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Section 5. Some advice for people who design, build and sell new houses, and for other involved parties

"It is because of the glaring indifference shown by many law enforcement people that some builders have continued to build inferior houses. If officials would get tough, there would be far fewer abuses in home construction."

A. M. Watkins. How To Avoid The 10 Biggest Home-Buying Traps, The Building Institute, 1984

On the chance that this book will find its way to builders, developers, real estate agents, lawyers, politicians, and other people involved in designing, developing, building, selling, insuring, arbitrating and litigating residential real estate, I have some advice.

To builders and developers

The next to last thing homebuyers want is aggravation with their new home. Calling you, bugging you about construction problems, is aggravation. The last thing any homebuyer wants is to file a lawsuit, to end up in court over his defective house. My advice is, work hard not to let this happen.

The all important first step, of course, is to build the house right. There is no way I can tell you what to do. You know what to do. Basically, don't cut corners. Make sure the foundation and `rough-in' are done properly. Most importantly, care about your work. A well-built house is a beautiful thing. Care about what you are doing and chances are the house will be well-built. It's when you really don't care that mistakes are apt to occur.

What if there are complaints? Investigate the complaints and try to help the homeowners, not fight them. Call in other experts

and be honest about what they find. If there is a problem, fix it right the first time and don't let it languish.

Please don't blame the homeowner when mistakes arise. Blaming others is "externalization". By externalizing the problem to someone else, it becomes easier for you to handle, at least for the moment. But be realistic. Is the homebuyer really responsible for construction mistakes? Doesn't it make more sense to investigate the problem and try to fix it, than to blame the homeowners or some other party?

Don't let your ego get in the way of finding a solution. Everyone makes mistakes: doctors, lawyers, builders. If the house didn't turn out right, the problem should at least be fixable with money and time. It's not as if someone was physically hurt; emotionally, yes, but not physically, so all you have to do is fix the problem and the homeowners should be satisfied. But if you send a junior carpenter to repair a structurally defective foundation with a few pieces of particle board, you know it's not going to work.

Don't put your head in the sand. And don't create a situation by which the homeowner has no choice except to file a lawsuit. After all, a lawsuit will cost you something as well. Every dollar you spend on legal fees is a dollar that could solve the problem, and help preserve your reputation. I'm not saying the homeowner is always right, but you shouldn't assume the homeowner is always wrong, either.

Finally, don't make up lies about the complaint. When you lie you engender rage and frustration in the homeowners. Lying, or distorting the truth, destroys your credibility. It shows that you are angry with the homeowners for complaining, and that you are incapable of helping them. Lying hardens the resolve of home- owners to fight you, which is not at all what they want. They want your help, not your anger.

The attitude of builders and developers caught in their mistakes too often seems to be: 'The homeowners are bastards. They are crazy people, you can't satisfy them. They are nuts.' But think: after spending hundreds of thousands of dollars on a new home, why would the homeowners wish to incur aggravation and frustration? None of your customers is asking for a fight. They just want what you promised to deliver, no more and certainly no less. They complain only because something is wrong with their house, not because they are bad people. They will pursue the complaint only if you don't act to fix the house you built.

In summary: Assume the homeowner's complaints are legitimate unless you can prove otherwise with independent, objective evaluations. Investigate the complaints honestly. Work with the homeowners. Don't make up lies or twist the truth for self-serving purposes. And above all, don't call your lawyer unless you have no other choice.

To architects

Don't assume you know it all. Your biggest collective sin may be arrogance. Don't make a mistake with the foundation, the footers, the steel beams, or anything else that can affect the house's structural integrity. Consult a structural engineer, especially if the house has never before been built. Please understand that homebuyers want and deserve more than just a pretty design.

To housing inspectors

Some of your peers have been accused of being dishonest, of accepting bribes to pass on defective construction. I believe that situation is rare, and that most mistakes made by housing inspectors are honest ones, not a result of some builder's bribe. So what should the typically honest inspector do? For starters, be thorough and forthright. If you see a problem, speak up. It will only hurt the homeowners in the long run if you remain silent. Don't worry about missing the small stuff. Are there enough footers? Are they placed in the proper positions? Are the steel beams the right strength for the load they carry? Are the horizontal beams level? Was mortar used to cement the foundation blocks together?

In addition to plumbing and electrical systems, look at the walls and floors; are they straight, and if not, why not? Check for the structural integrity of the dwelling. Above all, think of the people who will move into the house you are inspecting; they are probably no different from you and your family. Don't make it possible for the builder to sell them a lemon.

To real estate agents

Apply the golden rule: treat the home-buyers as you would wish to be treated. Don't hide anything. Be honest with yourself, and your clients, and over time you will enjoy a very good reputation. Above all, recommend that buyers of new construction have the house or condo inspected by an independent structural engineer before title transfers. When people ask why, recommend they read Crumbling Dreams. They will be impressed by your concern for their welfare.

To home warranty insurers

It is difficult to know what to make of your industry. Your warranties seem to boil down to what's in the fine print, and damn the homeowners. When you state that there is widespread misunderstanding about what your policies cover, whose fault is that? If your `structural insurance' warranties don't cover homes with structural defects construction that doesn't meet local building codes is that fact made plain to the homebuyers? I suggest you re-write your policies so that homeowners understand what they are not buying. For example, you might state in bold print that the warranty will only pay for defects up to $3,000, $4,000, or whatever your unwritten limit is. The plain fact as is apparent to anyone who reads the many stories about litigation against home warranty companies is that too many people buying your product are not getting the protection they think they are.

The way you do business has attracted the attention of Congress. Before Congress tries to regulate the home warranty business, wouldn't it be simpler for you to revamp how your policies are presented to homebuyers?

Here is another suggestion. Offer a "super policy" that does cover major structural defects. This super policy should guarantee without argument or litigation repair of any construction problem that does not meet local building codes. We would have bought such a policy, and I'm sure many other homeowners will. You could have a Class A and Class B policy. Class B would be very limited, covering minor defects only, up to a few thousand dollars apparently what your current policies offer in fact, if not in plain language. Class A would be unlimited, covering all defects what many homebuyers think they are getting with your current policy, but clearly are not. Figure out what you will have to charge to offer a Class A policy, stand behind it without giving homebuyers a run around, and you will have a lot of takers.

To lawyers representing builders and developers

The non-lawyer public is not too happy with the legal profession. If you wonder why, read some of the books in the last category of the Bibliography. At the grass roots level you can work to change that poor image. When a builder calls you in because of an unhappy homebuyer, don't automatically assume the homebuyer is a nut case. Don't write letters criticizing the homebuyer. Those knee-jerk letters are a cheap shot, and totally unnecessary; if anything, they reflect your own feelings of inadequacy.

Before you heap calumny upon the plaintiffs, have their complaints investigated professionally. By investigating the problems, instead of reflexively fighting the plaintiffs, you will actually help your builder client in the long run. You might not make as much money getting a complaint settled early, but in the long run you will gain a better reputation and probably do better financially, as more and more builders hear about how efficient and reasonable you are.

We know of a lawyer who represented a builder in a defective construction lawsuit. He treated the homeowner plaintiffs in an unnecessarily hostile and combative fashion. When the construction case finally settled out of court, this lawyer was stiffed by his builder client for a huge legal fee. Believe it or not, the lawyer then phoned the plaintiffs, asking if they would testify that he, the lawyer, had actually done the work that generated his legal fees! You can imagine how the plaintiffs responded. I am sure the lawyer wishes he hadn't been so nasty to them.

To lawyers representing unhappy homeowners

Don't take the case if you know of any conflicts, even if they are minor. Do you play golf with the builder's brother? That's a conflict. If you don't think you can adequately represent the plaintiffs all the way through the appeals process, don't take the case. If you don't feel some sense of outrage over their plight, don't take the case.

Be honest with yourself and with your clients. Homeowners who call you about a construction problem are experiencing tremendous frustration. Don't add to their problem. Bow out if you are not the right attorney for them.

If you do take the case, tell the homeowners up front what their chances are of winning and collecting. Let them decide if the case is worth pursuing. Give them a maximum figure that they can expect to spend, and offer to take anything over that on a contingency basis. A bottomless legal bill is a hard nut to swallow for people who have just bought a new house.

To arbitrators in construction cases

Don't arbitrate the case if you know the defendants professionally or socially, or if you also build houses in the same area. Be fair in your deliberations. Remember that the house has to meet local construction codes to be salable. Your arbitration should lead to repairs that conform to these codes. A patchwork repair is not fair to the homeowners. Ask yourself what you would want done if you owned the house.

To judges in construction cases

You are charged with treating plaintiffs and defendants equally before the law. The problem is that the law is stacked heavily against victims of defective construction. They lose the moment they are forced to file a lawsuit. By the time they enter your courtroom they have lost even more. You know that plaintiffs' legal costs are not recoverable. You know that plaintiffs' costs to litigate are not part of doing business, and therefore are not tax deductible. You know that damages are almost never awarded, even though the trauma experienced by homeowners may be as great, or greater, than in most tort cases.

Understand that the plaintiffs have already incurred great expense in just getting to your courtroom. Understand that no homeowners in their right mind want to be in your courtroom fighting their builder, and that the case is a unique and traumatizing experience for them. On the other hand, builders (or their lawyers) appear in your courtroom all the time.

Within the law, try to treat the plaintiffs fairly. At the same time, don't reward defendants who have clearly lied, breached their contract, or given homebuyers an unnecessary run around, as our defendents did to us. There may be no legal penalty for such behavior, but you have a societal obligation not to reward builders, developers and architects who have displayed unethical and dishonest behavior. When you ignore these transgressions, as the judge did in our case, you indirect reward the dishonesty and incompetence that caused the problems.

Is there nothing you can do a about a builder who defaults on a judgment by declaring a phony bankruptcy? Is there nothing you can do about a licensed professional who lies about his mistakes? Is there nothing you can do about a developer who knowingly tries to sell a defective house without proper disclosure?

To local government officials

Revise inspection procedures to make them tougher. Don't wait for another Seville Place to review your home inspection practices. If necessary, hire more inspectors. And give them sufficient training to do the job properly.

Your natural reflex seems to be to side with the builder or developer in any dispute. Perhaps it is because the builder or developer creates jobs and pours money into the local economy. But are you not elected by the public? Who is your real constituency?

If you are asked for help by someone who finds their new house was not built in accordance with local building codes, don't put your head in the sand. Investigate the complaint. You might be helping many more people and ultimately securing many more votes by thoroughly and honestly investigating a home- buyer's complaint. And you will win a friend for life.

To state legislators

The applicable laws are unfair in every state. Can't you change the laws in your state, to provide the homebuyer a fair outcome in a construction dispute? The ball's clearly in your court. Here are some suggestions.
  • Make reasonable legal and experts' fees recoverable if the homeowner wins a court case over defective construction.

  • Establish a builder-sponsored fund to reimburse homeowners who win a court case against a bankrupt builder.

  • Require that every new home not be sold unless it is accompanied by a document stating when it was inspected, by whom, and exactly what was found. This document what the founder of the Ridgemere Institute refers to as a "purple book" detailing every inspection should be given to the homeowners along with the occupancy permit.

  • Eliminate sovereign immunity for local government inspectors. Physicians who work for state and county hospitals can be sued for malpractice. Why shouldn't homeowners be allowed to sue for inspection malpractice?

  • Don't allow bankrupt builders who owe money as a result of a legal judgment to hide assets and keep right on building.

Many other people have suggestions for legal reform at the state level. To obtain more ideas, I suggest you consult attorneys who have represented homebuyer plaintiffs in court. Also, call the United Homeowners Association, the North Carolina Homeowners Association. The people who run grass roots organizations should have many sound ideas.

To members of Congress You have some input into new houses backed by federally-guaranteed mortgages. For such construction I have three recommendations; two of them would require new federal laws:

  • Don't allow title transfer of any house backed by a federally-guaranteed mortgage that hasn't been inspected for structural defects. Every new house sold should be accompanied by the "purple book" listing dates of inspection, who did the inspections, and what was found.

  • If a new house with a federally-backed mortgage is proven structurally defective in court, the government should offer to buy the house back at a fair market price, plus pay all legal fees of the homeowners. To recoup its costs, the government should then sue the builder or other culpable party. The U.S. government will have a much better chance of recovering a judgment than any individual homeowner.

  • Perhaps the most immediate step Congress can take is to investigate the extent of the problem. Input from people all over the country might help you pass laws to give the homebuyer some meaningful protection. Don't worry about scaring people away from buying new houses, or hurting the economy. Everyone wants a house of their own. If you figure out a way to financially protect innocent homebuyers against bad builders, more people will buy houses, not less.

To all

Recommend this book to anyone contemplating building or buying a new house or condominium. Better yet, give them a copy. And if you think of anything important I left out, or want to send along information that might be used in a new edition, please send me an email.

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