By Craig Shawn Williamson
When it comes to gathering information about a particular vacation rental property, more is better.
I recently posted about how important it is to know your salesperson when you are looking at purchasing VRP. Take the same kind of close look at the company you are buying from—as in, the property developer who actually built the vacation home you are considering purchasing.
Gathering as much information as you can ahead of a VRP purchase is an important way of protecting yourself. Assembling a great team to assist you throughout the purchase process is also crucial. You will need an attorney, and accountant, and a strong Realtor who will advocate for you from Day One onward—it is not enough to deliver you into the hands of the salesperson at a construction site. I am a consistent advocate of Realtor representation for the buyer when dealing with new construction in big projects.
If you’re buying a home within a community, it is a good idea to call the local Better Business Bureau to find out if there have been any issues with it. Doing so is part of your due diligence. Find out about any outstanding complaints against the developer and how they were resolved. Next, check with the state. See if there are any lawsuits against that company or if anything else is going on.
Of course, not all online information is useful information. If you find a forum with one or two rants about the company you are researching, take it with a grain of salt. Some people use a public forum to trash somebody or something. They may just be a dissatisfied or disgruntled customer. Unless there is an associated lawsuit, that’s not what I would look for. Go to real agencies like the BBB or established media outlets. You’ll find out what you need to know.
Take a Closer Look at Warrantees
There are a few different aspects you can research about the builders you buy from, including contracts, construction quality, buying experience, and warranty. I would specifically look at their warranty.
Warrantees are good for buyers and for builders. They exist to protect the builder’s reputation. A warranty claim may just mean that one of their suppliers had an issue the builder wasn’t aware of. There’s nothing awful about that. What you do need to know is how they respond to claims. What history does that builder have on responding to issues?
If a certain builder gets over to a property and fixes things promptly without fanfare, that’s great news. It’s what you’re looking for as a buyer, the ideal. If, on the other hand, a developer has a history of telling buyers, “Sorry, that’s not covered,” you need to know about it…before you sign on the dotted line.
On the front end of a property investment, you can do all the due diligence you want, but you’re not going to know about warranty and aftermarket service until after you already own a property—unless you dig in and ask some questions ahead of purchase. Find out which main company does property management for the developer you’re looking into. Choose one of the three top management companies that work within their communities. It’s very easy to pick up the phone, call that property management company and say, “Hey, I am looking at one of the builders that you manage. Can you tell me about them?”
Will the Developer Stand Behind Its Product?
The property management company is going to know if there is an issue with a particular builder and how they handle warrantees. They’re the ones who know exactly what is going on with 200 homes in a development at any given time. So, they’re going to say, “These guys are a nightmare to work with. Everything we put into warranty they claim is not included. They come out and void the warranties and they’re very difficult.”
That’s clearly a problem.
Or, they’ll say, “Yes, they’ve got a warranty program. It’s one year. We’ve got an online portal we use. If there’s an issue, we drop it in there and they fix it within a week or two.”
Have the property manager specifically talk about how hard is it to get warranty items fixed. Ask what the aftermarket service is like of the company. Do they stand behind their product? Or is it more like the first thing that goes wrong, they void the warranty? Most reputable builders allow a year-long or two-year-long warranty.
When they come back in and have to fix things, some of the worst builders out there will find any reason they can to void a warranty. They’ll say, “You put in the wrong kind of light fixture. Void. You used the wrong pool equipment. Void.” This is obviously an exaggeration, but it’s not that much of a stretch. This is why it’s so important to do your research and find out about the reputation of the builder from the people who know.
Some of the bad companies out there don’t have a customer-centric view at all. They see themselves as soldiers in battle with customers. They are not after customer satisfaction; they are after moving inventory. And so, you need to know what kind of challenges you’re going to have and be ready for them.
Look for Brand Names and History
It matters if a developer has just created their own brand name, or if they’ve actually got a brand name associated with their development that has high standards. At Four Seasons, for example, the builders are highly vetted. There are standards associated with this luxury brand that are very difficult to meet. Four Seasons is consistently enforcing those standards, and that’s a great brand attribute. Buyers pay a lot for it, and they receive exceptional quality.
You want to find places where there’s an actual international brand name with a great reputation, not one that was created by the developer last year. I am a big believer in this point because it matters if you’ve got somebody looking over the shoulder of the builder to ensure quality and best practices.
Finally, as a buyer, you want to know what a builder has done before.
Is this the first development under that brand? Or are there others? What kind of relationship do they have with that brand? There’s nothing wrong with calling up the brand headquarters and saying, “Hey, you’ve got a development here. This is the developer’s name. How’s everything going? Tell me about it.”
It could be a million-dollar home you are buying. Make the phone call. The good brands will tell you either, “Everything’s going great. Everything is on track and we are excited.” Or, “We had a couple of issues there but they have been fixed.”
The savviest VRP buyers out there have one thing in common. They’re not afraid to ask a lot of questions.
To learn more about how to get the most out of your VRP purchase, be sure to check out my new book, LIFE AS A VACATION: THE ULTIMATE BUYER’S GUIDE TO VACATION RENTAL PROPERTY: 2020 EDITION.