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Don't pay builder until home's built right

Dear Steve,
My builder can only obtain a 30-day temporary certificate of occupancy due to code deficiencies noted by the city. He claims he cannot correct deficiencies until materials arrive that are on order. He wants to go ahead and close on the sale. He claims he is liable, as the builder, to correct the deficiencies. I am concerned the liability will transfer to me upon closing. What are your thoughts, and how can I protect myself? Thanks.
-- Suspicious Stacy

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Dear Stacy,
If you're looking for a brief answer on whether you should close your deal based on the builder's promises, here it is in three words: No, no, no! If you close and hand over your money, you may relinquish the only leverage you have in this matter and possibly be stuck with a home that's at least temporarily uninhabitable and may even require thousands of dollars to fix.

While I'm not quick to refer readers to attorneys, you need an experienced real estate lawyer, and pronto. If you have friends or colleagues who can recommend one, fine. Or you might go to the Web site of the National Association of Consumer Advocates for the names and numbers of legal experts in the real estate field in just about every major market. Brief bios give their areas of expertise.

While you're waiting for your appointment, contact the city's code-enforcement division and ask to speak to the inspector who found the deficiencies at the site. The inspectors are usually out most of the day, so you'll probably have to leave a message. Note that it's an emergency. It is -- for you!

When you do speak with the inspector, ask how serious the new home's problems really are, how they arose and what caused them. Realize that they don't want to get involved in a legal controversy, so you may have to read between the lines of the responses. Try to get an idea of what's truly needed to fix the problems.

You may also want to call the Better Business Bureau and ask for the track record of the builder. And keep that phone number handy: You may have to call them back with your complaint.

Meanwhile, take a long look at that contract you signed with the builder. Take it with you to the attorney's office, along with any pertinent correspondence or records. You might have an "out" for builder nonperformance -- assuming you can bear to part with the house. Most contracts say the contractor must "substantially comply" with terms of the construction agreement. If a 30-day certificate of occupancy is the best the builder can offer before closing, you probably have solid legal footing.

Even if the builder is indeed liable for fixing the problems, it doesn't mean he will correct them down the road, even if those individual deficiencies are covered specifically in your contract and (or) by local government requirements, says Beau Brincefield, a real estate attorney in Alexandria, Va., and author of "Brincefield's Guide to Buying a Home; The Twenty-One Biggest Mistakes People Make When Buying a Home."

Many people think they're dealing with a reputable "name" builder when they're getting a new house, but some builders make a habit of setting up different limited-liability subsidiaries that have no assets from subdivision to subdivision, says Brincefield. So even if there's a judgment against them, they may have nothing to pay it with.

Of course, the problems in your new home may actually be minor and the builder may fix them as soon as materials come in. But don't count on it. Act quickly. Be persistent and firm. Don't leave anything to chance. And good luck.

-- Posted: Oct. 2, 2004

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