Consumer Rights When Purchasing New Homes


It wasn't so much about the squirrels.  This Silicon Valley development was advertised as brand new --- which is technically true because no one had lived in these homes for sale.  But the first proverbial "for sale" sign had been put up almost two years ago and the developer still had leftover inventory.

The first to move in, though, weren't the people who had signed their contracts.  The first occupants were actually a set of long-tailed friends using the attic as a roost. 

Indeed, uninvited guests in the attic are annoying, but there was a good chance they wouldn't have been more than an irritating nuisance to be taken care of "soon".  Except they brought their own uninvited passengers, which were so great in number that they fell from the ceiling. 

The owners were obviously unhappy with an indoor rain made up of mites landing on the bed, couch and kitchen table --- especially in their new home.  And you can bet that the threat of a lawsuit was broached more than once. 

Prevention is the best cure and knowing your rights when buying a new home will help you sidestep major headaches down the road.

Working the Bugs Out of New Homes Before Moving In

In a project as large as a home, with hundreds of homes being built in a subdivision, there are bound to be mistakes.  So the home builder almost always offers a modest warranty to buyers. 

For example, Pulte offers a one year warranty on materials and workmanship and two years of coverage for heating, A/C and electrical for its Bedford Square subdivision in Mountain View.  (The videos in the link are still good, but we have updated numbers.)

Warranties Are Obviously Good, But...

Typical home buyers, though, will plan to live in the development longer than a year or two: if they don't, they risk completing with the builder when they go to sell. 

Not only that, the warranty only covers buyers against minor risk.  After all, a warranty doesn't provide entitlement: every claim will need to be negotiated with the builder, and larger claims are more difficult.

Consumers have the right to their own detailed home inspection where the construction of and systems in the home are professionally evaluated.  That way, you know about the home's risks and defects before they become your problems.  Savvy real estate agents always know a good (read: thorough) home inspector.

Negotiation and Comparison Shopping

Incomplete information.  Buyers who tour all the new homes in an area still don't have the complete picture of what they can get for their money.  Sometimes it takes a secret handshake.  Sometimes you need to think outside the box.  Sometimes the easiest path is the most expensive.

Consumer advocates are usually pretty difficult to find in the sales office of a builder.  It makes sense: the agents there have a fiduciary duty to their employer, so it'd be reasonable to expect them to give you only information advantageous to the powers that be.  Not so good for the buyer.  Buyers have a right to the complete picture and their own advocate who looks out for their goals and needs.

Comparative Market Analysis (CMA) for Buyers

CMAs are typically run before putting a home on the market.  The analysis includes how the cost, value and features of the home in question compare to others in the area.  This information (when it's objective) is also extremely useful for buyers because it can uncover exactly what the premium is for purchasing "new" relative to homes that might be under a decade old.  Buyers have the right to have the best market information possible before making such a life-altering decision.

Thorough real estate agents not only provide this information and analysis but arrange for tours of comparable properties.  Both are typically best done with agents because the freshest sales information is accessible to members of the local MLS (no matter what we might think of their policies) and owners are more comfortable opening their homes to someone licensed and accountable.

Incentives and Financing

Sometimes asking isn't enough.  The CMA is also occasionally useful for teasing out incentives that a builder wouldn't have offered otherwise and getting "in-kind" incentives like upgrades is usually easier than negotiating cash discounts.

But more often than not, there are incentives tied to using the financing options provided by one of the builder's partners.  Sometimes, it turns out to be a pretty good deal.  Other times, the terms are structured in a way that buyers pay for the incentives they get through the financing they sign up for. 

Silicon Valley consumers have the right to independent opinions (and options) for financing their home purchase, without the conflict of interest generated by partnered builders and lenders.  Connected real estate agents know lending experts and, as consumer advocates, can often provide incentives not offered upfront by real estate developers.