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Building Delays Can Leave Buyers Homeless



By Zoe Berg
The Washington Times

Closing costs, moving fees and hefty mortgage payments might not be the only expenses new home buyers can Incur. Before signing, buyers should read the fine print.

Builders are recognized throughout the real estate industry as having one sided contracts; that is, the contracts cover the builder but provide little protection for the buyer.

In a heated market, or when the weather doesn’t cooperate or a host of other reasons intervene, builders do not always make their scheduled delivery dates. This leaves buyers with added moving expenses, storage costs and temporary housing payments if they already have sold their home or have given notice to their landlord and a rent back or extended lease is no longer an option.

“No builder contract obligates the builder to deliver the house when promised, so no builder contract allows the home buyer an out or my damages if the builder fails to deliver when promised,” says Beau Brincefield, a real estate lawyer in Alexandria who has written a guide to buying a home.

If you are concerned about the timing of the move, that section of the contract must be addressed, he says.

Builders give oral estimates and may put something in writing, but it is not binding, Mr. Brincefield says. The contract supersedes oral estimates.

The delivery date is not the only thing that can get off course. The contract usually allows the builder to change the physical construction and layout of the home, Mr. Brincefield says. The builder can change the floor plan, grading of the lot, building materials and orientation of the home on the lot, he says.

The home buyer has no assurance that the property will be completed properly, Mr. Brincefield says. Most contracts provide for a pre-settlement inspection. The representative may or may not include on the punch list what the home buyer says is lacking, he says.

Furthermore, few home buyers bring a certified home inspector along, Mr. Brincefield says, Even if an inspector visits and finds something wrong, the builder is not required to hold funds in escrow to fix what is deficient, he says.

“The only shot that a home buyer has is to know how to negotiate the contract before they sign it,” Mr. Brincefield says. He advises his clients to add the line, “This contract is subject to review and approval by an attorney for the purchaser.”

Scott Avery, president of Tysons Corner based Avery-Hess Realtors agrees. Builders have every thing covered in the contract, he says, and that is why buyers need representation.

Some buyers go into a new project without being represented by a Realtor or lawyer, Mr. Avery says, and the sales people on the premises represent the builder’s interest.

When delivery is delayed, the buyer is caught between a rock and a hard place. When the market is hot, what is a buyer to do? Threaten to walk? The builder has his deposit and other buyers lined up, Mr. Avery says.

“If you’re working directly with the builder, their motivation isn’t there to assist you in all of this,” he says, whereas a buyer broker will help clients find housing and perhaps get the builder to chip in financially.

Bonnie Edwards, a relocation specialist at the Avery-Hess Springfield office, has had clients in this sticky situation. The delay did not surface until two weeks before settlement. She already had sold their home, so she went back to the builder and negotiated.

Mrs. Edwards says the builder is paying $65 per day for storage and about $2,800 toward the cost of the second move for these buyers. The builder also is paying $482 to extend the lock on the loan interest rate. Mrs. Edwards says not all builders would do this, and “it took some work to get it accomplished.”

Mr. Avery says buyers should start their home search by hunting for reputable builders and get a Realtor who call represent their interests. Realtors can stay abreast of the time line, he says. If they see possibility for delay, they might negotiate a rent-back situation or direct the buyer to temporary housing or a short-term rental.

He says buyers stuck with a delayed closing, call compensate somewhat by getting a rental I hat is less costly than their mortgage. Shirley Long, a relocation specialist and associate broker at Avery-Hess’ Tysons Corner office, says the going rate between Tysons Corner and Washington Dulles International Airport for a two bedroom corporate apartment furnished down to the silverware and linens us as high as $2,600 per month.

“It’s very difficult to get rentals under 12 months, so you have to pay a lot more,” she says. An unfurnished apartment costs around $1,200 per month for a six-month lease.

Finding these apartments is difficult because most short-term corporate apartments are rented by corporate – apartment referral companies, Mrs. Long says. Many new week/rental suites are entering the marketplace however.

Short-term, unfurnished condos and town houses are less expensive but are difficult to find for less than six months, she says.

Some investors and Realtors, however, have homes they rent out, furnished down to the silverware. They can be found on the multiple listing service, she says. “Buyers Would prefer not to do this [be delayed], but in order to get their dream house, they’re willing to do this, even up to six months,” Mrs. Long says.

Mr. Avery says, however, that when a market heats up and cannot keep pace, some buyers pick resales to be assured of delivery dates.

To avoid a delayed closing, William “Kip” Laughlin, president and owner of Century 21 Fine Homes and Estates in Vienna and McLean, tells his clients to contact homeowners in other subdivisions and ask how well the builder responded to any problems. He also says contact homeowners in other subdivisions and ask how well the builder responded to any problems. He also says contact the Better business Bureau and local building associations to see if any complaints about the builder are on record.

Reprinted from The Washington Times, Friday July 10, 1998

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