What Recourse You Have Against a Home Builder If Your Dream House Becomes a Nightmare

You’ve built the home of your dreams and moved in, but this isn’t exactly the dream house you planned on — more like a nightmare. Things are falling apart!

Maybe it’s something small, like the dishwasher stops working. Or maybe it’s something large and urgent — like a serious roof leak or a destructive flood due to faulty plumbing. Either way, it’s not something anyone caught at a new-construction home inspection… and now the house is yours.

So what recourse do you have against a builder who did a poor job? We talked to real estate and legal professionals in order to walk you through your options.

Step one: Talk to an expert!

Even if you’re just day-dreaming at this point, it’s never too early to ask a local real estate agent for advice on building a house.

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Refer to the contract and warranties

Before you escalate the issue, first refer to any contracts and warranties that might apply. Most builders issue warranties for homeowners, and these would be reflected in the contract. Aspects of your home are likely to have different term lengths — for instance, you’ll be covered for shorter amounts of time for plumbing or electrical systems, but longer for structural problems.

Albert Vasquez, a top-selling real estate agent in the Miami region (who works with 72% more single-family homes than the average agent in his area), explains that it behooves buyers to “be very well educated upfront and know what you’re getting yourself into” when it comes to signing builder contracts. Read them carefully so you know what to expect. If possible, do so with a lawyer.

Kevin Hirzel, managing partner at Farmington, Illinois-based condominium and real estate law firm Hirzel Law, says, “most builders will provide some form of a limited express warranty. If a builder did a poor job, the owner may be able to sue for breaching any express warranties that are provided.

“However, prior to entering into a contract, it is important to have an attorney review the contract to determine what the warranty covers. Many potential purchasers get excited about building a new home or about a major project and forget to read the warranty disclaimers in the contract.”

Is the builder responsible for the problem?

Hirzel says there may be reasonable claims for breach of contract or negligence if a builder did a poor job.

“It is important to be as specific as possible regarding the scope of work in contract,” he says. “The builder’s responsibility will largely be determined by the contract. In most cases, a builder is responsible for construction defects.”

But the builder may not be responsible for certain issues at all. For instance, if your problem is related to an appliance, then you may need to contact the manufacturer instead. Home appliances — such as a refrigerator, dishwasher, and oven — typically come with their own warranties and are therefore usually excluded from any builder warranty.

“Sometimes developers will just make the claim through the manufacturer as well,” Vasquez notes.

Are there expiration dates to pay attention to?

The builder won’t be responsible for problems that crop up after a certain amount of time has passed. Typically, the builder covers various different elements of the home at one year, two years, and 10 years — but this varies by case.

“I usually tell our buyers to be on high alert if anything were to happen within the first 12 months,” Vasquez says. “If you see something weird, don’t wait another month or two to say it — I would go to the developer within the first 12 months of ownership.”

Are there any exclusions?

In addition to the appliances, these issues fall under typical exclusions, according to a breakdown by the Cincinnati-based firm Craig T. Matthews & Associates:

• Damage that’s your own fault due to abuse or negligence
• Damage that comes from regular wear and tear on construction materials
• Damage caused by outside forces, like vandals or weather
• Damage caused by people you contracted to do work on the home
• Your expenses if you have to move out during repairs

Document the issues

What exactly is wrong, and how is it the builder’s fault? You’ll need to be able to prove this to the builder’s satisfaction, so collect your evidence and document it all.

Did the builder breach the contract by misrepresenting the materials they would use? Exceeding the budget without your say-so? Unreasonable delays in getting the home built? Shoddy workmanship?

Document your contact with the builder, too. If things escalate, you will want to be able to prove when and how you were in touch. Take notes on every conversation, including the date of each interaction.

Put everything in writing. Many builders will require you to file a claim in writing before you can take any other steps. (Others might have a phone number to call.) Information you document demonstrates your intentions to pursue the issue and can also be used as evidence in legal proceedings.

Include all relevant information: your name, your address, your contact information, and details about the problem, including what you want the builder to do and when you want it resolved. Be polite but firm. Show your determination and your intention to act quickly when you present your documentation to the builder.

Talk to a home inspector

A home inspector can help you determine the extent of any damage and offer an opinion as to whether the builder was responsible for it.

If it’s not too late, Vasquez underscores the importance of getting a home inspection before you close on your new-build home for this very reason.

“My biggest recommendation would be to get a licensed home inspector to go through every nook and cranny before you sign that closing,” he says. “We try to avoid these situations if we can prevent them. If you have a good home inspection, you know what you’re getting yourself into.”

Register complaints

You can complain to the Better Business Bureau, FTC, and licensing boards in your state.

Contacting the Better Business Bureau will put the builder on notice that you are serious. You can also register your complaints with the Federal Trade Commission, which collects complaints and investigates certain situations. This step won’t resolve your complaint, but it can be a good way to report a problem.

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Talk to a lawyer

“If you’ve already reached out to the developer and the developer is showing no signs of trying to remedy the issue — or maybe they have fixed it but it keeps on breaking — you can reach out to a construction defect attorney,” Vasquez says. “It’s not in a lot of cases that we have to send buyers over to a construction defect attorney, but if it happens, it’s usually because the developer has not decided not to play nice.”

You might have recourse for a small claims suit or even a lawsuit under a state construction liability statute. The statute of limitations may come into play, depending on the timeframe of your claim.

Matthew Kreitzer, a lawyer in Virginia who handles commercial litigation, explains that a buyer might have recourse against the builder under certain conditions, including:

• What type of defect there is
• What efforts the builder made to fix it
• Whether the builder knew of the defect in advance or had reason to know
• Whether the builder hid that knowledge from the buyer
• What disclosures were made to the buyer as part of closing
• How long ago the buildings were built
• The reason for the defect
• Whether there were any other contributing factors to the defect
• The state in which the building is located

For instance, in his state, “there are many instances where a builder might be on the hook to the buyer,” he explains. “Perhaps they did not properly compress the soil prior to starting the foundation. Perhaps they didn’t have the proper stormwater management in place that caused erosion. It is a case-by-case determination.”

David Aylor, founder of the South Carolina firm David Aylor Law Offices, says you can file a claim against a builder if you feel that they were professionally negligent or breached your build contract, “though you’ll want to consult a lawyer first to make sure you have solid grounds on which to pursue legal action.”

A lawyer should be able to tell you more about your probability to win and the potential costs involved with going this route. He warns, “sometimes, even if you have a legal case, it’s not worth your time or money to pursue it.”

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