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NC Real Estate: Builder Bails - Could This Have Been Avoided?

By Darleen McCullen

Real Estate Agent

April 12, 2008 03:12 AM

Written by:
Darleen McCullen, REALTOR®, Broker
Keller Williams Realty
Phone: 919.454.8864
Email: darleen@darleenmc.com

Construction - Inside House Earlier this week, I was watching the news and saw a sad story about two sisters who contracted to purchase new construction next door to each other in Franklinton, NC - but their builder refused to (or was unable to) complete the work because (allegedly) they're in a financial bind. (I have to say allegedly, of course, because I would really hate to get sued!) LOL.

The reporter didn't indicate if the women had real estate agent or not, but this started me to thinking that they surely could've used the services of someone good to represent them.

One of the saddest parts of the story was that one of the sisters took out a construction loan - and most of the money has been used - and the home is still incomplete. If they walk away now, credit will be ruined.

I don't know what other agents do for their clients relating to new construction- but I perform due diligence by researching the company to see if I can find, such as:

Any financial trouble - as well as any complaints that may have been filed against it with the Better Business Bureau of Eastern North Carolina, the Attorney General's Office, the North Carolina Licensing Board for General Contractors, and other agencies that may be relevant.
See if homeowners have published anything locally on the HADD Website (Homeowners Against Deficient Dwellings).
If the company is publicly traded, there's all sorts of great information available.

Many times, I find nothing at all. But every now and then, something may surface that gives my clients pause. It's best that they know beforehand what they may be up against, rather than going in blind.

For more on this story, check out the video.

Please share your ideas for going above and beyond for the customer.

Thanks for stopping by...

Darleen McCullen,

REALTOR® on a Mission... NOT Just Seeking a Commission!^TM

Phone: 919.454.8864
Website: http://www.darleenmc.com/ Disclaimer: Opinions expressed by those who are part of the ActiveRain community, including those providing comments relating to this blog, are their opinions and their alone - and do NOT reflect the opinions of Darleen McCullen and Keller Williams Realty. Darleen McCullen and Keller Williams Realty are not responsible for the accuracy (or lack thereof) or content provided by others.

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Kimberly Grant

Exit Leon Crawford Realty - Huntsville, AL

Real Estate Agent - Huntsville Alabama

When I first started in business one of the first deals I had was new construction and it did NOT go well. It was a very discouraging situation. That builder later went out of business and I think it might have been based on way they were doing business. It was almost two years later before I ventured out again to try new construction. It was much better. The only problem I had since then was a client that requested that the house be made handicap accessible for her disabled son. They said it would be no problem. Luckily, I was there and had them put this in writing even though they said there would be no problem. We later got her paperwork and the price of the house was about $10,000 higher than initially quoted. However, we had in writing that they would make the adjustments to the house for her for the lower price so she saved that $10,000. If she had not had a Realtor that knew the importance of written contracts, it could have been a much different story.

Apr 12, 2008 03:41 AM

Clint Miller

Real Estate Pipeline, Inc. - Missoula, MT

Wow...what a sad deal. I have not had any dealings with contractors, but I hear plenty of horror stories about it.

Apr 12, 2008 03:47 AM

Darleen McCullen

Raleigh, NC

Broker - Raleigh, NC Real Estate

Kimberly ~ Wow. That is so unfortunate that this happened to you early in your career. On the later deal, your client is fortunate that she had you there protecting her!

Clint~ There are some nightmares out there - but hopefully, the Public will either do some research on their own or hire a good real estate agent to represent them.

Apr 12, 2008 04:36 AM

Cynthia Tilghman, Realtor® Onslow County NC Home Specialist

Kingsbridge Realty, Inc - Hubert, NC

Hello Darleen,
It's a tough time for builders too especially those who have spec houses sitting with interest due to the bank every month. Many will not survive. My sympathy to these ladies and yes, a good agent might have been able to save them for this ordeal.

Apr 12, 2008 01:14 PM

Cynthia ~ Yes, it is a tough time for many builders. I feel sorry for everyone involved. Hopefully, these ladies will be able to have their homes built without ruining their credit. (I know that I would really hate to be paying for a home that had little to no chance of being completed.)

Apr 12, 2008 01:29 PM

Stanton Homes

Stanton Homes - New Home Builder - Raleigh, NC

Design/Build Custom Home Builder in North Carolina

Darleen - I'm wondering where the lender was in this situation? Most construction loans are based on a "draw" system. The builder calls the lender at particular stages of construction, lets the lender know that the stage is complete, then the lender sends out an inspector to verify completion. Once verification is complete, the builder receives the next portion of the construction loan. That way, both the bank and homebuyer are protected.

Homebuyers who are holding construction loans should verify that their bank requires and completes inspections before issuing funds. This system was set up to ensure that the above situation does not occur.

Apr 12, 2008 01:47 PM

Penny ~ Thanks for checking in and adding additional information. I, nor any clients I've worked with, had had this situation come up - but in preparation for this blog, I did some reading on construction loans and thought this was the case.

Apr 12, 2008 03:20 PM

NC Real Estate: Builder Bails - Could This Have Been Avoided?

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