- In the last 14 years, I've
seen some pretty crazy stuff when it comes to home builders, and here recently, I've
read some headlines that have absolutely blown my mind. So today we're gonna be going
over some of the biggest lies home builders have been telling you. Not only that, I'm also
gonna be showing you if you really didn't want
to hire a home builder, but you wanted to build your own home, I got something for you too there. So one of the craziest stories I've heard coming out of 2020 into 2021 is what home builders have
been doing to home buyers. - The builder cancels the contract for a new house they were building. The couple was six months into the process and had already sold their current home. - [Newscaster] Last August,
they signed a contract with Coventry Homes. Things moved slowly, but they trusted they'd get the house
they were investing in. CBS Austin reached out to Coventry Homes, but hasn't heard back. According to their website, the development where
the Browns were building is now sold out, with new
buyers on a wait list. - So what has happened
is that these home buyers had purchased the plan, so there was just an empty, vacant lot. Except for the fact that these home buyers had already agreed upon a price, and you can pretty much be the
judge of why they did that. With the home prices going up,
building materials going up, and they knew they had a bank of buyers sitting there in line waiting
to purchase the house. They didn't care it was a
hundred thousand dollars more than it was six months earlier. They're ready to purchase right now. So they found every loophole under the sun to get those buyers to
just go and walk away, unless they were willing
to pay the new amount, which was a hundred thousand dollars more. Terrible way for a home
builder to do business, but they really don't care right now. But they will care in the future whenever these home prices
start balancing out. But in the meantime, it
seems that greed is awry. Not all home builders are like that, so don't even start with
me in the comments section, saying, "My home builder
would never do that." There are very reputable
home builders out there. But in this specific case, how would a home buyer protect themselves so they would still be
able to purchase a house? Well, there's one problem that
most people don't know about when it comes to home builder contracts. It's that when you're dealing
with a new home builder that's a track builder, in
most cases, in most states, they never sign the state contract. They have their own specific contract that only protects them. So you could go through
that with a fine tooth comb and you would have a hard
time finding any loopholes to be able to retain any kind of deposit or that you could sue them. Before you decide to hire an attorney to help you with your
problems with your builder, there's a letter that you probably want to try to write first. Make sure you include your name, address, and home or work telephone numbers. Type your letter if possible. If not, use printing or
handwriting so it's easy to read. Keep your letter brief and to the point, but include all your relevant details. State exactly what you want done and how soon you expect
the problem to be resolved, but be reasonable. Include all the relevant
documents regarding the problem. Send copies and not originals. Keep a copy of the letter for your files. I touched on this, but
I'm gonna repeat it again. Another way that home
builders flat out lie to you is the cost of the
appliances and upgrades. This is very common with
a lot of home builders. Not all, again, not all
home builders do this. But in many cases, they will tell you that this
specific upgrade for a stove is gonna cost you an extra $250. But then if you actually go online, it ends up being a lot less than what they're saying that it costs. But then they'll tell you, "Well, that's including the installation", but didn't that include the installation for the cheaper stove? Yeah, that's what I'm thinking. So this happened to me when I was going to purchase my house here and I was having it built, and these plumbers that were putting in all the sinks and everything
had a tub that I really wanted. And I'm like, "That tub
seems extremely overpriced", and it totally was. The tub that I wanted, when
he went into their showroom, was $6,500, which was insanity. And I, again, I went on Home
Depot and some other websites and I ended up finding
almost the identical tub for a lot less money, a lot less. But this is one more way that
home builders lie to you. It isn't just necessarily the cost of those specific upgrades. This is something else that can happen, and it's super important
for you as a home buyer that's building a house to
watch every single step, because once that tub was delivered, I had them open the box
right at the location of where my house was being built, 'cause I wanted to, luckily
wanted to take a picture to show people at my work. When we opened the box,
everything was perfect and I had taken several pictures. Later that same exact day, I came in because they
had installed everything, and then I get to where the bathtub is and there is a gigantic thick
scratch going all the way down and a chip where the drain is. And you know what the first words out of those plumbers mouths were, right? You know exactly what it was. "The scratch was already there." So I call my builder up and he's like, "Well, the thing is, is that's
not stuff that we warrant. "We didn't do that." And I'm like, "But I opened up the box "and I took a picture of it that morning "and those scratches weren't there." So they had to replace my tub. So that is another warning
if you're building a house and you're gonna get upgrades
and you're going to have them bring in your own stuff
from another location. Make sure you take photos of it before you have it put into your house, 'cause you never know what's gonna happen, and if they get a chip on their shoulder 'cause you're not using
their specific products. Now with every new home
build here in Louisiana, we have something called
a New Home Warranty Act. Many states have something very similar and this will cover certain
aspects of your house. You'll have a warranty for how long your foundation is under warranty. You'll have a warranty for
the actual structure itself. And then we have what they call the bumper to bumper warranty, everything inside the house is
warranted for one exact year. So that includes paint chips
and things that are loose, anything that needs to
be kind of touched up, and that's warranted for one year. But every year after that, things start to fall off of warranty. Home builders don't tell you there's other warranties that are included besides the Home Warranty Act. So you can have a
windows put in your house and each of those windows has
a warranty attached to it, so you can have those windows
warranted up to eight years and you may not know that
because they don't tell you. A lot of your appliances are
gonna be warranted as well. So whenever you move into your house, make sure you pull out all those cards that have the warranty and fill them out, so you have them all under warranty, so three years later down the road, if you have an issue, it's
still under those warranties. Some appliances are up to
five years on a warranty, so just make sure you
fill out those cards. That home builders will do is sometimes, especially here in our area, they'll already have a
alarm company come in and put an alarm system in. That does not mean you have to use that specific alarm company. They have made some kind
of deal with the builder to go ahead and put that alarm system in, but that does not mean you have to use their specific alarm company
that's been in there. Now, does it make it more convenient? Sure it does. But I definitely think
that you should shop around those prices, 'cause alarm companies, as far as what they do
and how much they cost, are all over the map,
so do your due diligence when it comes to having
an alarm system put in after you've had your house built. Now, one of the things that really stinks about buying from some home builders that you're not familiar with is if they have a specific model home. So just like any builder,
or if you go to a car lot, they always put their best foot
forward as the actual model. So they'll have every single
upgrade in that specific model. And then by the time a lot
of the houses are built, you're like, "Where are all the upgrades?" But of course, those costs extra. But sometimes they'll
put things in that model that they don't even offer in the houses. This happened to one of my clients, and when she walked into the model home, they had a specific type
of texture on the walls and she thought it was
absolutely beautiful. It was called knockdown. And so she was more than
ready to have her house built with these rounded corners and this knockdown texture on the walls. And then once the house was being built, it was all framed up
and the drywall goes up and then they start mudding. She walks in the house
and it was orange peel, totally different texture. And the home builder says,
"Well, we don't do that anymore. "That was something we used to offer, "but we don't offer it anymore." Now let me just tell you, the subdivision was only six months old and knockdown takes a lot
more time than orange peel. So that was the reason, really. They just wanted to, it was
almost like a bait and switch. It wasn't the only thing that happened. So needless to say, with all these things, she was able to get her deposit back and she didn't have to work
with that specific builder. I wanted to say, just as a FYI, did not recommend this specific builder. Now there's tons of stories
throughout the internet of people that have had
horrible experiences with home builders. So what is it that you can do? So here's a few things. I know you're gonna
hate me for saying this, but hire yourself a good real estate agent because they are gonna
know the home builders that are gonna be easy to work with and work with you instead of against you. If you would plan on not
using a real estate agent, get yourself a real estate attorney that can go over that builder's contract before you sign anything. So that way, you have a good understanding of what's going on in that contract and what kinds of things
you're gonna be liable for, even if things go wrong on
your specific home build. Go ahead and find out if you
have any kind of referrals for that specific builder himself. If it's a private builder, try to see if you can go
into any of the houses that he's built previously and talk to some of those homeowners and see if they have any complaints. Look online. People love to air out
their grievances online, so see if there's anything on
that specific builder online. If you don't want to
work with a home builder, I actually have a really
cool solution for you, especially if you're thinking about building your house yourself. As crazy as that might sound, it's becoming more and more common because it's so hard to
get a new house right now. - All right, I'm here with Mike Luckado. The coolest last name I've ever heard. Michael, can you tell us
a little bit about you and your company? - So yeah, I started in the
home building industry about, I'm not gonna say how long ago. Decades ago, right after college. I graduated with a degree
in civil engineering and construction management. Started building houses, built a couple of thousand
houses since then, and maybe 10 years ago, somebody asked me to help
them build their own house, even as a builder, it
was a friend of mine. And I realized that there's
a lot of people out there that wanted help to build their own house. So I launched a company 10 years ago to kind of help owner builders, people that want to take
on the management role for their home as a project manager and been doing it ever since, and we've kind of
progressed through the time. We, two years ago, launched a
company called Open Book Build that really takes it to the next level. What we did was we created a house plan that's easy to build. It's got custom features and
it's an affordably built house where owner builders can take it and actually build it on their own lot. We created an online
course on how to build it, so kind of the ultimate
how to booklet with video, diagrams, everything that
you would need to learn how to build that house. And then we have a package of our stuff that we include with the plan for free. Basically, we call our
company Open Book Build because we want to share all the stuff that we created from building the house. So every line item from the budget, most builders wouldn't do
that, but we're saying, "Hey, here it is. "We created it, it took
us a long time to build, "why don't you guys share with it "and make your job a lot easier?" Will your budgeted items
be exactly the same? No, it's going to be
different wherever you are, but it has a really good
point to start from. And then we include our
spreadsheet schedule that you plug in a start date
and it shows you the end date and every day, what should
be going on in that house. And there's just a whole
suite of stuff that we use of digital resources that
I've created over the years as a builder to make the
home building process easier. I think it's, it makes what can be a really complicated process,
much easier for people. So our thing is to make
home building easier for anyone who wants to take
on this project themselves. - So basically you become
your own general contractor. - Yes. - What's the smallest to the largest size in your floor plans? - We just have one plan,
but we have the blueprint, I should say, for the whole process, for anyone to choose any plan
they want that's out there. Our plan is one, it starts
at, it's 1,120 square feet. Our plan is with a basement. I know where you are, they
don't have too many basements, but that's something
that can be addressed. So we, we offer the plan
in an AutoCAD version where you could change
it to any way you want with a local architect. I always mentioned that to people. Everybody has their own idea of how big each bedroom should be, and maybe you wanna take that and give that to your local architect to make those minor adjustments,
or to the foundation. We have people in Florida that
have built our plan on slab, but our version of the plan,
it actually has a basement. So if you wanted to build it on other versions of foundations, it's pretty easy to, for an architect, to take the plan and just
make those adjustments to it and to local building codes. - How much of a savings would somebody get from using your type of plan instead of actually hiring
somebody to build them a house of the same size? - Builders are so in demand right now. You guys know, there's such a shortage of any house out there right now, but on the affordable
side, it's even worse. What I'm hearing from all
the builders out there, if you look at some of the
publicly traded companies, if you see a $300,000 sales price, their cost is probably 225,
so their markup's about 33%. So on a $300,000 sales price,
their markup is 75,000, which gives you a 25% gross profit margin. Whereas we're selling it
for less than a thousand with all of our free resources with it, showing you guys all the
stuff that we did to build it. Significant savings. So matter what people
do, I would recommend, if you do build a house, your own house, I would look for some of these
stock house plans out there, lots of tremendous amount
of savings for you. And if you go that route versus just starting from
scratch with an architect, because the time of going back
and forth with the architect over what you might want in
terms of products in the house or layout in the house, or
the orientation of rooms and that kind of thing,
it's just way time consuming and these guys make really good money. So every time you have
that phone call or email, you pay for it, so it
can be very expensive. You could spend 20,
$30,000 on a set of plans for a semi-custom home. So stock can be a really affordable way to generate your design for your house. - Let me ask you, can you make these into
off the grid type of homes? I mean, do you have any kind of options where people could add
battery packs and solar panels and that kind of thing? - Absolutely, yeah. These power supply to the house and where we put it
right next to the garage, so you could easily add
charging for electric vehicles, whatever into the future. We made sure that in our plan,
we have a 200 amp service, which means you have lots of
power to add on other things. But yeah, solar power, easy
to add either on the roof or next to the house, so you can get to it and make adjustments or repairs. Well or septic is easy to add where you could do that
just about anywhere, or catchment, wherever you are. If you've got enough water
coming down, rainwater, you can easily add that. - So these types of homes, they are considered a standard home build or a modular home build? They're just a standard
for home build, right? - This is a traditional build,
so it'll be on a foundation. It should be easy to get financing. Final financing, for sure. As an owner builder, there's
some challenges in there, and that's one of the things
we go over in our online course and how to, what are the best
options and who you go to, and obviously you want good credit and you want a down payment
and all of those things, but there's specific
sources that you can go to. Credit unions are really good, Local, I always tell people,
local banks are fantastic. I mean, we want to make home
building easier for people, people that want to build their own home. How can we make building a house easier? And the good thing about
building a new home versus renovating an old one is it's a very straightforward process. When you're renovating a house, there can be issues with the existing home in terms of structure
and the way it's built and lots of things that you can't see until you actually start renovating it. On a new build, once
you dig the foundation, everything is very predictable. I mean, we've had really good feedback from people that have taken our course or used our plan and our kit stuff. I would love to take this and
expand into other house plans. It's a really time consuming
and expensive process, but I think people want more choice, and I, definitely one plan isn't enough. So I hope hopefully we can
get there at that point and, sometime in the future,
and offer more plans. - So if people wanted more information on your company and to
get your house plan, where could they find it? - They can go to openbookbuild.com. That's if you want to
try and build our plan. If you have a house plan
that you want to build and you already kind of
know what you want to do, ownerbuilderclass.com
is where we show people how to build any plan and
take them through the process. So I think if you're very
specific on what you want, then Owner Builder Class is the way to go. - How cool would that be to say that you built your own house? Now if you just decide to go this route, make sure that your specific piece of land is prepped properly, prepped properly, to have a house put on it. And Mike basically walks you through every single tiny step, so. Also make sure that you can put a house in that location as well, and make sure you get the proper permits. Mike's website explains
all of that as well. If you want to watch some more
videos about the differences of different kinds of home builds, go ahead and watch this video right here. My name is Kristina Smallhorn,
your real estate whisperer, and I tell you all this because good real estate
information matters.
