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New Home Defects Can Cast You Into the Money Pit

New house or old, expensive colossus or that cute little deal-of-the-century, hidden defects can make living in your home an expensive and miserably frustrating ordeal.

Part One of Two

By the Mortgage Guy /

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I am sure that most of you will remember the 1986 comedy starring Tom Hanks and Shelly Long, The Money Pit. And, I am sure that by now you all have met people who have suffered the same agonizing woes as their film counterparts, and it wasn't necessarily an old fixer-upper either to be labeled a "money pit."

You would think that purchasing a new home, or one that was built within the last three to five, years would exempt you from these kinds of problems. However, all across the nation people are discovering that not only are these homes riddled with hidden defects, they have very little recourse when it comes to having the problems corrected and then being reimbursed for the repairs. Today we will discuss the problems and how to avoid them and tomorrow we will explain haw this problem has caused home insurance costs to rise.

The Types of Common Defects That Exist Today

Typically it is shoddy workmanship, poor design or inferior building products that are the foundation for these problems. Upwards of fifteen percent of all new homes built today have hidden defects that are not apparent to the unknowing eyes of inexperienced home buyers. All that they see is the new paint on the walls, shiny appliances in the kitchen and the prospects of happiness and security for their family.

To make matters worse, many of these construction flaws are not apparent until the buyers have moved in, set up home and the builders or sellers are long gone. By this time they have very little recourse or a legal battle that could be as or more costly than the repairs themselves.

Not only is repairing a home monetarily costly, but it is disruptive emotionally and at times the defects can actually cause physical harm to the inhabitants. Water damage due to a leaking roof, cracked foundation or poor plumbing is one of the problems at the top of the list. Any of these defects are costly and require major repair work. One of the side effects of water damage is mold or rot and a side effect of these is health problems. Many people have been forced to move out because of mold and the associated risks and the prospects of selling a home with this type of problem are monumental. Further, the problem of mold is most often times in hidden areas of the attic, inside the walls or in a crawl space, all places that are hard to work in properly or efficiently. Infestation by pest will often follow and the problems associated with them.

Faulty foundations can be another problem to contend with. If foundations are poured on top of a poorly compacted site, one that has not yet settled completely or has ground water running underneath of it, it can settle and crack. Improperly mixed concrete can crumble, and if the foundation was poured using an improper mix of concrete, not enough steel reinforcing or on either a rainy or severely cold day the finished product will crack, crumble and deteriorate at an uncommon pace. Once the foundation of the home starts to crack, heave or settle the entire rest of the house is at risk. Repairing foundations and slabs is probably the most expensive single repair that could be undertaken. Some homes have even been condemned because foundation and slab defects.

Once the foundation starts to shift, due to any of these circumstances, it is like a domino effect. Windows and doors will shift making it impossible to open and close them properly, walls can crack, the roof could shift and ground water will start to seep in.

Faulty plumbing and electrical systems, by virtue of being inside the walls of a home can also pose excessive problems. Bad wiring or insufficient breakers are not only a problem but they are also extremely dangerous. Poor plumbing and fixtures can also be expensive. Not only the water ends up going down the drain, the home owners hard earn cash does, too. Both of these problems can also lead to others and the dilemma seems to become endless.

Poorly designed or constructed septic systems and tanks are another problem associated with plumbing and can also become environmentally unsafe, leading to problems with local municipalities or even the neighbors. To repair them often means having to also replace the landscaping afterwards and the costs shoot out of sight.

If a house is not insulated, sheathed or constructed properly, ventilation of the structure will not be as it should and problems will arise. The home may be hot and stuffy in the summer months and cold in the winter. These situations are not only uncomfortable for the inhabitants but they will also exasperate the utility bills. Poor ventilation in a home can also be quite hazardous especially in the winter months when furnaces and heating systems are employed and high levels of carbon monoxide because a hazard.

Low Standards, Tight Budgets, Insufficient Codes, and Little or No Oversight

All of these of problems are endemic across America. The housing industry is booming. More homes are being constructed than ever before. Qualified contractors, tradesman and inspectors are in short supply. In some localities there are so few inspectors that entire projects consisting of hundreds of homes never get fully inspected, certificates of occupancy are never issued, and yet these homes have been sold and the buyers have moved in. There are twenty states that do not even have an official building code, twenty three states that have no oversight of inspectors, and few states actually license contractors. Thousands of homes are under construction every day in America, the demand is just increasing and the problems are too. It isn't any wonder that defects and corruption exist.

Associated with the demand for more housing and the lack of qualified builders are the budgets, building costs, and new environmental and conservation requirements that constrain and frustrate the whole process. In order to meet budgets and keep costs down many builders now use inferior products that were not even available a few years ago. Pressed composite boards instead of plywood sheathing and plastic plumbing instead of copper are just two that are in use today. Some new energy conservation and environmental laws are so new and involved that not enough knowledgeable and qualified people are available to implement them properly. Plus they drive up the cost of a home and rob budgets that used to fund other elements of the home's construction.

How Can All of This Be Avoided?

By exercising caution, not being pressured into a quick signing and some preventative expenditure you can protect yourself to a great degree. Considering the purchase price of any home in today's market, the closing costs, origination and legal fees, insurance premiums and surveys, why wouldn't you want to spend a little bit more to make certain that the home you are buying is safe, sound, sturdy and certified?

Before anyone settles on a home to purchase they need to hire a qualified inspector, or inspectors, to go over the property from top to bottom, inside and out. A lot more needs to be checked than what is apparent to the uneducated eye. If the home is a new one, ask to see all the permits, the plans and the certificate of occupancy that would have been issued by the municipality where the property is situated. Read all of the warranties for the HVAC systems and appliances. Ask about the builder and check with the better business bureau. Find other properties that they may have built and talk to the current owners. If they have had problems they are certain to tell you all about them. Ask to see all of the permits and inspection certificates.

If you are doing repairs, renovations or expansions on an existing property make certain that you get at least three reputable contractors to give you quotations for the work. Insist on a written contract and be certain it states exactly what kinds and quantities of products will be used, how long it will take and what overruns will cost. Then have a lawyer who understands building and real estate examine it. Never pay for work that has not been completed, appears to be other than contracted for and hasn't yet been inspected.

And, finally, never get financing through the contractor. Borrow the money from any another source if you have too. This way you will always have complete control over expenditures and a reasonable amount of recourse just in case they are getting to re-release that Tom Hanks movie in your neighborhood.

Part Two: How Has All of This Affected the Home Owner's Insurance Industry and Your Rates?

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