Inspection Contingencies and New Houses

How to deal with problems that turn up at the final inspection of your newly-constructed home.

If you're buying a new home, be sure you negotiate a "final inspection" contingency, which allows you to bring in a professional to approve the completion of the house before closing. Be prepared for unpleasant surprises—legions of homebuyers have discovered unfinished construction or major defects just days before they were supposed to move in, such as:

  • improper weather detailing around doors or improperly installed siding (causing leaks)
  • poorly graded land or faulty sewer connections (causing flooding)
  • blocked vents in the kitchen (leading to mold and moisture problems),
  • and building code violations, such as ungrounded electrical outlets.

Finding Defects at the Final Inspection of Your New House

Ideally, you will have had your new house inspected at various points during construction, such as when the foundation is poured and when the framing is completed. Even then, the final inspection may uncover problems with your new house. If this happens, you have several options:

Delay the closing. This is your most obvious choice, but it may be impossible if you’ve arranged to move.

Go ahead with the closing, but have the developer put aside money to make the repairs. Your next-best bet is to go ahead with the closing but insist on a written agreement that says the money needed to complete your house will be taken from the purchase price and put into a trust account that the developer can’t touch until the work is done. To protect yourself, add new deadlines to this agreement and state that if the work isn’t done by these deadlines, the money must be returned to you. You can then hire outside contractors to finish the job. Get an attorney’s help drafting an addendum to your agreement.

Make a list of the remaining tasks, assign each a completion date, and insist that the developer sign it before you agree to close. If you can’t get your developer to delay the closing or set up a trust account to finance the repairs, this type of “punch list” may be your only option. Unfortunately, you’ll have to chase down the developer to get the work done.

Finding Defects After You Move Into a New House

If you discover problems, such as flooded in the basement or a mold problem, after you’ve moved in, check to see if the builder’s warranty (typical with new homes) will provides coverage. For details, see the Nolo article New Home Defects: Holding Your Builder Responsible.

Resources on New Homes

For a detailed guide to buying a new house, preparing a purchase contract, arranging inspections, and more, see Nolo’s Essential Guide to Buying Your First Home, by Ilona Bray, Alayna Schroeder, and Marcia Stewart. For more information on new home defects, see Nolo’s book The Essential Guide for First-Time Homeowners, by Ilona Bray and Alayna Schroeder (Nolo).

If you need legal help with a home defect you discover before or after you move into a new home, consult an experienced real estate attorney. Check out Nolo’s Lawyer Directory for a listing of local real estate attorneys.

And if you need some convincing of the need for new-home inspections, check out the website of HomeOwners for Better Building.

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