– In the last 14 years, I’ve seen some pretty crazy stuff when it comes to home builders, and here recently, I’ve read some headlines that have absolutely blown my mind. So today we’re gonna be going over some of the biggest lies home builders have been telling you. Not only that, I’m also gonna be showing you if you really didn’t want to hire a home builder, but you wanted to build your own home, I got something for you too there.
So one of the craziest stories I’ve heard coming out of 2020 into 2021 is what home builders have been doing to home buyers. – The builder cancels the contract for a new house they were building.
The couple was six months into the process and had already sold their current home. – [Newscaster] Last August, they signed a contract with Coventry Homes. Things moved slowly, but they trusted they’d get the house they were investing in. CBS Austin reached out to Coventry Homes, but hasn’t heard back. According to their website, the development where the Browns were building is now sold out, with new buyers on a wait list.
– So what has happened is that these home buyers had purchased the plan, so there was just an empty, vacant lot.
Except for the fact that these home buyers had already agreed upon a price, and you can pretty much be the judge of why they did that. With the home prices going up, building materials going up, and they knew they had a bank of buyers sitting there in line waiting to purchase the house. They didn’t care it was a hundred thousand dollars more than it was six months earlier. They’re ready to purchase right now.
So they found every loophole under the sun to get those buyers to just go and walk away, unless they were willing to pay the new amount, which was a hundred thousand dollars more. Terrible way for a home builder to do business, but they really don’t care right now.
But they will care in the future whenever these home prices start balancing out. But in the meantime, it seems that greed is awry. Not all home builders are like that, so don’t even start with me in the comments section, saying, “My home builder would never do that.
” There are very reputable home builders out there. But in this specific case, how would a home buyer protect themselves so they would still be able to purchase a house? Well, there’s one problem that most people don’t know about when it comes to home builder contracts. It’s that when you’re dealing with a new home builder that’s a track builder, in most cases, in most states, they never sign the state contract. They have their own specific contract that only protects them.
So you could go through that with a fine tooth comb and you would have a hard time finding any loopholes to be able to retain any kind of deposit or that you could sue them. Before you decide to hire an attorney to help you with your problems with your builder, there’s a letter that you probably want to try to write first.
Make sure you include your name, address, and home or work telephone numbers. Type your letter if possible. If not, use printing or handwriting so it’s easy to read.
Keep your letter brief and to the point, but include all your relevant details. State exactly what you want done and how soon you expect the problem to be resolved, but be reasonable. Include all the relevant documents regarding the problem.
Send copies and not originals. Keep a copy of the letter for your files.
I touched on this, but I’m gonna repeat it again. Another way that home builders flat out lie to you is the cost of the appliances and upgrades. This is very common with a lot of home builders. Not all, again, not all home builders do this. But in many cases, they will tell you that this specific upgrade for a stove is gonna cost you an extra $250.
But then if you actually go online, it ends up being a lot less than what they’re saying that it costs. But then they’ll tell you, “Well, that’s including the installation”, but didn’t that include the installation for the cheaper stove? Yeah, that’s what I’m thinking. So this happened to me when I was going to purchase my house here and I was having it built, and these plumbers that were putting in all the sinks and everything had a tub that I really wanted.
And I’m like, “That tub seems extremely overpriced”, and it totally was.
The tub that I wanted, when he went into their showroom, was $6,500, which was insanity. And I, again, I went on Home Depot and some other websites and I ended up finding almost the identical tub for a lot less money, a lot less. But this is one more way that home builders lie to you. It isn’t just necessarily the cost of those specific upgrades. This is something else that can happen, and it’s super important for you as a home buyer that’s building a house to watch every single step, because once that tub was delivered, I had them open the box right at the location of where my house was being built, ’cause I wanted to, luckily wanted to take a picture to show people at my work.
When we opened the box, everything was perfect and I had taken several pictures. Later that same exact day, I came in because they had installed everything, and then I get to where the bathtub is and there is a gigantic thick scratch going all the way down and a chip where the drain is. And you know what the first words out of those plumbers mouths were, right? You know exactly what it was. “The scratch was already there.
” So I call my builder up and he’s like, “Well, the thing is, is that’s not stuff that we warrant. “We didn’t do that.” And I’m like, “But I opened up the box “and I took a picture of it that morning “and those scratches weren’t there.” So they had to replace my tub. So that is another warning if you’re building a house and you’re gonna get upgrades and you’re going to have them bring in your own stuff from another location.
Make sure you take photos of it before you have it put into your house, ’cause you never know what’s gonna happen, and if they get a chip on their shoulder ’cause you’re not using their specific products. Now with every new home build here in Louisiana, we have something called a New Home Warranty Act. Many states have something very similar and this will cover certain aspects of your house. You’ll have a warranty for how long your foundation is under warranty. You’ll have a warranty for the actual structure itself.
And then we have what they call the bumper to bumper warranty, everything inside the house is warranted for one exact year. So that includes paint chips and things that are loose, anything that needs to be kind of touched up, and that’s warranted for one year. But every year after that, things start to fall off of warranty.
Home builders don’t tell you there’s other warranties that are included besides the Home Warranty Act. So you can have a windows put in your house and each of those windows has a warranty attached to it, so you can have those windows warranted up to eight years and you may not know that because they don’t tell you.
A lot of your appliances are gonna be warranted as well. So whenever you move into your house, make sure you pull out all those cards that have the warranty and fill them out, so you have them all under warranty, so three years later down the road, if you have an issue, it’s still under those warranties. Some appliances are up to five years on a warranty, so just make sure you fill out those cards.
That home builders will do is sometimes, especially here in our area, they’ll already have a alarm company come in and put an alarm system in. That does not mean you have to use that specific alarm company.
They have made some kind of deal with the builder to go ahead and put that alarm system in, but that does not mean you have to use their specific alarm company that’s been in there. Now, does it make it more convenient? Sure it does. But I definitely think that you should shop around those prices, ’cause alarm companies, as far as what they do and how much they cost, are all over the map, so do your due diligence when it comes to having an alarm system put in after you’ve had your house built.
Now, one of the things that really stinks about buying from some home builders that you’re not familiar with is if they have a specific model home.
So just like any builder, or if you go to a car lot, they always put their best foot forward as the actual model. So they’ll have every single upgrade in that specific model. And then by the time a lot of the houses are built, you’re like, “Where are all the upgrades?” But of course, those costs extra.
But sometimes they’ll put things in that model that they don’t even offer in the houses.
This happened to one of my clients, and when she walked into the model home, they had a specific type of texture on the walls and she thought it was absolutely beautiful. It was called knockdown. And so she was more than ready to have her house built with these rounded corners and this knockdown texture on the walls. And then once the house was being built, it was all framed up and the drywall goes up and then they start mudding. She walks in the house and it was orange peel, totally different texture.
And the home builder says, “Well, we don’t do that anymore. “That was something we used to offer, “but we don’t offer it anymore.” Now let me just tell you, the subdivision was only six months old and knockdown takes a lot more time than orange peel.
So that was the reason, really. They just wanted to, it was almost like a bait and switch.
It wasn’t the only thing that happened. So needless to say, with all these things, she was able to get her deposit back and she didn’t have to work with that specific builder. I wanted to say, just as a FYI, did not recommend this specific builder. Now there’s tons of stories throughout the internet of people that have had horrible experiences with home builders. So what is it that you can do?
So here’s a few things. I know you’re gonna hate me for saying this, but hire yourself a good real estate agent because they are gonna know the home builders that are gonna be easy to work with and work with you instead of against you.
If you would plan on not using a real estate agent, get yourself a real estate attorney that can go over that builder’s contract before you sign anything. So that way, you have a good understanding of what’s going on in that contract and what kinds of things you’re gonna be liable for, even if things go wrong on your specific home build.
Go ahead and find out if you have any kind of referrals for that specific builder himself.
If it’s a private builder, try to see if you can go into any of the houses that he’s built previously and talk to some of those homeowners and see if they have any complaints. Look online. People love to air out their grievances online, so see if there’s anything on that specific builder online. If you don’t want to work with a home builder, I actually have a really cool solution for you, especially if you’re thinking about building your house yourself.
As crazy as that might sound, it’s becoming more and more common because it’s so hard to get a new house right now.
– All right, I’m here with Mike Luckado. The coolest last name I’ve ever heard. Michael, can you tell us a little bit about you and your company? – So yeah, I started in the home building industry about, I’m not gonna say how long ago. Decades ago, right after college.
I graduated with a degree in civil engineering and construction management. Started building houses, built a couple of thousand houses since then, and maybe 10 years ago, somebody asked me to help them build their own house, even as a builder, it was a friend of mine. And I realized that there’s a lot of people out there that wanted help to build their own house. So I launched a company 10 years ago to kind of help owner builders, people that want to take on the management role for their home as a project manager and been doing it ever since, and we’ve kind of progressed through the time.
We, two years ago, launched a company called Open Book Build that really takes it to the next level.
What we did was we created a house plan that’s easy to build. It’s got custom features and it’s an affordably built house where owner builders can take it and actually build it on their own lot. We created an online course on how to build it, so kind of the ultimate how to booklet with video, diagrams, everything that you would need to learn how to build that house. And then we have a package of our stuff that we include with the plan for free. Basically, we call our company Open Book Build because we want to share all the stuff that we created from building the house.
So every line item from the budget, most builders wouldn’t do that, but we’re saying, “Hey, here it is. “We created it, it took us a long time to build, “why don’t you guys share with it “and make your job a lot easier?” Will your budgeted items be exactly the same? No, it’s going to be different wherever you are, but it has a really good point to start from.
And then we include our spreadsheet schedule that you plug in a start date and it shows you the end date and every day, what should be going on in that house.
And there’s just a whole suite of stuff that we use of digital resources that I’ve created over the years as a builder to make the home building process easier. I think it’s, it makes what can be a really complicated process, much easier for people. So our thing is to make home building easier for anyone who wants to take on this project themselves. – So basically you become your own general contractor. – Yes.
– What’s the smallest to the largest size in your floor plans? – We just have one plan, but we have the blueprint, I should say, for the whole process, for anyone to choose any plan they want that’s out there. Our plan is one, it starts at, it’s 1,120 square feet. Our plan is with a basement. I know where you are, they don’t have too many basements, but that’s something that can be addressed.
So we, we offer the plan in an AutoCAD version where you could change it to any way you want with a local architect. I always mentioned that to people. Everybody has their own idea of how big each bedroom should be, and maybe you wanna take that and give that to your local architect to make those minor adjustments, or to the foundation. We have people in Florida that have built our plan on slab, but our version of the plan, it actually has a basement. So if you wanted to build it on other versions of foundations, it’s pretty easy to, for an architect, to take the plan and just make those adjustments to it and to local building codes.
– How much of a savings would somebody get from using your type of plan instead of actually hiring somebody to build them a house of the same size? – Builders are so in demand right now. You guys know, there’s such a shortage of any house out there right now, but on the affordable side, it’s even worse.
What I’m hearing from all the builders out there, if you look at some of the publicly traded companies, if you see a $300,000 sales price, their cost is probably 225, so their markup’s about 33%. So on a $300,000 sales price, their markup is 75,000, which gives you a 25% gross profit margin.
Whereas we’re selling it for less than a thousand with all of our free resources with it, showing you guys all the stuff that we did to build it. Significant savings. So matter what people do, I would recommend, if you do build a house, your own house, I would look for some of these stock house plans out there, lots of tremendous amount of savings for you.
And if you go that route versus just starting from scratch with an architect, because the time of going back and forth with the architect over what you might want in terms of products in the house or layout in the house, or the orientation of rooms and that kind of thing, it’s just way time consuming and these guys make really good money. So every time you have that phone call or email, you pay for it, so it can be very expensive.
You could spend 20, $30,000 on a set of plans for a semi-custom home. So stock can be a really affordable way to generate your design for your house. – Let me ask you, can you make these into off the grid type of homes? I mean, do you have any kind of options where people could add battery packs and solar panels and that kind of thing? – Absolutely, yeah.
These power supply to the house and where we put it right next to the garage, so you could easily add charging for electric vehicles, whatever into the future.
We made sure that in our plan, we have a 200 amp service, which means you have lots of power to add on other things. But yeah, solar power, easy to add either on the roof or next to the house, so you can get to it and make adjustments or repairs. Well or septic is easy to add where you could do that just about anywhere, or catchment, wherever you are. If you’ve got enough water coming down, rainwater, you can easily add that.
– So these types of homes, they are considered a standard home build or a modular home build? They’re just a standard for home build, right? – This is a traditional build, so it’ll be on a foundation. It should be easy to get financing. Final financing, for sure.
As an owner builder, there’s some challenges in there, and that’s one of the things we go over in our online course and how to, what are the best options and who you go to, and obviously you want good credit and you want a down payment and all of those things, but there’s specific sources that you can go to.
Credit unions are really good, Local, I always tell people, local banks are fantastic. I mean, we want to make home building easier for people, people that want to build their own home. How can we make building a house easier? And the good thing about building a new home versus renovating an old one is it’s a very straightforward process.
When you’re renovating a house, there can be issues with the existing home in terms of structure and the way it’s built and lots of things that you can’t see until you actually start renovating it. On a new build, once you dig the foundation, everything is very predictable. I mean, we’ve had really good feedback from people that have taken our course or used our plan and our kit stuff. I would love to take this and expand into other house plans. It’s a really time consuming and expensive process, but I think people want more choice, and I, definitely one plan isn’t enough.
So I hope hopefully we can get there at that point and, sometime in the future, and offer more plans. – So if people wanted more information on your company and to get your house plan, where could they find it? – They can go to openbookbuild.com.
That’s if you want to try and build our plan.
If you have a house plan that you want to build and you already kind of know what you want to do, ownerbuilderclass.com is where we show people how to build any plan and take them through the process. So I think if you’re very specific on what you want, then Owner Builder Class is the way to go.
– How cool would that be to say that you built your own house? Now if you just decide to go this route, make sure that your specific piece of land is prepped properly, prepped properly, to have a house put on it.
And Mike basically walks you through every single tiny step, so. Also make sure that you can put a house in that location as well, and make sure you get the proper permits. Mike’s website explains all of that as well. If you want to watch some more videos about the differences of different kinds of home builds, go ahead and watch this video right here.
My name is Kristina Smallhorn, your real estate whisperer, and I tell you all this because good real estate information matters.