10 things homebuilders won’t tell you (© Steve Cole/Getty Images)

1. “I’ll build your house on marshmallow.”
Population growth and urban sprawl mean there’s not much residential land left in many areas these days — and what there is may not be ideal. Shortly after John Duffy and his family moved into their $234,000 home in Highlands Ranch, Colo., long cracks started showing up in the walls, and the porch started pulling away from the house. After badgering his builder for the soil report, Duffy learned his lot was a hot spot for potential swell. (Writer Homes, the builder, was ordered to pay Duffy $544,000. John Palmeri, Writer’s attorney, says the company offered to fix the house, but “they were bent on going to court.”)

The Duffy family isn’t alone. In fact, a number of homes today are being built on “expansive soil” — earth that swells when it rains — without adequate safeguards. How common is the practice? About 50 percent of homes in Southern California are built on expansive soil, according to Patrick Catalano, founder of The Law Firm of Catalano and Catalano in San Francisco and San Diego, which specializes in real-estate and construction defect litigation.

But soil isn’t the only issue when it comes to shoddy construction. In October 2007, four hillside homes built in La Jolla, Calif., slipped off their foundations, burying two other dwellings in an alley below, after a landslide that damaged 111 homes. Catalano, who’s representing the owners of 25 of these homes, says that in about 20 percent of cases, the homebuilder is at fault, since the landslide occurred within 10 years of the home being built. (These cases are pending.)

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2. “I won’t just cut corners — I’ll sever them.”
Substandard work has always existed in homebuilding, but the collapse of the housing market and the increased costs of construction are making the problem worse, says Jonathan Alpert, a retired Tampa, Fla., attorney who represented homebuyers. Alpert says he’s handled cases in which builders didn’t seal roofs, in which two-inch concrete slabs were used instead of the four-inch slabs specified, and in which sewage pipes were cross-connected to drinking-water pipes.

In some cases, builders are skipping steps dictated by municipal building codes. In one Sarasota, Fla., gated community called Turtle Rock, four families cut open their houses in 1998 to ferret out the source of some mold growth. What they found, in addition to wet lumber, were several code violations, including missing hurricane straps, which are steel plates that tie the wood frame together and to the concrete base. Says Brian Stirling, the structural engineer hired by the homeowners to investigate, “If we’d had a strong storm, they would have had some serious problems.” Like what? “Like losing their top floor.” In 1999, the builder, U.S. Home, agreed to buy back the four houses and said it would make county-supervised repairs on 12 others in the subdivision. “We dispute the extent of the problems,” says the builder’s attorney, Fred Zinober. But by settling the case, he says, “U.S. Home did the right thing.”

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“It used to be during the housing boom that builders were cutting corners because they were putting things up as quickly as they could stand,” Alpert says. Now the issues are inflationary pressures on builders and the need to increase profits. “The cost per square foot for construction is actually increasing while home prices are decreasing,” Alpert says, “so that’s putting pressure on builders to cut corners.”

3. “This is a rogue’s industry.”
Given how complicated it is to build a home, and how serious the implications are if it’s done incorrectly, you might expect homebuilders to answer to rigorous regulatory authority. Think again. According to the most recent survey by the National Association of State Contractors Licensing Agencies, only 18 of the association’s 27 member states regulate homebuilders. And of those member states that do regulate, only 15 require any kind of exam — Arizona and Maryland being two of them — and only 13 require on-the-job experience. Two states, Louisiana and Utah, have continuing-education requirements, but they’re the exception.

But greater regulation comes with a price. “Red tape and compliance issues add cost to building a new home,” says Carlos Gutierrez, assistant staff vice president for the National Association of Home Builders. “And that cost is inevitably passed on to the consumer in the form of a higher-priced home.” While he acknowledges that some regulation of the industry is necessary -- even welcome -- Gutierrez adds that “at a time when affordable housing continues to be a crisis nationwide, governments ought to be careful not to overregulate.”

4. “Public inspectors won’t catch my shoddy work.”
Max Curtis, a Livermore, Calif., private home inspector, says he hears it all the time from his homebuying clients: “Their builder tells them, ‘Why do you need your own inspector? This has been signed off on by the municipal building department.’”

Sure, the public inspector is required to check out your new house, but only to ascertain that it’s built to code — essentially, that it’s safe to live in — not that it is well-constructed. “They’re just looking to see if that wall is up and painted,” says Dwayne Jones, a Memphis builder.

And sometimes they don’t even do that well. On one inspection, Curtis found 64 items that the municipal inspector had missed, including a gas water heater lacking flues (without which the heater may leak poisonous carbon monoxide). Bottom line: Don’t rely solely on the word of a public inspector; hire your own person to inspect the building as well.

5. “Your warranty may be worthless.”
Many homebuilders tout 10-year warranties as protection against future problems. But these warranties are often extremely limited in coverage, particularly after the second year. “It gives people a false sense of security,” says Brent Lemon, a Dallas attorney who represents homebuyers. “Most of these basically require that the house fall down on top of you before they kick in.” Consider the warranty offered by Denver, Colo.-based Home Buyers Warranty. It lists 71 exclusions and, like many, states that the home must be “unsafe, unsanitary or otherwise unlivable” to get structural-defect coverage. Em Fluhr, the warranty company’s CEO, says, “If (homebuyers) detect any worsening of the situation, they can submit another claim.”

The root of the problem with warranties is that builders characterize them too broadly when they say they’ll help protect homeowners who discover a structural problem, says Anne Stark, a Dallas attorney specializing in homebuyer complaints. “Structural-defect coverage often covers only catastrophic failure,” Stark says. “Builders will say you’ve got a great warranty, but then you wake up in the third year with cracks all over your house and you call the warranty company and they say, ‘Sorry, it’s not a structural failure.’” Some states, like Texas, are aiming to alleviate the problem: In 2003, it created the Texas Residential Construction Commission to help builders resolve disputes without litigation. “We require a warranty whether the builder wants to give it or not, and that warranty needs to meet the minimum level of state standards,” says Duane Waddill, executive director of the commission. “Even if the builder goes bankrupt, the buyer has additional protection.”