rasmichApril 17, 2012

Had a very disturbing conversation with a soon to be neighbor yesterday. I am currently building a home in a development. We are in the framing phase. The builder, at least I thought, had a great reputation. I looked at several homes he built and was pleased prior to starting the build. This neighbor told me I had made a huge mistake and he spent over an hour pointing out short-cuts and cost cutting the same builder did with him - and all of them where on the outside. He said the inside was even worse. Several questions- should I hire an inspector to check on the progress at completion of each stage? I have near no building knowledge. I am scared I am going to be taken advantage of and have a home with lots of problems. One of the other big concerns was that this neighbor informed that he was charged $30,000 over the contract price for sanding and staining of the hardwood floors. Despite prolonged mediation and a lawsuit, this has yet to be resolved. In his case, per the builder, the contract calls for hardwoods but doesn't mention sanding and staining. I reviewed my contract and it is a similar wording. I assumed this was included. Was this assumption wrong? Thanks for any advice.

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Do you have a construction mortgage? As part of our contract, before each draw, an inspector came out and conducted an inspection to make sure all was OK. We also had to sign off on each draw before money was released. I most definitely would do that at regular intervals before additional sums of money are released to the builder - regardless of his perceived reputation, good or bad.

As to the specific builder- if this neighbor and the builder are involved in legal problems, then the neighbor's opinion of what is going on w/ the builder might be skewed. You are only hearing one side of the story. Are other neighbors happy? Have you checked public records to see about pending/resolved lawsuits with the builder? Contacted the local contractors board (probably not the right name) to see if any complaints have been filed against the builder? I would do those things before getting freaked out. If you are worried specifically about the floor, I would ask about that issue and make sure that it is clear what you will be responsible for paying.

    Bookmark   April 17, 2012 at 10:17PM
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Who is your builder?

    Bookmark   April 18, 2012 at 11:12AM
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Your neighbor MAY have a skewed opinion of your builder but, since he too hired the builder, it seems likely to me that your neighbor started out with the belief that the builder was a good one. And then something - or multiple SOMETHINGS happened that changed your neighbor's opinion about the builder.

IMHO, most homeowners - even those who are not completely satisfied with their builders - don't file lawsuits against their builders. They just suck up their disappointments, do their best to fix whatever messes the builder left them with, and move on. They may bad-mouth the builder for awhile but they usually don't actually file a lawsuit unless the problems were really egregious. It is almost impossible to get an attorney to take these cases for the simple fact that such cases are expensive to prepare for and very difficult to win. Typically most of the "evidence" needed to prove construction damages is in the hands of the builders - and they pull every trick in the book to keep from turning that evidence over. Then one must often hire expensive experts to testify, and the builder will bring in his own experts to say that your expert doesn't know what he is talking about. Juries often don't understand all the complexities they're hearing so ultimately the result of a lawsuit may turn on which attorney the jury happens to find most likeable... which pretty much means the homeowner has about a 50/50 chance of winning/losing....assuming the homeowner can afford to keep paying his attorney long enough to actually go to trial. Most people give up after awhile and drop the case deciding that throwing good money after bad is a losing proposition.

Then, if a plaintiff homeowner actually manages to win a case against a builder, by the time he can do so, the homeowner often finds that the builder has transferred all the company assets to a new company and declared bankruptcy... which means that, unless the homeowner had an ironclad fraud claim against the builder (and the jury awarded damages for fraud) the homeowner's judgement is discharged in the builder's bankruptcy action meaning that the homeowner can never collect.

I don't know of any attorneys who will take these cases on a contingency basis and, unless the client has lots of evidence of egregious wrong-doing by the builder, most ethical attorneys won't take the cases even on an hourly fee basis. Ethical attorneys will usually advise potential clients to "put what money you have available into fixing your house as best you can instead of paying me to chase a lawsuit that will be very difficult to win and, even if we win, almost impossible to actually collect damages on.)

Long story short, the fact that your neighbor has filed a lawsuit and has laid out very detailed examples of the problems he had with builder, suggests to me that there is at least some fire somewhere underneath all that smoke and that your neighbor has actual evidence of builder's wrongdoing.

To check for other lawsuits, go to your local county courthouse and ask the court clerk to search for any cases where your builder is a party. Be sure to both the builder's personal name and his business entity or DBA name. And check alternate spellings.

To check for evidence of issues with other neighbors' builds that may not have escalated to the point of a lawsuit, go to the county land records office and search for Mechanics liens in which your builder is a party. Also, if you know the addresses of houses that your builder built, you can search for Mechanics liens filed against those properties by subcontractors whom builder might not have paid. And it never hurts to casually ask other neighbors whose houses your builder built, what their experience with builder was like and, now that they've lived in the house awhile, are they satisfied with it.

If you don't uncover any more evidence of unhappy homeowners, maybe your one neighbors' experience is a fluke. If you do find others, at least you know that you need to be on guard.

But what you can do to protect yourself at this point is very difficult to say. It depends a great deal on what your contract says. I'm guessing your builder drafted the contract and you signed it without really understanding it and without having it reviewed by an attorney of your own. If so, the contract is likely to be heavily slanted in favor of the builder giving you very few, if any options.

Yes, I would definitely hire a third party inspector to inspect the house at various stages of completion. City inspectors are not responsible for ensuring that things are completed according to your plans and specifications - only that the work that is done is up to code. In other words, to give a simple example, if your plans call for builder to build you a 3000 sq ft house and he instead frames up a 2000 sq ft house but the framing is up to code, the city inspector will approve it. Plus there are a whole lot of potential code violations that the city inspector won't bother looking for at all. Typically, city inspectors are expected to inspect anywhere from 10 to 15 homes per day. With travel time taken out, that means they can probably spend about 15 to 20 minutes at your house before they need to move on so that they can stay on schedule. With the best will in the world, even the best inspector from the city won't catch every code violation.

And the inspectors sent out by banks often have little or no building experience themselves. They pretty much just look to see if the thing builder is asking to be paid for has been "done". In other words, if builder is asking for a draw to cover installing the windows and doors, the bank inspector will come out and look and say "yep, the doors and windows are installed" and he will approve the bank giving the draw. The bank inspector will not look to see if the doors and windows have been installed properly (eg., with proper flashing) so that they won't leak the first time it rains.

But, having a third party inspector won't be of much immediate help to you unless your contract requires the builder to fix any code violation pointed out by the third party inspector. Chances are, it doesn't. Your third party inspection reports might give you the evidence you need to support your case if/when you find yourself needing to file a lawsuit of your own. Or, you might be able to work it out with the city inspectors that your guy will send them his reports before the city inspectors come out to inspect. That way, they'll have a heads-up on what code violations to look out for and if they cite those violations, then your builder will have to fix things. A lot depends on the relationship your third party inspector has with the city inspectors.

Your third party inspector can also look to see if things are being built in accordance with your plans and specifications and, where they are not, he can give you a head up so that you don't pay for work that is not properly completed. Eg., if your plans/specs can be reasonably interpreted to say that windows and doors should be properly flashed so that they don't leak (DUH!) and your builder installed the doors windows without proper flashing, a report from your inspector to your bank pointing out (in simple language) that the doors and windows were installed improperly MAY cause the bank inspector to refuse to pay the draw which would then hopefully force the builder to reinstall the doors/windows with proper flashing.

2nd thing I'd do is get a camera and take about a gazillion pictures. Everytime something is done in the house, take pictures - and label the pics immediately indicating date taken and exactly what the picture shows. Again, this is potential evidence in the event you ever decide to file a lawsuit. And for things that look really bad in the pictures (bad enough that even a layperson would recognize that "that's not right") you might have some success with asking builder, "Are you PROUD of this work? If I post this picture online and simply mention to all my friends at Gardenweb that YOU are my builder - are you going to be happy or will that be negative publicity for you?" I actually found that this worked quite well when I was dealing with subcontractors after I fired my own builder.

As for whether a mention of "hardwood floors" include sanding and staining the floors and finishing them, I would certainly think it should! If your builder insists that his price does not include sanding and finishing, perhaps he typically uses factory finished hardwoods which is not an unreasonable stance.

MAYBE your neighbor insisted that he wanted site-finished flooring instead of factory-finished and his whole dispute with builder stems from that disagreement. It is certainly possible.

But if your neighbor was charged an additional $30,000 for sanding and staining hardwood floors in his home (on top of what the builder saved by buying less expensive unfinished flooring lumber) then I sincerely hope your neighbor has about a 10,000 sq foot home. Otherwise he was seriously overcharged! The cost of sanding and staining and finishing hardwood floors on-site should run somewhere in the neighborhood of $1.50 to $4.00 per sq foot depending on labor costs in your area, the species of wood involved, and how many coats of finish were applied. If your neighbor has a more typical home with somewhere in the neighborhood of 2000 to 3000 sq ft of hardwood flooring, then he was charged more like $10 to $15 per square foot for sanding, staining, and finishing the flooring. That's highway robbery in my book.

Hope I haven't further scared you...

    Bookmark   April 18, 2012 at 8:17PM
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Thanks for the replies guys. Bevangel, you actually helped me to calm down. I spoke with the builder today and brought to his attention some of my early concerns- and have been assured that they will be addressed. I think I m going to hire a 3rd party inspector- even if the builder doesn't correct the issues- at least I know what the problem areas are. Going to do some important investigating with the town next week- wish I did it a month ago before I signed a contract and broke ground. Thanks again.

    Bookmark   April 18, 2012 at 8:53PM
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Again, who is your builder? Is it a national builder, or a local one?

    Bookmark   April 20, 2012 at 9:38AM
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We hired an attorney to go over our contract prior to signing with a builder. The attorney's advice was to hire an architect to represent us and do inspections. Our architect will be going out to our house prior to any of the construction loan draws our builder makes, and she has to sign off on everything. We added this to our contract before we signed. I'm not sure what your options are now, but it has been a great sense of relief to have someone "in the business" to represent us. DH can barely figure out his electric screw driver, and I'm much better at wrangling kids. We definitely needed outside help for this project.

    Bookmark   April 20, 2012 at 1:31PM
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Its a local builder in the NE US. I'd rather not post his name. Thanks.

    Bookmark   April 21, 2012 at 12:11AM
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