anyone ever work with a homebuilder before?

[Ohio Guy]

we're giving serious thought to having a house built when we move to Athens....there's a really good neighborhood that is currently being developed and it's already custom made for people with kids our age. Everything about the location is great, but we're already starting to see rumblings of the builder being somewhat difficult to deal with.

For starters, we're still very much in the discussion stage (we've already signed a six month lease for a place to move directly to in January) and nothing has been put in writing or signed. When we initially talked to the builder, everything seemed great. According to him, he'd build the house, give us a budget for modifications/ various choices and we wouldn't have to owe anything until we got our home loan and moved in. He said it'd likely be done in May or June (it was originally going to be spec house and the foundation is already laid) and everything seemed like it'd be easy and smooth.

We got an email from his assistant yesterday with all these weird stipulations (like no site visits while the house is being built). The biggest thing was the insistence that we take out a construction loan. I did a quick google search and basically it doesn't seem like there is much - if any - upside for us to do something like that. The email also stated that the "approximate" finish date is now June 30, 2015 (so I guess May or June turned in to June/July). We also talked to our bank (it's a "big" bank) and they told us they don't do construction loans and that we'd have to go through a local bank or a credit union for that.

Has anyone ever dealt with something like this? A friend of mine told me that if the builder is using our money to build the house, then he officially works for us and that we can set perimeters like weekly updates and that we can negotiate a hard finish-by date and that there are penalties for going beyond that date. I honestly don't know about all of that...half of me doesn't want to deal with the hassle, but on the other hand, I know we'd love the house and neighborhood when it's all said and done.

I'd love anyone's $.02 if you have any experience with this. Thanks.

This post was edited on 12/13 9:16 AM by Ohio Guy

This post was edited on 12/13 9:18 AM by Ohio Guy

 

[WisslerIII]

So many things to consider. I had a house built and spent

every day at the construction site, with blueprints and plans, to make sure they were doing it right. Because if they screw up and do it wrong, they won't change it - you'll be stuck with it.

It's not unusual to take out a construction loan and then the builder/contractor is paid in various stages. It's usually something like 25% in the beginning so he can buy materials, then 20% at different stages (it was 3 with mine). Then the balance at closing.

1 VERY IMPORTANT THING: Get written statements from his suppliers and subcontractors that they will not put a mechanics lien against your house if they're not paid. Otherwise, if they aren't being paid, you can pay the builder but they can have a lien against your house for the amount owed! Builders are notorious for declaring bankruptcy one day and opening up a few days later under another name. This happened to me and the guy was a very respected builder. I got the lumber and cabinet company to take the lien off, but it took a couple years.

Is he the only builder in the addition? I would get at least 2 other bids. If he's the only one in that addition, that's kind of a warning sign to me.

I enjoyed building the house. But I went to the site one evening to find that they had started the foundation 2 feet back from where they should have (it was a tight fit on a lake lot) and the next day I met the builder out there and he had to tear out the foundation framing. If I hadn't caught that, the house depth would have been cut off by 2 feet and, multiplied by the width, that's a lot of square footage. That's why you have to be there every day. Every. Day.

Make sure the doors swing the way you want. Your tape measure and plans/blueprints will be your friend.

 

[Tracon]

Almost always a mistake


far better off to buy a standing older home. The quality of new construction for the most part is poor. You will be asked to get several loans in the process as Wissler said and costs will keep rising during the process. You will probably end up being gouged for about 20% more than you expect due to 'upgrades' to trim, cabinetry, doors, etc. Then there is landscaping to deal with.

And after all that you will not have any nicer of house than if you buy existing and do some upgrades on your own.

Most people dont want to hear the down side however .

 

[DougS]

32 years ago

We agreed to a price and date, visited the site frequently during construction, and paid him the agreed upon price when he was done. Had a couple warranty items in the first year (roof didn't seal and we lost a lot of shingles in a nor'easter) but, other than that, it worked out well.

It doesn't sound like yours is shaping up to be that kind of experience.

 

[CO. Hoosier]

Take a walk

You can't get a construction loan for a house on a lot you don't own. Sounds like the builder is asking you the co-sign his loan for a house construction on a lot he owns. The lot is probably encumbered with a development loan anyway. You don't want any part of that arrangement.

It isn't uncommon for semi- custom tract builders to not allow site visits because you don't own the lot. All you can do to protect your interest is make sure your down payment is kept in escrow and that closing is contingent on your acceptance of the completed house in your sole, secret, and unfettered discretion.

OTOH, if you close on the lot and foundation before construction, see a lawyer who knows about construction contracts. Don't use the builder's canned document.

 

[Standard Issue]

Builders are in the business of making money not houses. If they won't let you visit the site tell them to bugger off. Show up every day with a tape measure, level and a square and check everything you can think of. Remember they aren't giving you the house.

 

[Noodle]

Re: Take a walk

Technically, you are right. However, it is not all that uncommon for construction loans to include the loan to buy the lot as part of the whole package. Then, the entire thing gets rolled over into a regular mortgage.

 

[CO. Hoosier]

Correct

The lot owner must still sign the security documents. If that is the builder I wouldn't advise my client to sign. If the builder goes belly up
The owner has nothing but an outstanding liability.

 

[Optimist13]

Incorporate your own business

and instead of the builder-general contractor being an independent contractor, then
you hire the builder-general contractor only as an "employee". You can then micro-manage
everything.

 

[hoot1]

Here's a good website on construction loans

This might be of some help.