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A warranty may, or may not, avert a new-home nightmare

If you buy a $5 shirt and then change your mind, chances are the merchant will give you your money back, no questions asked. And if the new car you buy doesn't run right, a lemon law is likely to protect you.

But, new-home buyer, beware. While purchasing a brand new house is the costliest expenditure many people will ever make in their lives, the home-building industry has a no-return, satisfaction-isn't-guaranteed policy.

Sure, every state has building codes and permitting processes that attempt to ensure that a new home is safe and livable before a buyer takes possession. Code inspectors, however, don't always spot big problems and a recent look into new-home construction by the New Jersey State Commission of Investigation found that the worst problems rarely surface within the first year.

On the business side, most successful builders try to do right by their customers. After all, as the National Association of Home Builders points out, if a builder gets a bad rep in a community, his business is in jeopardy.

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But despite government and industry efforts, once a new-home sale closes, any problems become the home buyer's, a pretty daunting thought for someone already facing a mortgage, moving hassles and decorating decisions. This is where new-home warranties are supposed to come in, to ease buyer worries and provide a recourse to get problems fixed promptly at little or no cost.

It doesn't always work that way.

The problem(s) with new homes
An examination of the new-home construction field helps shed light on the genesis of these warranties.

Horror stories, written by both builders and homeowners, could fill libraries. A lot of the problems can be explained by who's telling the tale of the new home.

For homeowners, a house is their biggest investment. And when it's a new one, they naturally want it to be pristine and perfect, the dream home they've been waiting to inhabit. Unfortunately, such standards are not likely to be met, especially when the house is one of hundreds in a suburban development. Home-construction reality is that work occasionally slips with even the highest-quality builder in charge.

From the builder's point of view, many buyers come across as unreasonably demanding, seeking perfection when perfection isn't possible. That demand for perfection clouds the issue and makes it harder for people with serious problems to get them repaired.

The issue gets more complicated when it comes time to determine exactly what qualifies as a construction defect. Buyers and builders often have different definitions. Cracks in drywall or cement or the failure to follow the specs of a building plan precisely can drive a home buyer nuts, while the builder just shrugs.

Defining defects
The NAHB put together a comprehensive guide to construction defects, Residential Construction Performance Guidelines, to bring some consistency to the issue. You can buy the book on the organization's Web site or find it in many public libraries.

The book documents what's an acceptable variation and what isn't; a 3/8-inch crack in cement is OK, but a 1/2-inch crack isn't. If you go to court, even small claims, and argue that a defect should be repaired, and the builder can point to chapter and verse in the book that the problem isn't a defect, you'll lose.


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-- Posted: Aug. 12, 2004
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See Also
PLUS: 10 ways to reduce new-home hassles
New home vs. used home
What to look for in a house, inside and out
My First Home blog by Jeff Gregory
Track prime rate/other leading rate indexes
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