July 2016 // Real Estate & Home Builders Guide // 19W
Builder stalling on repairs? Check warranty
By Ilyce Glink
and Samuel J. Tamkin
Tribune Content Agency
Q
: My husband and I closed
on a new home almost one
year ago. We did not have a home
inspection conducted, but we
did pay for one about six months
after we closed after inding
some issues in the home.
There were several minor
things the inspector found and
most have been addressed by
the home builder. However,
one of the major issues is water
penetrating into the uninished
basement and several large
cracks that have appeared in the
basement loor.
We had three estimates done
on what it would take to repair
the cracks. We provided the
builder with the estimate that
was in the middle of the three
and asked that he arrange to have
the work done. He said he would
have another company address
the issue, but after one walk-
through we have heard nothing
from this company or him.
My concern is that the builder
is stalling until the one-year
anniversary and is planning
to tell us that it is now our
responsibility, although he has
known about the issue for about
six months. What are our options
to ensure this builder complies
with the contract and ixes the
basement loor?
: When you buy a brand-new
home, the new construction
home builder will usually give
you a home warranty. That
warranty will lay out the process
you must take to make a claim.
It may even require you to make
the claim in writing. We suggest
you ind the home warranty
document you were given at
closing, read it and make sure
you have fully complied with its
terms -- to the letter.
If the home warranty
A
requires you to deliver written
notice of the problem to the
builder, do that. And if the
written notice must be sent via
certiied mail, return receipt
requested, make sure you do
that as well. You need to cover
your tracks and establish a
paper trail documenting that
you’ve followed the terms of the
warranty.
If the builder fails to abide by
the terms of the warranty and
you’ve followed the warranty
requirements, you may have
to sue the builder to get the
work done or to get reimbursed
for any work you might do to
make the repairs. Here again,
your warranty terms come into
play. If you sue the builder and
the warranty says that only the
builder can make the repairs and
you can’t get reimbursed if you
do them, you may have to sue
the builder to force the builder to
make the repairs.
With all these legal issues
you could face, you will also
have to determine the expense of
the work that needs to be done.
You’ve received three estimates
but we don’t know what amounts
you’re dealing with. If the cost
to make the repairs is in the
neighborhood of $5,000 to
$10,000 dollars, it may certainly
be worth the time to hire an
attorney to force the builder to
make the repair.
On the other hand, if the
repair cost is around $1,000,
you might have to do everything
yourself; it might not be worth
hiring an attorney and spending
money on legal fees when you
really need to spend the money
on the basement repairs.
We hope the builder decides
to make the repairs. From our
vantage point, you need to
make sure you follow the terms
of the warranty. Then you can
decide whether to seek legal
action against the builder with
an attorney or small claims
court. Your warranty may even
require arbitration. If you must
go the arbitration route, you then
need to make your claim for
arbitration and move that way.
Remember, before spending
too much money, time and effort,
you need to determine the costs
of the repairs and weight that cost
against everything else you have
going on in your life to determine
your best path of action.
Ilyce Glink is the creator of
an 18-part webinar+ebook series
called “The Intentional Investor:
How to be wildly successful
in real estate,” as well as the
author of many books on real
estate. She also hosts the “Real
Estate Minute,” on her YouTube
channel. Samuel J. Tamkin is
a Chicago-based real estate
attorney. Contact Ilyce and Sam
through her website, ThinkGlink.
com.
H om e B uyer's Glossary
Adjustable-rate Mortgage (ARM) - A
mortgage for which the interest rate and the
payments change during the life of the loan.
Agreement of Sale - The contract in which
the seller agrees to sell and buyer agrees to
buy, with conditions and terms spelled out
and signed by both parities.
Amortization - A plan for gradually repaying,
in periodic payments, money borrowed.
Balloon Mortgage - A mortgage that has a
large amount of the principle due at the time
of maturity.
Bridge Loan - A loan that finances a
mortgage at the end of one loan and the
start of a new one.
Closing Costs - Expenses and fees that are
added to the price of the property, paid by
the buyer and the seller at the closing. The
Agreement of Sale states who pays which
costs.
Commercial Bank - A financial institution
authorized to provide a variety of financial
services, including consumer and business
loans
(generally
short-term),
checking
services, credit cards and savings accounts.
Condominium - The buyer owns title to a
residential unit, shares common areas with
other unit owners and pays maintenance fees
to the condominium association for property
upkeep.
Conventional
Loan
- A loan not
guaranteed by the VA or insured by the FHA.
Co-op - In exchange for the right to occupy
a co-op unity, the buyer owns shares in the
co-op corporation (made up of co-op
residents), rather than owning real property.
Federal National Mortgage Association
Payment Cap - Limits the amount that a
monthly payment on an ARM loan can
increase at the time of adjustment.
(FNMA or Fannie Mae) - A privately owned
and managed corporation that purchases
mortgage loans originated by other lenders.
Fannie Mae issues stocks and securities to
obtain funds for its purchases.
Points - One percent of the amount of the
mortgage loan.
arrived at by dividing the borrower's fixed
monthly obligations by the borrower's monthly
income.
Fixed-Rate Mortgage - A loan that has one
Prepayment - Payment of a mortgage loan,
Due-on-sale Clause - A mortgage
stipulation demanding payment of the entire
loan balance upon sale or other transfer of
the real estate securing the loan.
Intermediate-term Loan - A home loan of
Debt-to-income Ratio - A percentage
Equity - The ownership interest remaining in
property after payment of all liens or other
charges on the property.
Escrow - Funds left in trust with a third party,
to be paid to a designated recipient at a
designated time.
F ederal
Home
Loan
Mortgage
Corporation (FHLMC or Freddie Mac) - A
quasi-governmental
secondary
market
agency that purchases whole mortgage
loans. Freddie Mac sells interest in pools of
mortgage loans to obtain funds for mortgage
loan purchases.
Federal Housing Administration (FHA ) - A
government agency within the Department of
Housing and Urban Development that
administers many programs involving housing
loans made from private funds, including
mortgage insurance for lenders and rent or
interest assistance for low-income tenants and
mortgagors.
set interest rate. Installment Debts - A buyer's
long-term debts; they usually extend for
periods longer than nine months.
less than 30 years.
Life-of-loan Cap - A consumer protection
on some adjustable loans. It limits the total
upward adjustment that may occur during the
life of the loan. Also known as an overall cap.
Loan-to-value Ratio - The relationship
between the amount of a home loan and the
total value of the property. Lenders may limit
their maximum loan to 80-95 percent of value.
Lock-in Rat e - A rate commitment made by
lenders when making a mortgage loan to
commit to or "lock in" that rate pending loan
approval. Lock-in commitment periods vary.
or portion of the loan, before the due date.
Prime Rate - The interest rate that banks
charge to their preferred customers. Changes
in prime rate are used as indexes in some
adjustable rate mortgages, especially home
equity lines of credit.
Principal - The basic loan amount, separate
from interest, insurance, and taxes.
Private Mortgage Insurance (PMI) - The
insurance coverage offered by a private
company that protects a lender against loss
on a default mortgage loan. Its use is usually
limited to loans with high loan-to-value ratios.
The borrower pays the premiums.
Title - Proof of ownership.
Title Search - A check of title records to
willing to pay for a property and the lowest
price the seller will accept.
assure that the buyer is purchasing property
with no liens, encumbrances, or other claims
which might adversely affect the title's value
or marketability.
Mortgage - A lien or claim on property given
Veterans
Market Value - The highest price the buyer is
by a buyer to a lender as security for money
borrowed.
Mortgage
Broker - An individual or
company that obtains mortgages for others
by finding lending institutions, insurance
companies, or private lenders to lend money.
Administration (VA) - A
government agency that helps veterans of
the armed forces obtain housing.