Consumer savvy in buying new house

Many buyers consider it prudent when buying a used car to have it checked over by their mechanic before closing the deal. Few run a new car through a similar examination. Yet with regularity news stories tell of auto manufacturers recalling hundreds of thousand of their fresh off-the-assembly-line products.

Worse, most perspective home buyers don't bother or lack the foresight to obtain professional help through the maze of paper work and legal documents involved in what is usually the largest investment they will ever make.

Not asking questions -- or not knowing what questions to ask -- can be a major financial pitfall for the unwary home buyer. A pair of consumer cliches should be well remembered here: Don't assume anything and don't invest before investigation. Add to those this admonition: Get it in writing.

"Home buyers are so starry-eyed," says an official with a California regulatory agency that oversees contractor licensing."They're buying that new dream castle and they get rushed through by a real estate broker or escrow agent who tells them not to worry, it's all guaranteed. Baloney. Get it in writing. Never assume you've got automatic guarantees or automatic protection."

The questions should begin at the beginning. Being shy or hesitant may be painful to your pocketbook. Don't sign documents unless you know what you're signing. Run whatever you don't understand by a lawyer or other expert.

Another common mistake is assuming you're making your purchase from a licensed developer. That may not be so.A developer may have a general contractor oversee the work or have it done by specialty subcontractors.

Crocker Bank in San Francisco recently hired Pat Connolly to the new post of director of consumer affairs, and one of her first projects is producing a "Learn a Little" series of consumer pamphlets. A brochure will be dealing with how to buy a new tract home.

"Considering the amount of investment made on a home, you really need to be extremely careful," stresse Ms. Connolly, who was founder of Western Women's Bank here in 1974 and served as president and chairman.

In deciding on a new tract home, she points out, you may in essence be buying an empty lot upon which sometime in the coming months a house will be built. "But all you've seen is a model home, beautifully decorated and with a lot of extras," she says.

Don't be misled by the finely furnished detailing of model homes. Know what to expect and be sure you're getting everything you're paying for. The first step, she says, is to be certain your contractor is fully and properly bonded.

How do you find out? "You ask," she says simply. Bonding ensures that if the developer or contractor goes under, you and your house don't sink with them. Inquire about labor, material, and faithful performance bonds.

"There usually are some surprises, no matter how carefully you approach buying a home," she comments, "but don't let lack of full bonding be one of them." Once the house has been completed and turned over to you in final escrow, it's yours. So are any problems that come up, unless you've pinned down ahead of time an agreement on warranty, repairs, and oversights.

If you're buying into a development with commons areas, such as recreational facilities, be sure you understand what your financial involvement is -- what are your responsibilities regarding maintenance and the cost of such upkeep.

Ms. Connolly also advises keeping tabs on construction. Take time to walk through the house during its framing stages. Check for quality of wiring, plumbing, and other details that will be hidden when work is completed. If you don't know what to look for, find a friend or pay a professional contractor to make the review for you.

Add to your consumer vocabulary "punch list." This is a checklist for a room-by-room inspection before you take possession. "Be sure you have that option to go through your new home, pointing out defects or damage," Ms. Connolly says. The punch list spells out what work is to be done by what date and is signed by you and the contractor.

Be sure too, to question any slowdown of work or outright stoppage of construction. If either happens, nail the developer and find out what's going on -- or not going on. You should also inquire with the bank financing the development project whether it makes regular inspections and prepares status reports as your house is being assembled.

"If a bank is financing a project, its construction financing division will do that. If it doesn't and the project is bonded, then you want to find out whether the bonding or insurance company does regular status reports on work in progress," says Ms. Connolly.

"If you've found the house you really like and you're comfortable with the answers you've received to all these questions, go ahead and negotiate. But don't assume anything," she emphasizes. "Ask questions. That's the key."