Home Buyer's Guide: How to Keep From Getting Burned

• Print this article

Even the most reputable developer will build homes that experience drywall cracks a year after the house settles.

— Todd Recknagel, president and CEO of Mr. Handyman

New Houses

If it's a matter of size, a new home could be the best option. According to a recent survey by the National Association of Home Builders, new home buyers consistently purchase larger houses than existing home buyers purchase. The report stated that the average square footage of a new home is 2,309 square feet, compared to 1,700 to 1,800 square feet for existing homes.

New construction also may be tailored to what the buyer wants, so that you get exactly the type of granite you want in the master bath and finish on the fireplace. And it comes with a big bonus: No one else has ever lived in this house. It's all yours, it's all fresh, and the entire place has up-to-the-minute appliances and fixtures. You get that "brand-new" feeling from top to bottom.

A new, bigger and snazzier house, however, could mean mega-sized problems. A family in Fairfield, Connecticut, thought a new and large custom-built "spec home"---a house built by a builder or developer that does not have a buyer---would be best. As soon as the family moved into the 5,000-square-foot newly constructed home---beautifully finished inside with stainless steel and granite---problems began to surface. First, they began to smell foul odors from the toilets, and then mice showed up inside the house.

The house was under a one-year builder's warranty, so the developer agreed to foot the bill to fix the plumbing and eliminate the rodent problems. What these experienced homeowners didn't know---but the neighbors on this street did know---is that there were key concealed structural problems that even the most thorough home inspector might not have detected.

"Don't be afraid to get out of the car, knock on doors and ask the neighbors to disclose what they know about how a new house was built," advised Diann Patton, real estate consumer specialist with Coldwell Banker Real Estate (coldwellbanker.com). Although home buyers instinctively know they should have an existing home inspected---and usually that is a requirement before the deal is closed---many feel the opposite about a new house.

Patton said that just because a house is newly built doesn't mean it's safe to skip an independent home inspection. It's not up to the inspector for the county or municipality to catch workmanship errors; they are there to enforce code compliance only, according to an article about inspecting new houses on Bank Rate's website.

Dan Bowers, a home inspector with Kansas City, Missouri-based Holmes Inspection (holmesinspection.com), said a number of real estate agents and home buyers don't believe new construction needs to be inspected. On Bowers' website, he urges homebuyers to have a new home inspected during the building process rather than after the house is finished.

Many of the problems with new construction have to do with speed and sloppiness that happened during the building boom between 2000 and 2007. "A lot of homes were slapped together," said Todd Recknagel, a former developer and real estate investor who is now the president and CEO of Mr. Handyman (mrhandyman.com), a national home improvement company.

"Even the most reputable developer will build homes that experience drywall cracks a year after the house settles," Recknagel added. "We do a lot of this kind of repair work on new construction homes."

Newly built homes may not be as plentiful as they once were. According to figures recently released by the U.S. Commerce Department, sales of new homes in February 2011 were down 28 percent from the same time a year ago. Soft home sales make builders jittery, and they aren't willing to readily gamble their resources on new construction. That means that there's more of a market for bargain-basement prices on existing homes that were built with some of the best-quality materials.

Existing Houses

"Pull up the carpet in some homes that were built in the 1940s and '50s, and you'll find gorgeous hardwood flooring," Recknagel said. "Homes built back then have a craftsman-like quality to them."

Patton, of Coldwell Banker, said her North California-based buyers prefer bungalows built in the '40s and '50s. "They are sturdy, and the design features are beautiful, with pink and yellow tile and arched walls," she said. Her clients tend to shy away, however, from the popcorn ceilings and rust-colored shag rugs of the houses built in the '70s and '80s.

Those popcorn ceilings are among many out-of-date finishes you might find in an existing house that has a lot of charm and a perfect location but requires a major decor redo. You also might have to replace working-but-older appliances and systems shortly after you move in, and that can be painful in the checkbook department if you've already stretched financially to buy the house.

Many of the issues that an existing house had when first built probably have been resolved over the years. Sometimes problems remain, however, particularly if they involve the structure trends and codes of a particular era.

For example, Recknagel warns that homes built in the early to mid-'70s might have less insulation than what is legally required as of 2011. "National building codes became strict after the energy crunch of the late 1970s," he said. "Even though you may not like the style, homes built in the 1980s and 1990s have better bones and better insulation."

Like the family of Fairfield, a full inspection does not guarantee a problem-free house even if the structure is brand new. In addition, depending on location, not all banks require a home inspection on new homes, Patton said. To see what is covered in an inspection on any age home, the National Association of Home Inspectors offers a complimentary "Standards of Practice" document, which outlines procedures to help homeowners understand the inspection process.

Read Next:

• Print this article