Owning New Construction Home And Mortgage Process


Owning New Construction Home And Mortgage Process

This BLOG On Owning New Construction Home And Mortgage Process Was Written By Alexander Thomas Carlucci of Gustan Cho Associates

Owning new construction home is extremely rewarding and a dream come true.

  • However, owning new construction home can be stressful also prior to closing
  • What really goes on in waiting for your home to be completed and after you close on the home and move in? 
  • Most people think there are minimal headaches since “hey, it’s new construction, it should be mistake free right?” 
  • This couldn’t be farther from the truth
  • Now I am not going to say I wasn’t happy and anxious to get into my new home
  • But there are definitely some parts of the process that can be downright maddening

Owning New Construction Home Starts With The Purchase Contract

After putting down our earnest money deposit and signing the contract, we were about 2 months from delivery of our home.

  • At this time the frame was up, the roof was on, the piping was being run, as well as the electrical
  • We went through our regularly scheduled walk-through with the builder’s foreman
  • We were assured how great the construction was and the quality of product we were getting
  • Now what first got me a little uneasy was the fact that the foreman told us there were 40 or so houses all going up at the same time
  • What this meant is that trades were coming in and out at a fever pace to get these houses up in 12-14 weeks depending on the size

Owning New Construction Home And Experience Prior To Closing

About 2 weeks before closing , we were driving by during the day and what really upset us the fact that we could see the sub-contractors smoking in our garage and in our house.

  • Now there are signs on the windows and sliding doors that smoking is prohibited within 15 feet of the home and there they are laying my floors and carpeting smoking away
  • Now I am tasked with the issue of do I say anything? 
  • These sub-contractors are in my house, so if I make a big deal about it, what else could they possibly do….. We let this go and moved on until our final walk-thru of the home

Owning New Construction Home And Punch List Process

Here is where a few key items were glaring that had been missed:

  • The doorway to our master bathroom was nowhere near where it should be
  • It was more than 1 foot from where it should have been
  • They forgot an entire 4 foot long bump out that was supposed to be in our master bedroom closet
  •  They forgot a window above the French doors to our office
  •  There were parts of our wood floor in the kitchen that appeared to be jammed together as if they didn’t cut the boards right
  • Other sections where there large gaps between the floors to where I could see the sub-floor below

Inspecting Work In Progress

After bringing up the structural items to the foreman, he swore up and down that the house was built to spec per the floor plan.

  • I fought him on this and demanded he get the plans and show me the measurements of these “properly built items” 
  • To make a long story short he finally admitted he was wrong but then tried to convince us not to have to make the changes citing “do you know how much work this will be?” 
  • Yes, in fact I do know how much work this will have to be, but if you built it properly in the first place, this wouldn’t have been an issue
  • These items were fixed and we took ownership in the house.  Let me tell you, the fun didn’t stop here….

Issues With Owning New Construction Home

Almost immediately we started noticing more issues:

  •  bending deck boards
  • more wood floor issues
  • caulking around our tub and shower was cracked
  • the shower pan squeaked all the time while taking a shower
  • the soundproofing for our dishwasher wasn’t installed
  • they forgot the downspouts to our gutters
  • the best of them all was the exact places where we made them fix and adjust the structural issues
  • the drywall was cracking and cracking quickly

They did come out and fix some issues, but the cracked walls we are still dealing with to this day as they have cracked twice now.

Rewards And Pros & Cons Of Owning New Construction Home

New construction isn’t all bad. You do end up getting a new beautiful home.

  • But you just have to remember that the quality of work in your house depends on the sub-contractors used
  • When these guys are all based on quantity and not quality, this is what you get
  • In the mass-produced community homes, this is almost 100% the case in each neighborhood and builder
  • A word to the wise, be prepared for this, don’t take it to heart, and go through everything with a fine-toothed comb, don’t be fooled by the sunshine and rainbows that are promised

Beware With Dealing With Home Builders

Home Builders are hands down worse than sleazy used car salesman.

  • Every single home builder I have visited pressured and steered me in going with their preferred lender
  • Builders steering to their preferred lenders is a practice that is illegal and considered as mortgage fraud if they are getting compensated
  • Kickbacks in referring mortgage clients by builders to lenders is mortgage fraud a a violation of RESPA
  • Since kickbacks is illegal for referring mortgage clients, home builders get a kickback a different way
  • Builders will have a MSA Agreement With Lenders
  • What this means is the home builder will charge some ridiculous desk charge to preferred lenders
  • Most builders will charge $20,000 per month for a desk to a preferred lender
  • In lieu of the $20,000 monthly desk charge, the builder will steer borrowers to the preferred lender
  • Builders will only offer incentives to home buyers who only use prefer lenders

This practice is illegal but the CFPB does not have the manpower to crackdown. Be aware when dealing with home builders and preferred lenders. Preferred lenders need to charge higher rates and fees since they need to pay this hefty monthly kickback to home builders.

About The Author Of Owning New Construction Home

Alex Carlucci is a senior loan officer with Gustan Cho Associates. Alex is also a contributing editor for Gustan Cho Associates Commercial And Residential Mortgage Information CenterA career accountant with expertise in all areas of accounting, Alex has helped countless of folks realize their dream of home ownership become a reality. Alex is an expert on all areas of mortgage loans, both commercial and residential, and offers advice on mortgage loans and interest deductions to the hundreds of accounting and financial clients he represents. Alex has committed himself in being the best of the best in representing the clients who trust him on his knowledge and that is why he is a loan officer. Alex loves his job and loves being part of Gustan Cho Associates Mortgage Group.

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