‘Construction is not perfect:’ Expert tips on what to do when you're building a house
From unresponsive builders to construction defects, these are just some of the problems some buyers can face.
In the south of Texas, a new housing development in a major boomtown stood frozen in time for a little over two years.
The project by developer StoryBuilt, consisting of nearly 100 new homes off North Bluff Drive in Austin, was constructed in three phases. The first two saw about 68 units completed between 2017 and 2018. The third phase broke ground around 2019.
But right before the pandemic, the third phase suddenly came to a halt, and homeowners in the surrounding community had no idea why.
“They basically stopped all construction,” said Steven Apodaca, who had moved to one of the earlier phases of the development. “I’m sure part of it was related to the pandemic, being able to get the manpower to continue construction.”
“But then, even several years after that, everything was just on pause,” he said.
While at least 10 of the units were completed in phase three, according to Apodaca, the rest of the community was littered with debris, exposed wires, and half-built homes, which sat seemingly abandoned from late 2019 until the end of 2023.
For the buyers, the worst-case scenario had occurred. Their builder was entrenched in financial turmoil: layoffs, a restructuring of its top leadership, followed by entering a voluntary receivership, according to public records and news accounts. Now, the struggling Austin developer is facing accusations of having misused funds.
It’s just one example of what can go wrong when building a house. You might have to contend with construction defects or an unresponsive builder. While these issues can feel out of your hands, there are steps you can take to ensure your purchasing experience goes as smoothly as possible.
Read more: Buying a new construction home: Pros, cons, and how to finance it
'There's always been a quality issue'
As a new homeowner, your main concern should be what color paint you want in your dining room.
But even new homes can come with their quirks and frustrations, Deb Burger, founder of Burger Homes & Development and owner of Modern Era Realty, told Yahoo Finance.
“Construction is not perfect. … There’s always been a quality issue. It’s always been there,” said Burger, who has worked in new construction for 30 years and built over 400 homes in Iowa.
“I think you can have quality whether you’re a small builder or a large builder,” she added. “It’s having the right system in place, a quality supervisor on site and making sure that they’re there every day.”
Many people buying newly built homes fail to do their due diligence, like examining the builder’s reputation and checking for complaints made by existing residents. Once a contract is signed, they may think their role is finished, but it’s important to stay involved and vigilant in the building process.
Taking the time to ask questions can save you from being in a pinch later on, Burger said.
“It’s about relationships and having a connection with the builder and being involved in the process,” she said. “It’s really important.”
Another crucial mistake is not getting a proper home inspection, one step that many homeowners who purchased during the early aughts of the pandemic may have skipped as they rushed to close deals.
According to WIN Home Inspection, some 36% of homebuyers nationwide reported issues with their new construction within the first year. That often includes COVID-related quality control issues with products.
“We’re seeing more broken glass or damaged glass. Not from faults of installation or anything, just the quality of glass in the last few years has gone downhill while they were trying to match the construction boom,” WIN home inspector Michael Palmer told Yahoo Finance. “We’ve also seen what we’ve come to call the 1,000 hands issues.”
Palmer, who is based in central Oregon, said about 500 people touch a house from start to finish during construction. That leaves a lot of room for human error.
“You have all 500 people working there, but they’re not working at the same time,” said Palmer. “So you end up with someone that will pull insulation down to do electrical work, but they don’t have a chance to inform the insulation contractor to go back and make repairs. An issue of communication between trades become major problems.”
Don’t be afraid to make demands
When purchasing a new home, you want to make sure your investment is in good shape.
While a home inspection is a crucial step prior to occupancy, you should also make several walkthroughs with your builder after you move in.
“We usually have a 30-day walkthrough, then a 60-day walkthrough, followed by a 90-day walkthrough,” Burger said. “Those are really important because if there are any issues or problems, you need to take care of them right away.”
In one instance, she noted that there was a bad rainstorm and went to the new home site at 3 in the morning to make sure the drainage systems were working properly.
“It’s a relationship that goes beyond just purchasing,” said Burger. “It’s proactive problem-solving.”
Another measure buyers should take is having their home inspected during the first year. Palmer recommends having your first inspection within the first 11 months of moving in, which should give you time before your first year is up — and many home warranties expire — to notice any issues with the roof, plumbing, or foundation.
“We started to do quite a few more new construction inspections just in our local central Oregon area, but we’re also seeing a lot more pre-one-year warranty inspections,” said Palmer. “Most new construction in our area has a one-year builder’s warranty that essentially covers the whole house.”
Typically, inspections made prior to purchase show unfinished items, so having that second inspection within the first year is crucial. A home inspection can set you back about $450 to $650, but it’s usually worth it.
“We almost always find notable issues in the range above $600. It’s almost always worth their salt,” said Palmer.
'Insult to injury when it's new construction'
Last year, the situation grew a bit worse for the residents off North Bluff Drive.
“It got to the point where unhoused individuals were sleeping in the units because they were partially constructed. Who knows what safety issues there were,” said Apodaca, who is also part of the neighborhood HOA.
Instead of settling into their new homes, the buyers were left wondering when construction would pick up again. The only marker of progress for some time was on StoryBuilt’s website, which showed monthly updates to phase three until October 2022.
According to StoryBuilt, the third phase was sold out in December 2020, but now, some of those sales appear to have fallen through. A recent walk-through of the third phase of development showed freshly placed “for sale” signs in some of the lots.
Apodaca said he has noticed construction activity within the last six months, with some of the homes that were left unfinished for years now being completed. Still, some debris remains.
“It looks like there has been significant progress in that third phase,” Apodaca told Yahoo Finance. “I’m pleased … but we [the HOA] still haven’t received a formal response from StoryBuilt.”
Yahoo Finance contacted MODUS Real Estate, which confirmed they are handling the sales for Stapleton Group, a firm managing the receivership for the third phase of North Bluff Drive. The real estate agency currently has two active listings for sale in that community.
One of the listings was posted on Feb. 27, and the second was posted on April 11. The 2-bedroom, 2 ½ bathroom detached condos are each priced at $425,000, and are around 1,294 square feet. MODUS Real Estate expects to list a third unit in the upcoming weeks.
Already, the homes have garnered interest from several would-be buyers, said one listing agent.
“With phase three, Stapleton Group was court-appointed to take over and facilitate sales on behalf of the banks that had loaned to StoryBuilt to get all these homes completed," Madison Morris, a listing agent at MODUS Real Estate, told Yahoo Finance. “Stapleton Group hired us several months ago to start listing several of their communities, including North Bluff.”
According to Morris, most of the homes in the third phase of North Bluff have been under contract since 2020.
“A majority of these people have stayed under contract since 2020, and will close on these homes in the next couple of months," she said. "Stapleton Group and MODUS have already closed on a couple of units so far in this community. They are hoping to complete that community by the end of summer.”
Yahoo Finance reached out to StoryBuilt for comment and received no response. Requests with the city for building records and other documents related to the project have so far yielded no results.
“It’s always an insult to injury when it’s new construction because it's the last thing a family wants to be dealing with after they’ve made a major purchase,” Jennifer Horn, founding partner and attorney at law firm Horn Williamson, LLC which specializes in construction, commercial and real estate litigation, told Yahoo Finance. “They want to think about how to decorate the home and enjoy the community in their neighborhood, not what’s bringing down the value of their home.”
“But people should remember, there’s power in numbers. You should talk to your neighbors, but always be cautious to get legal advice before you sign anything in order to get relief or repairs done,” said Horn.
Jeremy Knight, a real estate agent and founder of The Knight Group, has followed the company’s travails and visited other unfinished projects in the Austin area. Though North Bluff is on track to wrap up this summer, he has seen other sites still littered with broken glass, vandalized by graffiti, and exposed to the elements.
“Those homes are just deteriorating,” said Knight. “I mean, they’re going to have to sell off some of these developments.”
Gabriella Cruz-Martinez is a personal finance and housing reporter at Yahoo Finance. Follow her on X @__gabriellacruz.