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Monday, July 16, 2007

Bankrupt builder leaves four families in limbo

The McDades will not be moving into their dream home above Golden View after their homebuilder declared bankruptcy. (Eric Sowl/KTUU-TV)
The McDades will not be moving into their dream home above Golden View after their homebuilder declared bankruptcy. (Eric Sowl/KTUU-TV)
Mike McDade said the misadventure has completely wiped his family out of money. (Eric Sowl/KTUU-TV)
Mike McDade said the misadventure has completely wiped his family out of money. (Eric Sowl/KTUU-TV)
Niki McDade said she had covered all aspects of her home's construction. She did not expect the homebuilder to declare bankruptcy. (Eric Sowl/KTUU-TV)
Niki McDade said she had covered all aspects of her home's construction. She did not expect the homebuilder to declare bankruptcy. (Eric Sowl/KTUU-TV)
After handing Diamond Builders $30,000 in cash as a payment toward their home, the company filed bankruptcy and is the deedholder for the land. (Eric Sowl/KTUU-TV)
After handing Diamond Builders $30,000 in cash as a payment toward their home, the company filed bankruptcy and is the deedholder for the land. (Eric Sowl/KTUU-TV)
Attorneys and mortgage companies have told the McDades they have little legal recourse. (Eric Sowl/KTUU-TV)
Attorneys and mortgage companies have told the McDades they have little legal recourse. (Eric Sowl/KTUU-TV)

Anchorage, Alaska - At least four families are in limbo tonight. They're not able to move into their new homes because it turns out they don't really own them. When a local builder went bankrupt, families like the McDades found out they lost it all.

All is quiet at this new home perched way above Golden View -- and it will be for some time. Mike McDade was supposed to be moving in after Christmas with his wife and two young children, but instead they are still at the duplex they just sold, renting from the new owners.

"Now we have to buy a house again. We have no money for a down payment. We have no money for anything right now. We've been totally wiped clean," said Mike McDade.

"It was absolutely a dream home," said Niki McDade.

That's why Niki McDade documented every step along the way.

"We pretty much drove up there everyday to see how it was going along," she said.

It was a well thought-out plan; unfortunately, it did not include the builder going bankrupt.

"You think you can recover something, knowing it's your land. And then to find out legally you aren't entitled to any of it was, of course, devastating," said Niki McDade.

The McDades lost it all when Lance Lamb of Diamond Builders went bankrupt. That's when they found out they had no home and no land because it was all under Lamb's name.

"All of the equity we built up in buying a home, maintaining a home, getting land means nothing now. None of it is ours. We've lost all of it," said

That's because the McDades did what's common for homebuilders who don't want to take out their own construction loan: they deeded their land to the builder for collateral.

Ordinarily it's a successful business venture, if nothing goes wrong.

"One thing that went wrong is the builder went bankrupt," said John Carman.

Carman, with Homestate Mortgage Company, is the chairman of the legislative committee for Alaska Mortgage Bankers Association and he's familiar with the fallout over Lamb's bankruptcy.

"Some of these people, from what I've understood, lost hundreds of thousand of dollars. It's not a good situation," said Carman.

Indeed, it's a bad situation for both the homeowners and the subcontractors, who didn't get paid.

"Prior to going bankrupt, they were accepting money from homeowners for upgrades and not necessarily passing that money on to the subcontractors that were performing the work," Carman said.

It is the worst situation to be in if you've decided to deed to builder. While it's the easiest financing route, it's the riskiest for the consumer.

"With most builders, you can agree that you want to keep the land in your name. You want to get the construction loan in your name. You simply want to contract with the builder to build the home for a certain price and agree that you will pay them in stages as the home is built," said Carman.

Other options include the owner becoming the general contractor. You're in total control of the money but also have a big responsibility running the show.

The McDades admit it might be too late for them, especially since lawyers have told them there appears to be no recourse, but they want to warn other potential homebuilders now before their dream house gets lost in limbo.

The McDades are out $90,000 for the land, with $30,000 paid to Lamb in cash just before he declared bankruptcy.

Lance Lamb was not available for comment. His business and home phones were disconnected, but last week he left a message saying he also lost everything and is sorry that his customers were also hurt in the bankruptcy.

While it's recommended that consumers check out builders thoroughly before signing a contract, in this case Diamond Builders checked out before the financial problems came to light.

Do It Yourself?

Do It Yourself PitfallsIt has become popular for homeowner’s to “do it themselves” in an effort to save money. While taking on small projects can in fact save money, it becomes risky when the stakes rise. Over the last decade, people have flocked to the idea of building their own homes. Instead of hiring a General Contractor, they act as the project manager for their construction project. On one hand, it eliminates the fees from the builder, but these savings can quickly dwindle away.

Building or renovating a home is a complex process. In this complexity, a novice can become lost – or stuck – at a seemingly unending series of stages. When thinking of construction, most homeowners gravitate towards items they can tangibly feel – lumber, roofing, windows and cabinets. However, the success and failure of a project reside not in material choices but in the developmental costs of the project. A quick survey of do-it-yourselfers will show most of them are unfamiliar with such items as permit fees, utility connection costs, property easements, plan check requirements, and labor negotiations. If they do not pay attention to these items, the result can be thousands of dollars worth of cost overruns.

This is where hiring an experienced builder can pay dividends. While their services are not free, they can help homeowners avoid costly mistakes that can derail a project. Because builders are constantly dealing with building departments, utility companies and subcontractors, they have a working knowledge of the process. This knowledge can help a homeowner not only finish their project on time, but also on budget.

Another potential pitfall confronting do-it-yourselfers is the cost of time. If someone is building their own home, they may want to participate in as much construction as possible (hanging siding, painting, installing drywall, etc). While performing these tasks will save money from a labor standpoint, the savings can dwindle when compared to the amount of time it takes a novice to complete the project. In most cases, a homeowner will be using a construction loan to build or renovate their home. With these loans, interest is accrued daily during the entire project. The cost of daily interest will vary depending on the loan amount, but it some cases it could be a hundred dollars or more per day. If it takes a homeowner three times longer to complete a project than a subcontractor, potential savings turn into verified losses.

Another risk taken on by do-it-yourselfers is the stress of managing the project. Balancing multiple subcontractors (and problems), material suppliers, and deadlines can test the patience and sanity of a novice. This stress can carry over to life at home and in the workplace. In hiring an experienced builder, the stress of managing the day to day activities falls squarely on the shoulders of the contractor. When a laborer does not show up for work, the builder is responsible for picking up the slack. If materials are delivered incorrectly, he or she solves the problem with the material supplier. While these problems may seem trivial, cumulatively, they can become overwhelming.

When analyzing the viability of doing a project, homeowners should account for the benefits and drawbacks of doing it alone. While savings can be achieved, they can also disappear just as fast.

Homeowner Tips: Think of Windows when You Build Your Home

With all there is to consider when designing your home, many will overlook their window treatments. Here you will find ways to avoid the common pitfalls involved and help you save some money as well.

When you are using decorative casing such as shutters and 2 inch plantation size wooden blinds, you should always make sure that you have at least 2 ½ ". If you have a double or triple window encased within the window opening, you may want to use vertical trim strips between each window. Be sure to include this when you are measuring depth. It is less common to decorate sliding doors, but if you do, make sure to include the handle when you are measuring. The depth is usually 4".

There are several different styles of window treatments in which to choose. These include, circular, arched, eyebrow arched, or angels. Any of these choices are beautiful, but can be very restrictive this is especially true when it comes to working with eyebrow ¼ arches.

If you are planning to have French doors in your home there are a few things to consider. The doors normally swing open into the home, which in return, could cause problems with the valances you choose. Consider using a valance, which is mounted to the door allowing the doors to swing outward. If you are thinking of using shades, blinds, or shutters, do not forget to consider the handles as well as the locks.

It is important to remember when thinking about possible window treatments to remember window placement as well. If you have chair rails or baseboards going around the opening of a window this could create a problem with the hanging of draperies.

When considering the hanging of drapes, you should make sure you have the same amount of space on each window. Centering the window whenever possible is a good idea.

When you are designing the placement of your windows, make sure that you are leaving at least 2" at the top of the window to accommodate bracket placement. When installing wood headers make sure that they extend to the ceiling and that the heavier treatments are mounted on wood. If you are planning to mount on sheetrock, you should use molly or toggle into the sheetrock for the best protection.

When considering what you need when it comes to windows, make sure that all of your windows are fully accessible. This will make things much simpler when decorating. You should also be careful to have the same style of windows in the room.

Winterizing Tips For Homeowners

Winterizing Tips For Homeowners: 14 Easy Winterizing Tips That Will Save You Time, Frustration, Money and Your Life

By Richard Roll

The snow has already begun to fly in various parts of the country, and now you're looking forward to snuggling on the couch with a good book in front of a warm fire. But before you get too comfortable, make sure that your house is winterized for this coming winter.

There are many easy, inexpensive winterizing activities you need to do around your home fairly soon -- Things that can save you time, frustration, money and even your life! Unless you live in the tropics, the time to consider the annual ritual of winterizing your home is now before its too late and:

A tree limb is blown down in a blizzard and shatters your picture window.

A mailman injures his wrist when he falls on your slippery sidewalk or even worse, seeing your wife or kids desperately trying to get up off the ground and yelling for your help.

A cold snap freezes the water in your basement laundry rooms pipes, making them burst.

A friend comes over for a holiday get together, and gets an unpleasant surprise. As she enters the house, accumulated ice over the entryway falls on her head, giving her a concussion.
You open your heating bills and have a cardiac arrest because they are so high.

Here is some easy and inexpensive home winterizing activities you can do yourself to help your family enjoy a safe, warm and cozy winter.

To prevent water from building up and freezing in your gutters, clean dead leaves and other debris from them.
Make sure all your outside faucets that are not frost-free are shut off and drained to avoid freezing and/or pipe breakage. You should also insulate exposed pipes near insulated walls.

To ensure sufficient heat and minimize the risk of fire, make sure that your furnace is clean and check to see if it is working properly. Dont forget to examine the pipe bringing fuel to the furnace as well.

Properly maintain your storm windows and doors. Be sure your storm windows and doors are functional so if in the event they need to be opened during the winter, they work. Seal gaps and cracks around windows and doors with weather-stripping and caulk to avoid unnecessary heat loss. Gaps in caulk and weather-stripping can account for a 10% of your heating bills.

Be sure that your furnace is cleaned and properly maintained including the flue stack and chimney before the outset of winter. You should also buy a new filter that matches the specifications of your furnace exactly. Make sure, you read the packaging material to see how many months your filter shall last. If it says a month, then change it again in a month. While you are up the chimney, you should also install a screen over it to prevent future clogging.

Check all of your windows and feel the edges for any breezes or cool air coming through. Check the windowpanes for condensation or frost on the inside. Windows that form condensation, form frost over, or ones that you can feel a breeze need to be treated with weathering plastic.

Power wash mold from all stone or concrete walkways to avoid unnecessary slippery conditions if wet. Also, be sure to have an ample supply of traction sand and melting salt in accessible places with a proper dispensing tool.

Get on top of roof problems. Inspect your roof for damaged or curled shingles, corroded flashing, or leaky vents. Fail to do this and you may end up with chunks of wet ceiling dropping on your head. Signs of roof trouble include loose shingles in your yard, granules in your gutter, and worn or torn shingles or flashing.

Trim your trees and cut down any weak branches that can fall and injure you or damage your property.

Even if you live in more temperate weather zones, you should take time to look around your home to see what needs attention. Some useful winterizing ideas include:

  • Schedule your furnace inspection
  • Change your air conditioning filters
  • Clean your heating vents
  • Test your smoke alarm
  • Change your smoke alarm batteries.

Winterizing your home is generally not optional, although there can be aspects of it you can skip if saving hundreds to thousands of dollars isnt an issue for you and your family.

who is looking out for you when you plan to build a new home?

Real estate agents? Home inspectors? The local government?
The truth is, none of the above.

You have to protect your family and your investment.


Everyday, in communities across the country, there are dozens of headlines and articles, similar to those reprinted below, about the headaches, heartaches and shattered dreams of homeowners with new home building plans. And these stories are NOT just from "fly-by-night" home building companies, but range from small, local builders of new homes to the large, so-called "Wall Street" industry leaders.


These scenarios are all real.

We have witnessed them first hand.

Imagine your large, stable, reputable home builder going out of business while your new home is being built.

Imagine the horror of moving your couch to vacuum and finding toxic mold growing on the walls of your 6-month-old house.

Imagine your kitchen floor slowly heaving because your home builder ignored a natural spring and built your house on top of it.

Imagine placing your trust in a 10-year warranty, only to find out later that the warranty is worthless.

Imagine having a government inspector ignore blatant code violations in your house because your new home builder was giving him materials to finish the room addition on his own house.

Here are the things you must know in order to be on equal footing with your home builder:
  • How to avoid the “model home trap” used by every big builder
  • How to prevent your builder's assembly line construction techniques from getting in the way of the quality and craftsmanship you deserve
  • How to discover if your new home builder is telling the truth about claims of superior quality and customer satisfaction
  • How to prevent damaging mold growth that has become common in new homes
  • The tactics used by new home sales people to "up-sell" and persuade you to unnecessarily spend thousands of extra dollars
  • How your builder’s attorneys are working overtime to make sure they have the upper hand... and what you can do to foil their efforts!
  • How you can protect yourself from the exclusions and exceptions in the warranties of most new homes. These are exclusions that will cost you thousands of dollars when a problem arises with your new home.
  • How to avoid the biggest scam you will encounter when buying a home - The Home Inspector Scam (and no, it’s not what you think)!

Family, builder at odds over unfinished house

Macomb Daily staff photo by David Dalton
John and Mary Bliss look beneath the joists of their house to see accumulated water in the crawl space.
John Bliss feels like he and his family are homeless.

Bliss, his wife Mary and their three children are spending their second consecutive holiday season at his parents' home in Lenox Township because of ongoing construction woes at their house in Warren.

Plans to expand their house, on Gilbert Avenue, from 800 square feet to 1,800 square feet have been a renovation nightmare, the Blisses said.

"Every corner of the house leaks," John Bliss said. "You can go in and on certain days the walls are bleeding water."

The general contractor, Pinch Construction, of Richmond, acknowledges the prevailing problem is moisture that has led to mold throughout the single-story house.

The two sides disagree on the cause and who bears responsibility.

The family said improper roof construction, poor vinyl siding installation and a water-logged crawl space for a house built below grade are the problem.

Wayne Pinch, owner and president of the construction firm, blames inadequate insulation by one of his subcontractors. However, he asserts the couple played a contributing role.

"Do you think I like seeing a family be put on the street?" he said.

"I have conscience. I'm an honorable

person."

The Blisses took out an $80,000 home equity line of credit to pay for the expansion. They boosted it to nearly $95,000 and have spent it all. The financing plan they reached with Republic Bank was to convert that debt into a mortgage when the expansion was completed and they had a certificate of occupancy in hand.

The rift with the contractor, and mold on walls and ceilings may prove insurmountable. The bank won't grant a mortgage.

"The appraiser was in here three minutes and said the house is worthless," John Bliss, 43, said.

Enter attorneys, demands and counteroffers on both sides and you have a stalemate with both sides smarting.

"We're hoping for a miracle," Mary Bliss said.

In addition to not having a place of their own, the Blisses face monthly loan payments of $700. They strap on masks when taking anyone through the house (their youngest son suffers from asthma and cannot go inside).

They have tossed a sofa, chair and other mold-tainted furniture that they kept in the garage, onto the dirt outside. Some things remain covered inside, and other belongings are at a neighbor's home while the family resides with relatives.

"We don't have the funds to rent space to put our stuff," said Mary Bliss, a 43-year-old secretary at Wolfe Middle School in Center Line. "Our whole life was in there."

The Blisses accuse city inspectors of inadequate inspections and not checking on the progress of construction when they had concerns. At one point, a fed up John Bliss tossed photos at a Warren Building Department administrator and said: "Because of you, this is what's happening to our house, because you won't come out."

Pinch said he has virtually shut down his business. He insists the mold is not his fault and that he has corrected past building code violations.

Staying put

John and Mary Bliss paid off their house in 1996, 11 years after moving in.

Approximately two years ago, the family talked about moving to a bigger house. Sons Joshua, 18, and Aaron, 17, and 14-year-old daughter Melanie, wanted to stay put in Warren. Their parents considered demolishing the 800-square-foot house and having a company build a modular home. But the cost was a bit too expensive, and when the Blisses told their lender the bank referred them to Pinch Construction for an expansion.

Total projected cost: $109,000.

The family and Pinch agree the work progressed nicely during spring and summer 1995. According to Building Department records, an inspector in June 2005 rejected -- and later approved -- the footings for the new parts of the house because a septic tank had to be removed. Three months later, the rough construction failed inspection because of 13 items, records show. Those were corrected, and the city OK'd that stage of construction.

Disputes arose between the Blisses and Pinch, leading to a "field check" in October 2005 that revealed parts of the crawl space sit below the surface grade.

"Our house is basically sitting in a hole," said John Bliss, a 43-year-old vendor for Variety Foods.

Pinch, however, accuses Bliss of interfering with subcontracted tradesmen and asking city inspectors to check the progress of work before the company was ready.

"The worst nightmare a builder can have is a homeowner who won't go away" while construction is ongoing, he said.

Pinch alleges the Warren coupled waited too long to contact Consumers Power to hook up natural gas, resulting in a delay to late autumn 2005 before heat was available to keep new drywall from cracking. To hopefully dissipate the water in the crawl space, the furnace was installed -- but without proper ducts.

Moisture on floors and walls became obvious.

The construction company and the family hired various experts.

While the Blisses cry foul and point to structural problems, Pinch theorizes a gap around the insulation between wall studs caused the infiltration. But his insulation subcontractor disagreed and ongoing wetness puzzles others, he said.

Walls in the living room have been torn down and the insulation sits piled on the floor. Mud and water remain below the floor in the crawl space. Bedroom walls are tainted with mold.

Two court battles

The dispute wound up in district court last spring, when the building department cited Pinch Construction. The company was fined $2,500.

The matter later moved into Warren's new "blight court." An inspector alleged Pinch created "unsafe conditions" at the home and failed to comply with construction plans. On July 27, Administrative Hearing Officer Dean Ausilio levied $330 in fines and costs. More significantly, he ordered Pinch to post a $94,579 compliance bond -- the amount spent by the Blisses with the company.

No Pinch Construction representatives attended the hearing. Pinch said he was unaware of the proceeding.

Pinch has not posted the bond. He didn't exercise his option to appeal Ausilio's ruling within 28 days.

Since then, Warren has made no attempt to flex its municipal muscle.

"We thought the blight court ... was going to work," Mary Bliss said.

"I understand the situation she's in," said Jeffrey Schroder, an assistant city attorney. "She's frustrated. We sympathize with her."

Schroder said Warren's lawyers and administrators will meet this week about how to proceed.

"We're going to discuss our options. We haven't made any decisions yet," he said. But he added: "Our intention is to enforce" the blight court ruling.

The upcoming blight court hearing may not provide a solution for the Blisses. Schroder pointed out the city's case is based on tickets Pinch received for failing to obtain work permits at the Gilbert Avenue house, and that the citations may not impact the construction dispute.

No agreement

The couple and the builder could not agree on a resolution as late as two months ago. According to a July 20, 2006, letter from Pinch's attorney, Franklin West, to the couple's first lawyer, the builder offered to make a dozen "modifications." Those included removing and reinstalling vinyl siding; replacing the first 8 feet of exterior lumber and weather-guard sheeting; removing and replacing all shingles; finishing electrical and plumbing work; replacing the floor where necessary; installing the concrete driveway; final surface grading; and installing floor covering.

West stated that Pinch reports that all mold -- including some black-colored mold -- is non-toxic. The attorney also recommended the couple could use approximately $14,000 the bank could provide, in order to contract "with whomever they select to satisfy their apprehension concerning the mold."

"They turned it down. They screwed themselves that day," Pinch said.

The Blisses deny they rejected the proposal.

Through their new attorney Joseph Vengalil, the couple replied in an Oct. 25, 2006, letter: "The mold resulted from your client's failure to protect the home from moisture during construction, and he should fix the problem and complete his work." Furthermore, they requested 22 additional repairs, replacements or reimbursements the couple considers "vital."

Pinch said he has not seen that list of demands.

"Their foundation is fine," Pinch said. "If the (sump) pumps were running, there would be no water in their foundation.

"They can take me to court. I don't think there's anything I can do for them. I don't know what to do," he said.

The Blisses have not filed a lawsuit against Pinch. Mary Bliss said they initiated a complaint against Wayne Pinch's builder license with the Michigan Department of Labor and Economic Growth. A state-required inspection found 29 building violations, according to a city report provided by the Blisses.

They find it ironic that so many problems were documented Dec. 11 by a Warren inspector when far fewer were noted by city workers in the last 18 months.

Steven Sternicki, the inspector who authored the Dec. 11 report, could not be reached for comment.

According to the Labor and Economic Growth Department's web site, Wayne Pinch has been a licensed residential builder for 10 years. He faces no "open" complaints and has not faced any disciplinary action by the state. His license expires May 31, 2007.

Pinch said his is a small company that has built more than 150 homes, most of them modular. But he suggested his firm has been hurt by the construction slowdown amid the state's lagging economy, suggesting he does not have deep pockets to absorb any costs with the Bliss house.

"Pinch Construction Inc. has closed its doors," he said.

Dream home a nightmare?


Dream home is nightmare for Chesapeake family

Odetta Shepard’s $324,000 brand new dream home in the Old Mill Run subdivision in the Deep Creek section of Chesapeake has become a house of horrors.

There’s a mysterious black substance pouring from light switches and baseboards and collecting on the carpet.

"Even if I clean it, it comes back," she says.

It’s on the furniture, clothing and the toys her children play with.

"The black stuff is scaring me because I have two kids and I think it's a health issue."

Shepard says letters to her builder, Hearndon Construction went on for months -- and weren't answered.

So, 13News found a construction consultant and an independent home inspector to check everything. A big problem was the ducts leading to the air conditioner. Home inspector Floyd Gibbs says the ductwork was improperly installed, sucking all the dirt and grime from the attic into the house.

But he says there’s a much bigger problem.

"The wood upstairs has signs that they got it up out of a mud hole," he noted.

Gibbs says the wood in the attic was wet when it was installed. He adds that the warm, dark conditions were perfect to grow mold and that the faulty air duct pushed it all through the house.

Shepard says, "We begged the builder before it got to this situation to handle this."

13News went to Hearndon Construction. The owner was there but refused to come out from behind a locked door. Later, we were told it was none of our business and the company owed us no explanation.

According to Gibbs, air samples of the attic and upstairs show high levels of mold and fiberglass particles from the insulation, a potential health threat.

And after all this, Shepard's still forgiving.

"We all make mistakes and all I want is what is due to us. What was due to us is a home with no defects mold, mildew termites,” she said.

City inspectors also went over the Shepard's home before she moved in. We’re investigating why they didn’t find any problems.

REPERCUSSIONS

Construction-defect and related lawsuits and claims have drastically affected the cost of insurance.

Homeowners-insurance premiums are soaring, in part because of water-damage and mold-related claims. Premiums rose 20 percent in some areas in 2000 and 2001 and 10 to 15 percent in 2002. They are expected to have risen up to 10 percent in 2003. In Texas, some insurers stopped writing new policies when the state tried to impose price controls and to mandate mold coverage. The situation threatened to slow sales of new homes in Texas when potential buyers couldn’t get coverage because lenders wouldn’t extend credit on uninsured collateral. Similar problems have been reported in California and elsewhere.

Haynes family and their house.
HIDDEN MOLD

HOMEOWNERS Renee Haynes, 41, a homemaker, her husband Paul, 44, a pilot, and their sons Michael and Liam, of Sandy, Ore.

PROBLEM In 2002, four months after moving into their semicustom $66,000 house on land they already owned, the Hayneses say they discovered mold throughout the walls. They have moved out, citing allergy-related problems. Repair costs: $70,000, their lawsuit says.

Don Marr Photography
Liability insurance for builders and subcontractors also has skyrocketed in the last few years, with recent annual premium increases of more than 400 percent for some contractors. The increases became so high in California and Nevada, for example, that some builders and insurers withdrew from those states, and others slowed the pace of condominium building because they believed condo associations were especially litigious, say insurers, builders, and lawyers.

Builders have responded swiftly to those developments by trying to stamp out new lawsuits. They started including mandatory-arbitration clauses in many new-home contracts, requiring homeowners to take disputes with builders to an arbitration panel rather than to court, and to abide by the panel's decision.

Builders say arbitration is faster and cheaper than litigation. But homeowner and consumer groups, including Consumers Union, the publisher of Consumer Reports, say arbitration panels may be stacked in favor of industry and deprive citizens of their constitutional right to a jury trial. The outcomes may also be sealed, meaning the public can’t learn about serious issues.

Resale buyers are not bound by arbitration clauses because they were not a party to the original contract. In part to keep these buyers from suing over defects, builders have successfully lobbied states to pass “right to cure” laws. These require builders to be given a chance to fix defects before homeowners can sue.

Eighteen states have passed such laws in the last two years, and legislation is pending in at least two others. But homeowner groups complain that right-to-cure laws create unfair obstacles to justice. For example, if, after abiding by a right-to-cure law, a homeowner still wants to sue, he may not be able to if the statute of limitations has expired. In any case, no one we spoke to said they sued their builder without first trying to get repairs made.

Computer databases that track the claims history of a house are another development in the property-insurance industry that could have an effect on the resale housing market. A house with many claims may be difficult to insure or sell without major repairs. Prospective buyers who don’t check the claims history in the home’s Automated Property Loss Underwriting System (A-PLUS) report or Comprehensive Loss Underwriting Exchange (CLUE) report could find out too late that they must pay huge premiums to insure it.

Lenders could also suffer if shoddy construction problems multiply, and the effects could ripple throughout the economy. Banks and federally chartered institutions that buy bank mortgages, including Freddie Mac and Fannie Mae, with $3.3 trillion in mortgage-backed securities, could end up with a significant inventory of reduced or worthless collateral. Consider the case of one New Jersey homeowner who in 1995 paid $278,000, including a $150,000 mortgage, on a property recently reassessed at just $90,000 because of serious structural defects.

While mortgage lenders require real-estate appraisals as a condition of lending for a mortgage or equity loan, they generally don’t require a property inspection that would reveal defects that could undermine its value.

FEW CHECKS AND BALANCES

State and federal officials offer uneven help for home buyers with serious housing defects. In 20 states, no state building code exists, and in many rural and new suburbs there isn’t even a local one.

Even where building codes do exist, many local governments have lax enforcement. Home buyers can’t assume that officials have protected them by performing the required inspections. Building-department officials say they are understaffed and underfunded, and can’t keep up with permitting and code enforcement in areas where hundreds of new homes are being erected at a time.

In suburban Cincinnati, for example, the Enquirer newspaper reported this past June that in one county alone, at least 750 houses built between 1993 and 2001 lacked certificates of occupancy, which are supposed to prove that a home has been inspected and is safe to live in.

In New Jersey, state and county prosecutors have launched fraud probes into allegations that building officials in one county falsified reports on hundreds of homes in several large developments that were never inspected. Homeowners had long complained of faulty construction and poor sewage and storm-drainage connections.

Cindy and Brian Schnackel and their house.TY FOUNDATION

HOMEOWNERS Cindy Schnackel, 47, an artist, and her husband Brian, 37, a software engineer, of Edmond, Okla.

PROBLEM In 2001, a year after buying a new house for $127,000, the Schnackels say deep cracks formed in the floor and the brick exterior. An inspector noted a poor foundation, roof, and grading. The repair bill: $60,000.

Courtesy: J.D. Merryweather Photography

Concerning home-warranty programs, which builders provide buyers to warrant certain home systems, only 10 states regulate the programs or post bonds to secure performance. They are Arizona, Colorado, Connecticut, Florida, Maryland, Massachusetts, Mississippi, New Jersey, Oklahoma, and Oregon.

And 23 states don’t regulate home inspectors. Some states have contractor-licensing boards; others do not. Licensing requirements also differ among states.

Governments have little incentive to make consumer protection a priority, say homeowner activists and government-watchdog groups. “Construction defects are a very political thing, and everyone wants to dance around that,” says Elizabeth Owen, executive director of the National Association of Consumer Agency Administrators, whose members are consumer-agency officials across the U.S. Builders, developers, and real-estate companies are among the most influential political constituencies, and often heavy campaign contributors. And new housing helps swell tax rolls.

Consumer-affairs departments and state attorneys general can investigate home-building fraud, but they usually don’t give such investigations high priority unless there are many victims. Local Better Business Bureaus take complaints, but can’t force builders to make repairs.

At the federal level, the Consumer Product Safety Commission regulates few housing components, and the Federal Trade Commission hasn’t filed suit against a builder for defective construction in more than a decade. Starting in the late 1970s, the FTC sued several big builders, including Kaufman and Broad Home Corp., the corporate predecessor to KB Home, one of the nation’s largest production builders. Whether the subsequent consent degree is being honored is an ongoing issue.

“Major structural damage that could have been avoided by reasonable steps beforehand was defined as an unfair or deceptive trade practice,” says Thomas Stanton, a former FTC official. Stanton says the lawsuits were meant to prod the home-building industry to reform itself. Since then, he says, “things seem to have gone in the wrong direction.”

In this vacuum of oversight, ad hoc groups such as Homeowners Against Deficient Dwellings, www.hadd.com , and Homeowners for Better Building, www.hobb.org , have taken the lead in the battle for home-buyer protections. On their Web sites, dissatisfied home buyers swap information about builders and remedies and call for better laws.

Housewrecked 3 (NINE WARNING SIGNS)



Serious defects often present themselves in telltale ways. If you see one or more of the following problems in your home, hire an engineer to investigate.

1. Deep cracks in the foundation or basement walls. They can be signs that the foundation was laid on a poorly compacted base or poorly graded soil.

2. Sagging floors or leaning walls. A shifting foundation or structural problems with support beams could be to blame.

3. Windows and doors that never sit well in frames or close properly. House-framing problems may be at issue. If the beams, studs, and joists weren’t correctly sized or assembled, the whole house may not hang together well.

4. Cracks in interior walls. Wide cracks could signal a foundation problem. Generally, though, fine cracks are cosmetic, the result of normal aging.

5. Water damage. Warning signs include mold, rot, and insect infestation in exterior walls; staining, swelling and discoloration on interior walls; and a musty odor. Possible causes: improperly installed roofing, no flashing around penetrations and joints, no moisture barrier in a climate that requires it, lack of a drainage space behind brick or siding, poorly installed windows and doors, holes in siding, and trapped water-vapor condensation from heating and air conditioning.

6. Flooding, sewer and drain backups, and switched hot and cold water. Flooding and backups may result from poorly graded land or faulty sewer and water-main connections. Switched spigots may signal improperly installed plumbing.

7. Excessive heating or cooling bills. Rooms that don’t get warm or cool enough can be another signal that air ducts may be leaky or improperly connected.

8. Shorting or dead outlets. The electrical system may be installed incorrectly.

9. Lack of required permits. This indicates that building authorities have not performed the required inspections.

Why the problems? Many experts point to the country’s 10-year housing and real-estate boom. The top 100 U.S. home builders together sold an estimated 1,000 new homes a day in 2002, or one-third of all new-home sales.

That pace strained production. While home builders nurture the image of painstaking traditional craftsmanship, most new homes today are produced as if on an assembly line. Building affordable homes means being acutely aware of time and costs. Those builders that are public companies have the added pressure of shareholders to satisfy, industry executives and former employees say. Builders are completing homes in 90 to 120 days. A decade ago, the range was 120 to 200 days, according to one industry study.

“We were shooting for 60 days,” says Jim Banks, a former supervisor for an Ohio-area builder and a contributor to “HomeBuilding Pitfalls,” a book on how to avoid buying a defective tract home. “The quicker you do it, though, the more mistakes get made. Production supervisors aren’t working on just one home. They have 8 or 12 going at a time.”

Shortages of skilled tradespeople sometimes contribute to the problem of shoddy construction. In fast-growing areas, including parts of California, Florida, Nevada, and Texas, a lack of framers, plumbers, roofers, and electricians means that less-skilled or unskilled laborers may be performing this work, industry observers say. Lack of training and language barriers between construction supervisors and workers can also contribute to poor workmanship.

To lower housing costs, builders now often substitute new, less-expensive
materials for those they used in the past, industry experts say. For example, oriented strand board, a pressed-wood product made from small strands of wood, has replaced plywood as sheathing.

Some new products are better than those they replace, building representatives say. But some may not work well with other housing components or may not last as long as traditional ones. And some new materials are problematic, lawsuits suggest. For example, plastic polybutylene pipe has been the subject of product-defect lawsuits because
of leaks.

Also, homes are more complicated to build today because of regulations that, among other things, require homes to conserve energy.

“Home building is a complex process,” says Donna Reichle, NAHB spokeswoman. “It’s not reasonable to expect a house to be 100 percent perfect on the day that they move in.” But builders value their reputations, she says, so they generally strive to fix problems.

Housewrecked 2

Alan Mooney, president of Criterium Engineers, a consulting-engineering firm based in Portland, Maine, with offices in 35 states, estimates that seriously defective new homes account for 15 percent of all new-home construction, or 150,000 new homes a year. “That’s a huge number,” Mooney says, adding: “I don’t think many of these houses will last 50 years.”

Ricardo Cardona and his condominium.
CRUMBLING EXTERIOR

HOMEOWNER Ricardo Cardona, 34, an engineer and treasurer of the Society Hill at University Heights III Condominium Association, of Newark, N.J.

PROBLEM Cardona and other owners say that shortly after moving in, they found crumbling concrete, poor drainage, and loose brick facades that now must be held in place. In a partial settlement, the builder agreed to fix some problems and to reimburse the association $20,000 for previous repairs.

Curtesy: Tom McWilliam
Mooney and others identify several contributing factors. Builders are under pressure to keep costs down so homes are affordable and profitable. Demands for energy efficiency and environmentally sound products mean that homes today are more complicated to build. During the building boom that began in the 1990s, demand has sometimes outstripped the supply of qualified laborers and quality materials.

Home builders acknowledge isolated problems, but they deny that the rate of defective homes is on the rise.

“We don’t see that there is a systematic or endemic problem,” says David Jaffe, staff vice president for construction liability and legal research at the National Association of Home Builders, whose members, most of them small contractors, are responsible for 80 percent of residential construction. “We’re always striving to improve the quality of homes,” Jaffe says.

Some home-building officials and others blame lawsuits on bounty-hunting lawyers and homeowner associations.

“The real core of the problem is a migration of trial attorneys to construction defects as a lucrative new practice area,” says Clayton Traynor, senior staff vice president of the builders’ association.

But many homeowners say they went to court because builders ignored their repeated complaints or they had nowhere else to turn. Municipal building departments are often too busy to keep up with required permits and inspections, much less investigate problems. State and federal governments have few explicit consumer protections for homeowners.

All of which makes it imperative for home buyers to be vigilant before they sign a contract or go to closing.

“People are willing to pay for Jacuzzis and marble counters, when they should be more concerned about the quality of the house,” says Betsy Pettit, architect and president of Building Science Corp., an engineering, forensics, and consulting firm based in Westford, Mass.

How to prevent a shoddy home-construction job

Research your builder. It’s not enough to scan a builder’s Web site. If the company is publicly traded, check its Securities and Exchange Commission filing at www.sec.gov/edgar.shtml. Look for clues to its financial health, including bankruptcies and large liabilities. Consult your local Better Business Bureau and the one where the builder is headquartered for a complaint history. Get a list from your builder of all subcontractors to be used, and check them out with the BBB, too. Check for builder complaints at your state consumer-affairs department or attorney general’s office. Browse homeowner chat groups at www.hadd.com and www.hobb.org. Most important, talk to residents of other housing developments by the same builder.

Hire an experienced real-estate lawyer. An experienced residential real-estate attorney should review your contract before you sign it, and also the home warranty. Make sure the purchase contract includes clauses that protect you. Such clauses should state that materials must be installed according to manufacturer instructions, that you must approve changes in materials, that you have the right to have an engineer inspect the home at key stages of completion (foundation, framing, installation of plumbing and HVAC systems, roofing, and walk-through), and that the home will be completed before closing. (Attorney fees vary. In the New York City area, the cost is $650 to 1 percent of the purchase price.)

Hire a qualified home inspector. Preferably, the inspector should be an engineer or architect. Buyers of new houses should monitor construction with their home inspector at each stage of completion so errors can be corrected promptly. Buyers of older houses should have a thorough inspection of all structural and mechanical systems (plumbing, air conditioning, heating, and the like). The inspector should have insurance against liability errors and omissions. The National Academy of Building Inspection Engineers (www.nabie.org), and the American Society of Home Inspectors (www.ashi.org), can make a referral. NABIE members are prohibited from taking payments from real-estate brokers. (Cost for a visual inspection: $350 to $500 for a 2,500-square-foot home less than 50 years old.)

If you’re considering buying an existing home, check the insurance-claim history by asking the seller to provide you with a copy of the CLUE or A-PLUS report.



Visiting Model Homes?


Home Building Pitfalls Is A Must-Have Resource Before Buying Or Building

Armed With It's Inside Information You Can Avoid Becoming One Of The Headlines Below:

“Family, builder, at odds over unfinished house”
Macomb Daily, January 1, 2007

“Bankrupt Builder Leaves Four Families in Limbo”
KTUU.com Alaska's News Source, January 24, 2007

“Dream home is nightmare for Chesapeake family”
Chesapeake New, March 15, 2006

“Dream home is a nightmare”
Fayettville Observer, March 5, 2006
"Housewrecked: Serious hidden defects plague many newer homes"
Consumer Reports, January, 2004

(Some information came from Home Building Pitfalls)

"Luxury By Design, Quality By Chance: Home builder leaves a trail of bitter buyers"
Boston Globe, April 29, 2001
"Dream Home Becomes Nightmare: Their new home had $70,000 in problems. Now they are taking their builder to court."
St. Petersburg Times, October 22, 2000


Housewrecked

Serious hidden defects plague many newer homes. Here's how to avoid trouble.

CR Quick Take

A CR investigation involving extensive interviews with home buyers, building-industry representatives, inspectors, and others has found that thousands of consumers, faced with serious defects in their new or young homes, have spent millions on repairs. The fast pace of construction during today's building boom is a cause, experts say.

• Fifteen percent of new homes have serious problems, some inspectors say. That's 150,000 new homes a year. Many only show up months or years after moving day.

• Your best defense: Hire a real-estate lawyer and a building-inspection engineer. A few key clauses in your contract and inspections during construction can save grief later.
and • For information on what to do should you discover problems, see How to prevent troubleIf you think you have a problem.

Last year, consumers bought more than 1 million new homes in the U.S., a near record. Average sale price: $250,000. But a CR investigation has found that increasingly, buyers are discovering that their new dream home has serious defects and that they have more consumer protections for a fickle $20 toaster than for a flawed investment-of-a-lifetime.

In Oregon, a family built a semicustom home for $66,000 on a lot they owned only to discover mold in the walls four months later. Home buyers in Newark, N.J., found crumbling concrete, falling bricks, and flooded basements within months of moving into a recently built condominium complex. An Oklahoma couple says they face $60,000 in foundation and roof repairs for a house they bought new three years ago for $127,000.

And it’s not just new-home buyers who are getting stuck. One Upper Saddle River, N.J., couple is paying $375,000 to repair water damage to a five-year-old home that they bought for $1.4 million.

Our investigation, which included dozens of interviews with homeowners, builders, inspectors, industry representatives, government officials, and lawyers, found those defects and more in many new or young homes. Faulty foundations, serious moisture intrusion, and shoddy framing are often at the root of problems, which manifest themselves as gaping cracks, rotting walls, and windows and doors that don’t close right. Often, though, they show up months or even years after the buyer has moved in and the builder has moved on.

No one seems to be documenting the extent of the problem, yet many experts agree that construction-defect lawsuits are rising nationally. Add to that a sharp increase in toxic-mold lawsuits. Mold is often associated with moisture intrusion.


Own Your Home

Home. How for granted we take it until we do not have one anymore. countless people do not have a place they call their home. Though they may have a place they live, at the mercy of their landlord who may be an individual or government, they still think of living in a house they call their dream home.

To some they may want a small comfortable home for their convenience. Other may want a large and luxurious homes, all these depend on some circumstances surrounding the prospective home owner. This circumstance may include the size of the family, individual taste, financial status and many others.

Whatever the case, be it an isolated home with a well manicured lawn with a cosy garden and sizable swimming pool allocated in a friendly natural layout with trees to shade the property to let you feel closer to nature. Or an artificially created lovely home with a professional architectural finishing. All of them are obtainable through various means. You can buy an empty piece of land and build your own dream home or buy an existing home and rebuild it to your taste. The aid of a good mortgage loan will help too.

Apparently, even with some the facilities and instruments available to help the citizens with good home, there are still a lot of pitfalls that await its victims- WATCH OUT!