The Challenge Of Buying New Construction Homes In Chicago

Buying a home is challenging enough but if you are buying a new construction home in Chicago before it’s completed you have a special challenge on your hands. I would imagine that this is a problem everywhere but I can only speak to what the market is like in Chicago, given the conventions for builders that have evolved here. The fundamental problem is how do you know exactly what you are going to get if the house is not finished?
I have some clients that are so daunted by the task that they won’t even consider buying a home that is not completed and I can’t say that I blame them. There are simply too many variables – materials used, fixtures and appliances used, and the quality of workmanship – that remain unknown when you sign a contract on a home that is still in progress.
Many of my East Village neighbors have been struggling with the aftermath of their recent new construction purchases. The frustration is probably best exemplified by the poor folks who bought the house at 1845 W Race, pictured at the top of this post. See that sign in their front window? Here is what it says:
Denmax sign in windowCan you imagine the level of frustration these buyers must be experiencing to a) create this sign and b) put it in their front window and c) risk stigmatizing their house? They closed in January but I don’t know if the sign has been up that long.
I actually thought about interviewing these folks but then I’d have to interview the builder as well in order to provide both sides of the story and it would end up as a classic he said/ she said situation. But I will tell you that many of my other neighbors are not happy with Denmax and I myself have had personal conflicts with Sergey when he was building the house next door to mine (another reason I didn’t feel like interviewing him). However, watching the construction of the basic structure, I always felt like they were doing good work.
So what is a buyer to do in order to mitigate their risk? The options are limited but here are a few suggestions:

  • See what your realtor knows about the builder if your realtor will level with you.
  • Check the BBB for complaints against the builder
  • Check reviews on Yelp and Angie’s List. In the case of Denmax the information on Yelp is pretty sketchy but it’s not favorable.
  • You can talk to the Alderman’s office to see if you can get any information on how these guys conduct themselves.
  • You can talk to buyers of other homes the builder has completed.
  • You can check for lawsuits against the builder.

And what about that contract you signed? It’s a real can of worms that is tilted pretty strongly in favor of the builder. If they’ve been at this a while they know how to cover their ass really well. Let me give you a few examples of wording you might find – or is conspicuously missing in that contract:

  • Light and plumbing fixtures “provided and installed by developer”. No mention of brands or specific model numbers.
  • Cabinetry defined in very broad terms. They could meet the specifications with painted particle board purchased at Kmart.
  • Seller has the right to make changes from the plans, including floor plan and room dimensions, to accommodate structural or mechanical elements or comply with the building codes.
  • Seller has the right to select the exterior colors and materials.
  • Seller has the right to substitute materials and products of equal or similar quality, utility or color.
  • You are not entitled to anything you see in advertisements, brochures, or model homes.
  • You will conduct your inspection once the seller has determined, in their sole discretion, that the home is substantially complete.
  • You can create your punch list but the seller has to agree with it.
  • You can not delay closing or hold money back for the completion of the punch list items.
  • You will close once the seller says the home is substantially complete.
  • You get a one year warranty but it has a bunch of weasel words in it regarding no guarantee that you can actually live in the house or use it for any other purpose. (I’m not a lawyer but that’s what is sounds like to me).
  • Faulty material and workmanship is limited to material and workmanship that is not in compliance with the Chicago building code.
  • Settlement, shrinkage, cracking is explicitly excluded – even if it’s the concrete or the bricks.
  • If they fix your walls they don’t have to repaint them or re-wallpaper them.

This is just a sample. Of course, you can try to get your attorney to modify the contract so that you have more power but I don’t think you’re going to get very far with that. This is why, at the end of the day, the builder’s reputation matters more than anything else.
#NewConstructionChicago #RealEstate
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