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Hamptons Life

Dec 15, 2017 12:58 PMPublication: The East Hampton Press & The Southampton Press

Old Versus New: Ups And Downs When Buying A Home

Newly constructed homes come with a New York State warranty that builders must honor.
Dec 18, 2017 10:27 AM

So, you’re finally ready to buy your dream home.The first thing most people have to decide is whether to buy new construction, or old. For many, it’s not a discussion—they are either absolutely in love with the idea of old, or absolutely in love with the idea of new.

Whatever your persuasion, this you need to know: Newly constructed homes (meaning they’ve never been lived in before) come with a New York State warranty that the builders must honor by law. That definitely feels good when entering into a multimillion-dollar purchase.

But, by the way, if your builder is not licensed, the same rules do not apply. Know beforehand whether your builder carries all the correct licenses and insurances necessary for you to be able make a claim under the warranty for any unforeseen issues and expenses that may arise.

Many fans of new construction are such because they love the idea of walking into a beautiful new home with everything working perfectly. Right?

Well, not always.

You should keep in mind that a house is actually like a big puzzle, with many different people putting all the pieces together, trying to make everything work in sync. When a house is newly constructed, the builder is supposed to check all the systems to see if they work properly, including plumbing, heat, A/C, lights, sound system, audio and visual systems, security, etc.

Often, these systems will work just fine for the initial test period, but eventually some will develop problems as the systems get more use. Some defects will not be noticeable during a typical pre-purchase house inspection, but you may notice them over time.

How much time before they become noticeable will determine whether the builder is responsible for fixing them or not.
 

 

Just The Facts
 

The state law that protects new construction home buyers is called the Housing Merchant Implied Warranty. It is a mandated warranty for all sales of newly constructed homes, meaning that it is implied and does not have to be written into a contract.

The warranty is written to cover construction defects resulting from a failure to construct in a “skillful manner,” which is defined by the building codes of the area, which dictate locally accepted standards. To determine exact coverage for your particular home, investigate local building codes and determine how they differ from state standards.

The Housing Merchant Implied Warranty states: “For one year, the home must be free from defects caused by workmanship or materials that do not meet the standards of applicable building codes or are not in accordance with locally accepted building practices.”

Things covered for two years include major systems such as plumbing, electrical, heating, cooling and ventilation, if the defect is from a failure of the builder to install such systems in a skillful manner consistent with the area standards.

Material defects are covered for six years after the passing of the title. “Material defect” is defined as physical damage to the load-bearing portions of the home to the extent that the home becomes unsafe, unsanitary or otherwise unlivable. The areas of construction covered under the definition of “material defect” include things like foundations, footings, beams, walls and roof framing.
 

 

Try To Play Nice
 

If you believe that you deserve reparations from your builder, before filing a lawsuit you must notify the builder of a warranty claim, in writing. You also must give the builder a reasonable opportunity to inspect, test and repair the defect. Don’t assume the builder will not fix it. Most builders have a budget for “punch-list items.” These are all the little things that need tweaking, fixing and adjusting after the heavy lifting is done.

Oftentimes, and with reputable builders, problems just need to be bought to their attention. There is a lot going on during construction, and it is difficult for your builder to catch everything the first time around.

The good news is, except for general maintenance, a new, well-constructed home should pretty much be maintenance free for about 10 years. The warranty from the builder has expired by this point, however. Therefore, all costs of fixing and upgrading the home will be yours.
 

 

The Older, The Better
 

If your dream is to buy an old house, you have to be careful you are not buying a money pit. The rule when buying an old home is caveat emptor, which means, “let the buyer beware.” Always verify anything anybody has told you, and get it in writing if it’s important.

New York State has given some legal rights to “old home buyers.” These are meant to protect them so they are not completely stuck holding the bag if there are unforeseen or hidden problems with the house, and things start falling apart (literally!).

The act protecting old home buyers is called the Property Condition Disclosure Act. This caveat puts the burden of disclosure on the seller. The PCDA has 48 questions for the seller to answer. These questions are based on the seller’s present and actual knowledge. It does not require the seller to do any kind of due diligence; the due diligence is still left to the buyer and should be completed before a closing occurs.

View the property condition disclosure statement form at www.dos.ny.gov/forms/licensing/1614-a.pdf.
 

 

The Opting Out Option
 

Be aware that there is a provision that allows the seller to opt out of providing the disclosure and instead give the buyer a $500 credit at closing.

This is what is done in most transactions out here in the Hamptons. The opt out option is obviously beneficial to the seller. For most, it’s much better than the risk of something becoming unearthed for which they could be held accountable.

Opting out does not protect sellers from liability if they are intentionally misleading or hiding major issues concerning the property.

Sellers often can head off glitches in a potential sale of their property by hiring an engineer to perform an inspection of the property prior to it being listed. Then they can decide whether to fix any items they feel may be an issue, give the buyer a credit, or reduce the price to cover the defect.

Many home inspectors who complete the pre-purchase home inspections are not engineers, nor licensed in a particular trade. Therefore, the report they give you after their inspection may say the plumbing or another system is satisfactory—but you should still have a licensed plumber or another tradesperson verify it.

This disclaimer effectively shifts the burden of responsibility to the buyer. (For more information, read “Five Things To Know Before Becoming A Home Buyer” on 27east.com.)

So, whether you love old homes or new, clearly, there’s plenty to be educated about. If you are planning on renovating your home, ask your builder to take a careful look at the house—old or new.

If you are not doing business with a builder, it will probably be well worth the time and money to hire one to do an in-depth inspection report. The inspections most people get during the process of a deal are helpful, but they may not give you the detailed information you’ll want when deciding on your dream house.

Ed Mulderrig is a seasoned real estate agent as well as an experienced builder and zoning specialist. Email ed.mulderrig@sothebyshomes.com or call 631-374-1197.

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