A Presale Buyer's Guide, Avoid the Heartache by Knowing What to Expect

How many of you know what a presale is?  A presale is an empty lot, with the intent to have a house built on it, usually with a pre-determined floor plan; however, if the builder has not pre-determined a floor plan, the buyer is given the option to pick among a select few, limited by the size the lot can accommodate.  In summary this is what typically happens after both parties have come to an agreement in price and terms:

1) Buyer picks lot location
     a) which sometimes may or may not include an option to reserve, usually $5,000-$10,000 to reserve. This amount is usually counted towards the buyer’s home purchase if they were to follow through. However, if they did not, in the past...most recent past, some builders required buyers to forfeit their “reserve” deposit if they chose not to follow through. Don’t confuse this with the earnest money deposit.

2) Buyer picks floor plan option, if the choice is available

3) Buyer picks upgrade options, some options must be prepaid in advance whether it is due to permit requirements, ordering parts, or construction stage requirements; builder wants advance payment.
     a) Some upgrade options may require buyer to make payment to a third party like a flooring company
     b) The true customize home builders provide limitless buyer upgrade options

4) Buyer to wait patiently while builder shuffle paperwork, deal with the city and county, their contractor, their subcontractors, their field experts, their ordered parts and while waiting eagerly…watching for their home to rise from the ground up.
     a) Buyers are not encouraged to be at the building site while work is being done: avoids liability, interference and miscommunication. However they are allow to see it from a distance.

5) Schedule final walk through with builder/managing supervisor/attending supervisor to glean over any mistakes, mishaps and to have them corrected; the list of items to correct is called a “punch list”. I call it the blue tape list because they use blue tape to note areas the buyer sees as concerns.  A copy of the walk through list should also be provided.

6) Schedule a home inspector to come the same time or earlier that day to thoroughly inspect the house so it can be part of this “punch list”. Schedule for a re-inspection of the work done, it would be a good idea to address this request somewhere in the presale purchase and sale. Important to note, it is always best to have as much of the punch list completed, as some builders are known to not follow through after the house closes, even when promised. Can you force them to complete it? Yes, it requires your time, attentiveness and follow through with third parties who could help:
     a) City/county inspectors (i.e. where applicable)
     b) The listing broker’s office
     c) Write and petition the builder under the one year builder’s warranty. It is important that you address your concerns within that one year period and it is important that you keep good and thorough documentation in all communications sent (if in letter form have it certified). Keep tract who you’ve spoken with, details of the conversations, date and time. If the builder has offered another warranty on top of their one year builder’s warranty, like a 6yr warranty or a 2-10 Warranty, the buyer can, after due diligence in seeking recompense from their builder and have gotten no response, they can file a claim against the additional warranty to have those problems resolved. How they (the additional warranty folks) will take care of it will be a matter between them and the builder who has membership with them.
     d) File a complaint with the Department of Licensing, under Labor and Industry department
     e) File a complaint with the real estate licensing department if they have a real estate license
     f) File a complaint with the contractor licensing department
     g) The buyer can stop escrow from closing after signing, to force the builder to compete the project. However, seek the advice of your real estate professional as it will depend on the outline of the contract and how it may or may not jeopardize your earnest money deposit.


Oh yes, one more thing...especially if you are new to the area request utility contact information from the builder and/or escrow before closing and confirm with those companies that all  the utility billing information has been updated to reflect your correct billing address. So, to end in a more positive note, presale is fantasticaly economical with customizable options even to meet the most finicky buyers with limitless imagination, eager to watch their dream home come to life.