New home, no worries. No way! They have it wrong


New home buyer beware

An article in northjersey.com and in The Record…New home, no worries. No way! is the perfect example of why home buyers should only consider purchasing new homes from quality builders, who have years of a long standing and proven track record, and not just buy a home because it’s priced at the right number.

When buying a new home in Englewood, Tenafly or anywhere else in Bergen County, you get what you pay for.

Years ago when the market was hot, so many people pooled their money with small investors and over night became builders.  Theses “builders” bought up lots of property, and in most cases over paid for them, built substandard, but fairly attractive homes. But the builders either cut back on certain things because they wanted to make more money.  These people hired the contractors who cave then the cheapest bids…and that’s where all the problems started.

When I was building, I rarely hired the cheapest contractor, and when I did it was always a disaster.  It cost me more to fix their lousy workmanship, then if I had hired the most expensive contractor.

…The ironic thing here is that, this practice is even a bigger problem for people who are renovating their homes.  The hire the contractor with the cheapest price, and that’s the worst thing they could do.

Here’s the problem for consumers…either hire the best contractors who have the best sub-contractors…who charge more money, or hire a contractor with the cheapest bid, and roll the dice, because you’re going to have a lot of sleepless nights.

These buyers were happy to have this home, but once they moved in, they started noticing a multitude of problems: substandard heating and air conditioning systems, plumbing that didn’t work right, windows that leaked, roof leaks, unlevel floors, doors that wouldn’t open and shut right, cracks in walls and a whole host of other problems.

Often by the builder was either out of business and were untouchable because they built under a shell corporation with no assets, or they were just unresponsive to the buyers.

And the buyer just as in this article were left with major problem problems to deal with.

In the case pointed out in this article, it’s misleading and erroneous to state that the warranty has no protection for the purchasers.

The New Home Warranty Act is by no means a light-weight program.  It was started in the late 1970’s by the National Association of Homebuilders as a way to protect the building industry and builders from the problems that were being created by people and companies who didn’t have the qualifications to be great builders.  So they started this program to differentiate the good builders from the bad ones…and to set quality work standards that went far beyond any building code.

Building codes are meant to protect people from safety and structural problems.  It’s a minimum set of standards, and doesn’t guarantee that products will even be installed according to the manufactures specifications.  That responsibility falls on the builders and contractors.

Fact

Building inspectors are not empowered to deal with most quality control issues.  Their job is to inspect homes are built to a statewide code, which are mainly safety and structural issues. Licensed building inspectors are not trained construction experts…and that’s why they are called code officials….and for good reason.

The States and local municipalities do not want to shoulder the liabilities for quality control issues, such as the ones in this article.  They don’t want to be blamed or have to defend disputes that could easily hurt a town financially, if they were found responsible for causing a defect.  Municipal code officials and the towns, cannot be held liable for construction defects, unless they were found to be grossly negligent…which is almost impossible.

In New Jersey we have a State wide building code that building officials must follow.  So no matter where a home is built in New Jersey that home was built to the same code standards as all the other homes.  This is a good thing for consumers and builders.

Warranties

  • The New Home Warranty Act makes New Jersey the only State in the nation to mandate a 10 warranty for every new home that is built by a builder, and sold to consumers.
  • The New Jersey Home Builders Association started this program on their own and builders could elect to participate or not to participate.  The program was designed to protect buyers from shoddy construction and to promote those builders who provided this warranty, as quality builders…it was the gold standard of quality.  Builders in other states offer 10 year insured warranties, but they’re not mandated.
  • The builders program was called Home Owners Warrant (HOW), and it was written by the NAHB and underwritten buy a major insurance company. The New Jersey Home Builders Association started offering this program on the own, The State then recognized the benefits for consumers, and it became law. It is an insured warranty that stays with the home even if the builder is no longer in business.  And the standards are fairly strict, and it covers every aspect of the home.  It’s a program that is aimed at quality control.  If there is a dispute that can’t be worked out between the builder and buyer, either party can ask for an arbitration to be held.  And that arbitration is binding on the builder.
  • The few warranty companies that are approved to do business in NJ are set up to deal with these problems fairly and within a reasonable time frame. The offer of a $200,000 settlement is considered extremely high.

Unfortunately for these buyers, the builder had to have known that there were leaks, because I’m sure it rained numerous times during the construction process. Good builders continually look for evidence of such problems and correct the problem as soon as it arises. Though there are times that every builder has had some water leakage that didn’t occur until long after the home was completed…the reputable builders fix the problem, and bad builders don’t.

It’s basically impossible for the repairs on this home to cost $1million, unless the contractors giving the estimates were trying to rip off the owner. The replacement value for the this home isn’t $1million…even if the home was destroyed by a fire.

Home Inspectors

Though they are licensed, using a home inspector when you purchase a home by no means is a guarantee that the home you buy will be free of latent defects. That good they’re not. But it’s better than taking the word from a realtor that it’s a great home and you’ll live happily ever after there.

Home inspectors are a valuable asset to buyers, but they don’t have x-ray vision to see behind walls

Though I’ve seen numerous inspector reports filled with erroneous information and insane assumptions, they are for the most part unbiased in their reports, and anal at the least in their inspections and reporting. And yes, they can and do blow deals that sometimes shouldn’t be blown. But it is what it is.

Sorry to say that it’s buyer beware when buying a home.  But in most instances you unfortunately get what you pay for.  So be smart, ask a million questions, and research your purchase.  Don’t just take anyone’s word when buying a home…new or old.

A home inspector wouldn’t have been able to tell this that there were potential because the home was completed, and it was impossible to see structural defects that were behind enclosed walls.

Disclosure: The reason I’m well versed on this topic is from 1980-1984 I was the Northeast Regional Underwriting Manager, and the east coast Multi-Family Manager for the HOW Corporation…which was a subsidiary of the National Association of Home Builders.  They hired me in 1980 to find out why they were paying out so much money for construction claims.  In a one-year period I conducted thousands of site investigations of homes being built by our builder members from New York to South Carolina.  Needless to say I found that there were some builders who were building the worst homes imaginable.  We threw those builders out of the program.  However, I also found that a vast majority of builders built quality homes.

During my stay at HOW, I revoked our insurance from a number of builders in NJ, and as a result, those builders were no longer allowed to build homes in the state…unless the State allowed them to use their program at a tremendous premium surcharge, and with periodic inspections.

I also worked with the NAHB, NJHBA and the NJ DCA redrafting the warranty programs coverage so that it worked even better for consumers. And the re-drafts came about at the request of the NJHBA.  They demanded a quality program.  They’re proud to be the only State to mandate this requirement.

And from 1984-1985 I was the Northeast Regional Underwriting Manager for the 2-10 Warranty Company that is mentioned in this article.  I was responsible for setting the ground work for them to become an approved warranty provider in New Jersey.

Even though this owner has a different opinion, this is a program that protects home buyers.

I have been building homes for more than 30 years, and in 1986 I started building homes in northern New Jersey and proudly used the HOW warranty program.

Next time you’re looking at a new home for sale in Tenafly or anywhere else in New Jersey, ask about the builder and his experience.  If it’s a group of investors who don’t have a track record…run!

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