Real Estate Reflections: Navigating the rollercoaster ride of building a home in Westchester

Ah, the elusive perfect home—that magical abode that checks all the boxes, a unicorn in the wild world of real estate. Lower Westchester County’s rich history often poses a challenge for eager house hunters. With communities dating back over a century, trying to find a house that aligns with modern needs frequently drives buyers to explore the realm of new construction.

Since most of the Sound Shore and surrounding areas are overbuilt, many new construction sites start with the demolition of an existing structure. Technically, if enough of that original structure remains, the project may be deemed a “renovation” instead of “new construction.” In some municipalities, renovations may yield property tax benefits, but this option may also abdicate the seller’s requirement to provide purchasers with a limited warranty.

Under New York law, in an arm’s length transaction, sellers do not provide post-closing warranties or guarantees; buyers must conduct their own due diligence. For a major renovation, a builder should theoretically offer coverage akin to a remodel—typically a one-year warranty on their work. When you buy new construction, however, the law requires builders to provide a limited warranty—mandatory coverage that shields buyers from unseen latent defects for one to six years, depending on the issue. This warranty encompasses construction flaws, defects in the plumbing, electrical, heating, cooling and ventilation systems and material structural defects but excludes manufacturer warranty-covered appliances and mechanicals.

With these warranty conditions in mind, what is the best way to buy your newly constructed home? Some builders prefer to maintain complete control and avoid buyers’ ever-changing construction whims. If that is the case, the house may not even hit the market until it is virtually complete. If the seller advertises the property as new construction, buyers can expect to receive a limited warranty at closing. Buyers should also expect to pay New York State transfer tax.

If you want design control over your future home, brace yourself for an obstacle course—renderings, construction plans, town hall approvals, budgets, allowances--it's like the Olympics of real estate. Purchasing a to-be-built home poses a plethora of pre-contract questions. Typically, buyers view online renderings and floor plans, but it is crucial to also understand construction plans, desired alterations, specifications and allowances. Unanswered questions consistently turn into costly change orders. In recent months, builders have been requiring buyers to release a portion of the purchase price for construction costs. This scenario demands legal finesse to safeguard buyers’ interests. If the seller backs out, breaches the contract, or files for bankruptcy, how will the buyer recover their funds? This form of purchase does entitle purchasers to warranty coverage and the buyer is generally responsible for transfer tax. Buyers can roll the entire value of the finished home into a conventional mortgage.

Finally, if the standard options don’t resonate, there is always the pseudo-DIY approach. Buy the land, hire your own construction team, and watch your dream home rise like a phoenix from the ashes. Just remember, in this instance, DIY may as well stand for Dive Into Your Bank Account. There is virtually no way to stay within budget and you cannot finance the project with a conventional mortgage. But at least you own the whole kit and kaboodle. This scenario does not leave you with limited warranty coverage and you typically would not pick up the bill for transfer tax. There is potential for a real property tax benefit, but that perk remains specific to the municipality.

In sum, building a home is like riding a rollercoaster—you'll scream, laugh, possibly cry and probably get a bit queasy. It's not for the faint-hearted, but hey, who cares about a faint heart when you can have the perfect walk-in closet? Happy house hunting!

Randie P. Paterno, Esq. is a real estate attorney with offices in Rye. Randie is licensed in New York, Connecticut, and New Jersey and lives in Rye Brook.