Rancho Sahuarita and Their Slanted Rules

Recently I placed about 10 bandit signs (small signs that stick into the ground next to the street) around Rancho Sahuarita. These signs explained what 99% of people buying a new home do not know, which is that homebuilders hold back most incentives and do what they can to make some people pay a lot more for homes than others. There’s nothing wrong with that. They are a business. But what about the people who thought they got a great deal only to find out they paid tens of thousands more than their neighbors? I put the signs up on Saturday and got a good reception from the public. Sunday morning I received a call from the Rancho Sahuarita Clubhouse saying, “Rancho Sahuarita does not allow bandit signs.” Hmm, that’s funny. I put my signs right next to the Pulte Home bandit signs and other numerous small signs that all the builders have used for years. Furthermore, I have placed bandit signs in Rancho Sahuarita before with no problems. But those other signs were fine because they were not trying to inform the public about how the builders try so hard to hide the fact that they frequently rip people off. Now, I have always said that I do like the Rancho Sahuarita concept, but it is obvious that they are very pro-builder. In my opinion, this is censorship. The builders definitely do not want a message like mine to get out.
Here are some things that I have observed builders do to make sales and additional money that, had the customer been more educated, never would have been allowed. These actions are legal in the sense that no one has ever called them on it, and they happen regularly.

One of the main things builders do is take advantage of people’s ignorance of the process of building and selling a home. There are so many different aspects to the process that few fully understand it. Some builders will pay their staff bonuses for getting the buyer to accept less than the ongoing incentives. For example, a builder may be offering a 20k discount incentive to buy one of their homes. If a sales person gets a buyer to accept a 15k incentive, the builder pockets the 5k and, depending upon their agreement with the sales staff, may give them a $500 bonus on top of their commission. Now, that is on the light side. With some builder incentives in the $100k off range, think how motivated the builder and sales agent will be to try to withhold. I may be going out on a limb here, but I do believe this practice of withholding blanket incentives (those incentives they are offering everyone who comes through the door) is illegal and could be interpreted as discrimination. Think about it. Everyone that buys is supposed to get the $20k off for buying on a particular weekend, yet a few people only receive $10k off. Why would this be? A few years ago, one major builder made it so that everyone that bought into a community got the same incentive. I believe this was brought about because of a legal battle that the builder lost. This is a big problem, in my mind, with the industry because buyers often cost themselves as much as a year’s salary. They don’t understand how the building industry works and believe the sales rep when he says, “You’re getting a great deal!”

Another thing I see builders do all the time is build homes horribly. The buyers complain, and the builders don’t really do anything to fix it. Their response in most situations is, “If you don’t close on the home, then we’ll take your earnest money deposit.” Many times this earnest money deposit is 5k-20k, and the threat is a significant reason that buyers just go along with sub-par construction. Other times, buyers don’t even realize that their home was skimped on. I have seen entire neighborhoods in which a builder was being cheap with the sub-contractors, and the contractors decided to only put in half the insulation they were supposed to. Well, the builder knew what the problem was but no one was calling them on it. They just went along with only putting in half the insulation that was supposed to be installed. Before long, people starting complaining that some rooms were overly warm, etc. The builder knew that these homes really were missing a lot of insulation. But instead of doing the right but expensive thing (ripping all these homes up to do the insulation properly), the builder just decided to “take it case by case.” If an owner complained that the home was warm, the builder would fix it. If an owner didn’t complain, he was out of luck. And once the homebuilder’s warranty expires on insulation, you’re really out of luck. Oh yeah, and good luck reselling your $300k-$500k home with only half the insulation it’s supposed to have. Here’s the bad news: once you lose the first buyer to insulation issues, you will have to have your home ripped up and repaired (which will never look 100% correct) at your cost! This is why I always recommend that a buyer building a new home have a home inspection. The items I have seen home inspectors find on “brand new” homes is downright amazing, and most of the time, these items show that the builder was just trying to cut costs, as in my insulation example.

These are just a sample of issues I have seen with builders over the past 6 years. To be fair, 95% of the time a newly built home is a great way to buy. However, you should not think, ” I paid for x and therefore I’ll get x.” Having a home built is a challenging process, and you should be fully involved in it. If you’re not, only bad things will happen. As already explained, it’s wise to have a home inspection at the end of framing (right before drywall goes up) and again upon completion. This $500-$700 is almost always money very well spent. And, as always, BUYER BEWARE!

This entry was posted on Wednesday, June 25th, 2008 at 12:19 am and is filed under New Construction. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.