you will ever need and more.  We are seeing that builders are reducing costs by installing “Home Depot quality” fixtures, flooring and appliances instead of the really good stuff.  This is not to say that the quality of these materials is sub-par but rather to say that when you figure out you are paying $200 or more per square foot of house, the buyer really should be getting everything they deserve and everything that they pay for.

Things to Look For

Flooring

If carpeting is installed in the house, what s underneath it?  In this type of construction there should be hardwood floors throughout and any covering should be installed over it so that the homeowner has the option of reverting to hardwood if they so chose to do so.

Make sure that the quality of the installed products are equal to the quality of the home being purchased.  That is to say, make sure the flooring is of the first grade of lumber, no knots for Oak, Mahogany, Cherry or other hardwood or zillions of knots for flooring such as birds eye Maple.  Make sure that the installed products are installed correctly, that the flooring meets up to the walls and there is no gap being hidden under the molding, that the crown molding, tile work, counter top, etc. is perfectly installed and does not contain any defect.

Windows

Check the windows.  Make sure the windows installed in home are what you want them to be.  This is a big money saver for the builder.  Anderson and Pella windows are expensive, but worth it.  No name vinyl windows are cheap.

Appliances

Are the appliances what they should be?  Do your homework!  LG and Viking are not the same thing, there are many levels of GE Profile appliances.

Construction Quality

Take a really close look at the quality of the construction itself.  If you cannot tell the difference between the number 1 oak flooring and number 2 oak flooring, custom cabinets and store bought, real wood and Pergo, then bring along a professional to look at the house before you buy it.  There are so many areas where a little cut here and pinch there can make all difference in profitability for the builder and headaches for you later own the road.

Remember, buying new construction residential real estate is generally more expensive but as a buyer there are additional hidden costs above an beyond the sticker price.  In New York, the purchaser generally pays the sellers transfer taxes and title bill, pays for the survey (which the builder needs to get a certificate of occupancy) and covers multiple other expenses.  Any upgrades requested by the buyer are not part of any escrow money and are typically not refundable if the transaction fails to close and there can be a long waiting period before you ever get ownership of the premises, be prepared for delays.

The Good News

There are some great advantages of buying a new construction home as well.  You get exactly what you want, a home the way you want it to be, move in ready, painted the colors you want, the appliances you want, etc.  You have no worries about old heating systems, or old appliances, leaks, cracks, or worries about what the seller covered up, fixed.

Furthermore, new construction homes come with a warranty.  Don’t get overly excited here, it is good but not great.  The warranty in New York basically says the following, if any of the work was one using defective materials or not in a “workman like manner” the builder is on the hook to fix it for one year.  The problem here is that almost anything in a home will last for the one-year term.  This covers defective materials, not sub par materials, if the floor you got is number 3 Oak and not defective, it is yours, if the windows are vinyl and not the quality expected once again you own it.  The workman like manner material is harder to get around but basically if another builder did the same thing would this happen is the test.  Leaks in the roof, tiles falling off the walls or something would be covered, but cracks due to the house settling are all yours as well.  As stated, the warranty is good, well maybe just OK.

There are deals to be had in this market for buyers looking for newly built homes just be careful, use a reputable builder, an get all the inspections and reports you can.  Make sure that you are getting exactly what you are paying for, and know that in the current market buyers are in command.

As always, please comment below and let Stef know what you think.  Also, please subscribe to keep up with this and other Guest Post Fridays here at Construction Law Musings.