Highlights [and bracketed comments] added

When residential roofing contractor Ralph Cox started his company six years ago, he rarely had a problem getting paid by the builders who hired him.

But with the housing industry now in turmoil, Cox is having a hard time collecting.

About five builders, he said, owe him about $400,000. Some of his invoices date back to June of last year.

Already, Cox has had to lay off two employees, and he’s not sure if his business will survive if he doesn’t get paid.

Already, Cox has had to lay off two employees, and he’s not sure if his business will survive if he doesn’t get paid.

“A small company like myself ... it can almost ruin you and it may ruin me,” he said. “I don’t know if I can recover from this stuff, the way things are going.”

Cox is one of a growing number of local building contractors and suppliers getting stiffed, as builders are caught in a trap of sinking home sales and a lack of credit.

[HOT: What are unpaid subcontractors to do? Even if they complain to the Texas Residential Construction Commission, the agency can't force builders to pay up. The TRCC does not license or regulate builders but instead registers them and administers a mandatory state inspection & resolution process (SIRP). That's why we support a bill that would abolish the TRCC, license homebuilders and require a performance bond. The intent is to protect homeowners. Once enacted, the bill would allow subcontractors to collect what's due to them from the builder's bond.]

“This is a huge problem right now,” said Dan Wallrath, a custom builder and vice president of the Greater Houston Builders Association. “Big companies are going out of business because they’re sitting on inventory they can’t get rid of.”

Builder Brian Binash said his company, Wilshire Homes, has significantly discounted prices and recently had to stop construction on an estimated 15 homes.

That’s because a line of credit the company had with Franklin Bank dried up after the bank was taken over by the Federal Deposit Insurance Corp., Binash said. But the builder has other concerns.

Last month, Wisenbaker Builder Services filed suit against Wilshire Homes Houston for failure to pay more than $400,000 for labor and materials on various home building projects in 2008.

The contractor filed liens against the properties and is asking a judge to order that the properties be sold to pay the outstanding amounts that are due.

[HOT: If homes are sold already as having a free and clear title, the judge is unlikely to evict the homeowners. Either the subcontractor won't be able to collect what's due until the home eventually sells, or the homeowner must file a claim against against their title insurance policy, assuming they have one.]

Binash said he has been negotiating payment plans with other creditors and most of them have agreed to the terms.

And this week he learned the FDIC had approved a compromise that will allow his company to take its loan out of Franklin Bank receivership and place it with an investor that will fund the unfunded portion of the loan, allowing the company to finish homes and continue with its plan to pay off vendors.

As for the lawsuit, “we’ll defend it, and probably at end of day there will be a structured settlement,” he said.

Some of the homes named in the suit, however, are now owned by third parties.

Wisenbaker’s attorney declined to comment on the case.

David Powers Homes, a high-end home builder with more than 20 years experience in the Houston area, has struggled to pay contractors and vendors.

By NANCY SARNOFF (nancy.sarnoff@chron.com), Houston Chronicle, 03/28/2009
Source: http://www.chron.com/disp/story.mpl/headline/biz/6347202.html

Reader Comments

Ratfink wrote:
People are not getting paid in part due to the builders hanging on to their money. Go look at their homes, cars, and extravagant lifestyles and you will say why cant they pay me?

jdhogg wrote:
If Texas builders had to do what many other states require -- produce a signed release of lien from every contractor who worked on a house before they can deliver clear title....these folks would be paid and the buyer wouldn't be left on the hook.

mlkary wrote:
In the market for a NEW home? Be darn sure every subcontractor who worked on it is paid or they will sell you a house with 2 dozen liens on it and leave it up to you to straighten it out. BUYER BEWARE .... these con guys are not done yet.

Cali_girl wrote:
As I read through this article I'm thinking this is our nightmare. We bought our new home and were given a clear title from Steward Title on August 29, 2008 only to get a lien filed against our home. Our builder Mercedes Homes was not mentioned in this article, but numerous subs/vendors, and suppliers were not paid by them for months. They then filed bankruptcy on January 26, 2009 and now this hard working people did not get paid. We did what was required to buy our home, only to learn it has "Above Average Problems" and the builder has done nothing to address them, but promise and stall. Yet, this builder based out of Florida continues to sell homes they know have liens. This is wrong both for the contractors and the consumer.

[HOT: This KEYETV news story (text & video) has the details.

mustang_man wrote:
Poor builders, with no money, how can they pay their illegals?

Eaturmeat wrote:
John Speer (Royce Homes) filed bankrupt and took the money and ran, now both he and the former VP have started "new" homebuilding companies, watch out!

[HOT: The TRCC only "registers" Texas builders; it doesn't license them. Even if the builder is displined and loses their registration, they can reregister under a different name (DBA or "doing business as").

Redtexan wrote:
Powers has had money trouble for a long time. Wilshire has been a poorly managed company with high turnover and slow to no pay for its vendors since inception. Binash was president of GHBA, just a slick marketing tool for his company. Buyers can find out a lot more about the builder they want to use but they have to do the homework. A lazy buyer is a "mark" in any industry.

[HOT: One can argue that the TRCC is complicit in fraud and deceiption. Wary buyers are led to believe that the agency "licenses" builders. The TRCC wedsite doesn't say this, but the employees do. I called to ask if Mercedes Homes (see above link to KEYETV story) was licensed. The gave me the builder's TRCC registration number. I said, "Yes, but I want to know if they're licensed." I was told "it's the same thing." No, it's not! Where does this misinformation come from? Builders proudly display their TRCC license# on their websites. The city of San Antonio says in order to get a building permit, their "staff will verify through the TRCC website (www.trcc.state.tx.us ) that the license is current and in good standing.” And even Texas legislators misuse the terms licensing and registration. This misinformation is intentional in our view, and it's coming from either the homebuilder associations or the TRCC or both.]

Chuck84 wrote:
Thank God. These greedy developers have been responsible for urban sprawl that has destroyed Houston. People have gotten so lazy and fat that they want Mickey D's 200 feet from their house, but need to transgress a major road in order to get there and waddle inside for that Big Mac.

They also plan on destroying Katy Praire. Pretty soon, kids will find parks to be an urban legend. As a lifelong conservatice I never thought I would side with liberals on anything, but I gotta say, they have a point about urban sprawl.

FreedomIsntFree wrote:
Its not just the new home contractors! It is any contractor that does repairs on your home too. Very few people realize that when you get a new roof, if the contractor does not pay off his suppliers, the home owner is hit with a lien. Everyone should beware and make sure that the contractor you hire to do work on your home is a member of the BBB! This goes for ANY TYPE of work done on your home.

babydolly wrote:
A major part of the problem is homes built that don't appraise at the asking price. The new homes are WAY overpriced, and shoddily built with cheap laborers. What happens when problems develop with shoddy home construction and the builder has gone bankrupt? Who honors the home warranty then? There is much to be said about Buyer Beware because you can't trust anyone anymore. One thing I hope that people will remember is to get everything in writing! At least with that, you have some legal grounds to stand on.

Ellisor wrote:
Caveat emperor .... especially with cars, new homes and investments. We went with a large, established, national builder for just this reason, and required a listing of all vendors' showing payments at closing.

Hoss2 wrote:
The Texas Legislature has been bought and sold when it comes to real estate development. This is a very unfriendly consumer state when it comes to homebuilding. Nobody has the balls to do anything about it.

johncoby wrote:
Why would anyone buy a newly constucted home when there are plenty of used homes that have a clear history of no defects? Why risk buying a new home and getting screwed and then being subjected to the builders commission which is run by the builders. DO NOT BUY A NEWLY CONSTRUCTED HOME!

 ↑ Back to Top