Buying a New Construction Home? Read This First

Dear Readers:

Your home is one of the biggest investments you’ll make. It’s also a purchase that’ll affect you and your family every single day.

But, as an ABC News “Nightline” investigation revealed this week, buying a newly constructed home can be fraught with perils such as melting siding, loose bricks, mold as well as foundation problems.

These are just some of the flaws found in new housing developments by ABC News reporters around the country.

The recent U.S. building boom -- with tens of thousands of new homes going up every year -- has brought a flood of consumer complaints.

At the same time, there’s an industry trend toward mandatory, binding arbitration clauses in new home sales contracts.

Full Investigation: New Home Heartbreak

Many consumers sign these contracts not really understanding that the arbitration clause takes away their right to go to court before a judge and jury.

The building industry says arbitration helps unclog the court system and deal with complaints more efficiently. But consumer advocates say it’s often stacked against the homebuyer, as private arbitrators want to keep being used by the construction industry to hear cases to which can bias the arbitrator's decisions in the industry’s favor.

Given that legal landscape, the best advice for consumers is to try to avoid problems in the first place.

Consumers need to be conscious that buying a new home is a highly emotional purchase, says New York-based construction expert Mark McGivern.

You can counter that by making sure you understand exactly what your warranty includes and whether you’ll have legal recourse.

“Be an informed and educated consumer…whether you're buying a $200,000 house or a $2 million house,” McGivern says.

A few more tips:

—Choose the builder, then choose the house. Check out the builder’s reputation by talking to local building department officials and real estate agents, and check complaint records with licensing and consumer protection agencies, and be sure to look up the construction company via the Better Business Bureau.

—Knock on some doors. Ask current residents about their experiences with the construction quality and the builder’s responsiveness.

—Hire your own buyer’s agent. Remember: that friendly sales agent at the model home is representing the builder’s interests, not necessarily yours. An experienced buyer’s agent will give you objective advice and can use market data and analysis to help negotiate the best price.

—Hire a qualified home inspection engineer and go along with the inspector to ask questions. If the inspector finds minor problems, include those in your closing documents so that they get addressed. If he or she finds major problems, consider yourself lucky and run for the hills.

—If the home is still being built, make sure the inspector gets a thorough look while the foundation is being poured, when the framing is finished and when the rest of it is done.

—Read all the fine print in the contract. If you want specific brands or models of appliances, carpeting or other materials, make sure all those details are included. Ditto for any verbal promises made by the sales agent.

—Make sure you understand the new home warranty terms and conditions.

—Protect yourself against delays with an unfinished new home by including a cancelation clause that lets you out of the deal with a full refund if the builder fails to complete it by a reasonable date.

And as always, if YOU have a consumer problem, The Fixer may be able to help! Submit your problems at ABCNews.com/Fixer.