When you buy an older home, you're often buying into the implied promise that a home that's held up for 50 years won't suddenly fall down around your ears. But when you buy new home construction, all bets are off if you haven't thoroughly researched your builder.
Cindy Schnakel discovered problems the first night she and her husband spent in their brand-new Oklahoma City house. She was cleaning the ceramic kitchen floor tile when she found cracks.
"The problem worsened," Schnakel says. "It turned out to be the foundation. There were cracks in the tile large enough you could slip a coin in them. The cracks in others parts of the house — in the floor and walls — (were) big enough you could put your finger in them."
The Schnakels’ struggle with the builder — who disputes the couple's version — and insurance companies went on for five years, Schnakel says, before they received a privately negotiated settlement to fix the problems. "We are renting now," she says. "There is no way we were going to buy another house."
Other owners have complained of everything from cracked foundations and leaking roofs to upside-down windows and short-lived materials. And critics say such defects are on the rise, blaming everything from underfunded government inspectors and inexperienced builders to cost competition and the high-volume, mass production of homes.
A boom-fueled fiasco?
During the recent housing boom, many builders raced to keep up with escalating demand. In 2005, at the peak of the housing boom, builders were completing about 2 million condos and houses a year — almost twice today's production. When builders work fast, the chances of cutting corners and inadequate supervision increases, says Richard Thompson, a Portland management consultant who specializes in homeowner associations and writes a column on the subject for Realty Times.
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Customers also are helping drive the market trend away from durability, says Daniel Friedman, a Poughkeepsie, N.Y., home inspector and building failures diagnostician. He notes that few U.S. homebuyers are willing to pay for lasting quality. "The buyer of a McMansion wants gloss and space and glamour but may not care that the next owner 10 years later will face big repair costs," he says.
Discuss: Talk back: Is your new home a lemon?
Unfortunately, no government agency or industry group tracks defects or complaints. In its ranking of the professions receiving the most consumer complaints, the Better Business Bureau lists home builders 19th of 3,900 categories in 2006, the most recent year for which data are available. The group received 7,081 complaints about home builders — up from 6,365 in 2005.
Shoddy construction is still the exception, acknowledges Paula Sonkin of J.D. Power and Associates. "But that's not to say that those who are really, really unhappy are unjustified." (J.D. Power and Associates, which surveys homebuyers, found satisfaction rising from 2000 to 2005, when it leveled off.)
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Besides the frustration and hassle of dealing with cracked walls or leaking sewage, fighting back can take years and cost plenty in the meantime. Cindy Schnakel says her settlement allowed them to roughly break even after selling the house at a discount and paying legal fees. Twists in state laws and complicated warranties can increase the difficulty of your battle. (Read more on that here.)
So while you are unlikely to experience a serious problem, it pays to do your due diligence and protect yourself upfront from a bad builder.
Here are some common problem areas and what you can do to protect yourself from a bad investment.
