Segment 2
New Construction Nightmares and How to Avoid Them
Barb Schlinker Radio Show
719-888-3736 | 719-301-3900
Your Home Sold Guaranteed Realty Colorado

In Colorado, you have said before that Real estate agents are licensed to fill out the forms the state gives them to complete the legal contracts for buyers and sellers.
What about New Homes, are those forms the same and how can buyers protect themselves? Builders use their own contracts to protect themselves. The problems, especially in this red-hot competitive market is that buyers fall in love, decide to sign an agreement with the builder but often those agreements have zero protections for the buyer and all in favor of the builder! I do recommend you take an agent with you, if you decide to buy directly from the builder, at least hire an attorney to look over the contract.
I recently had a buyer that decided to walk away from their deposit and a new home because the construction quality was poor & the home did not appraise VA. Although the salesperson on-site ‘said’ the Earnest Money was $3500. The form actually said $500 was Earnest Money, $3000 was a NON-REFUNDABLE INDUCEMENT FEE.

Per the VA rules, if a house doesn’t appraise the buyer cannot face losing their earnest. Yet the way the contract was written the best case would be they only get $500 back. It was a classic bait and switch. The salesperson, AFTER buyer, signed filled out another form about the “Deposit” that the buyer never got to see until after the builder executed the entire contract. The buyers decided not to buy because they visited the property often and found many, many construction issues to include:

• Contractors having lunch and leaving food and drink stain on the new carpet
• Drywalling over heat vents
• Affixing a handrail to only drywall – not a stud causing the rail to breakthrough
• When my clients inquired about those issues, and this was a buyer who had purchased 11 new homes, they were made to feel like they were an ignorant annoyance rather than a client.

What are some other issues you see out there with new construction contracts and the process? Title Insurance: Back just before the mortgage meltdown in 2006, one builder in town had overbuilt what we call “Spec” or speculative homes…meaning they build them without having a buyer lined up. Once the market started to change the builder had to file bankruptcy – which meant they were no longer responsible for their bills. There were a few homeowners who had just purchased the homes – paid full price… Just after the Builder Files Bankruptcy and failed to pay the vendors who installed the Electrical and Ducting. Because those home buyers did not obtain a small, inexpensive upgrade to the title insurance that only costs $75 – $100, those homeowners were stuck PAYING AGAIN for electrical and ducting because those contractors successfully put mechanics liens on their homes. Had they purchased the upgrade to the title insurance it would have NOT been a problem for those homeowners.