Eulogy for the TRCC
A real estate inspector blogs about the loss of the TRCC, and HOT responds

Blog posting by Frank Schulte-Ladbeck, Professional Real Estate Inspector TREC# 9073 - 7/31/2009
Source: http://yourhoustonhomeinspector.com/living-in-houston/ieulogy-trcci/

[HOT: We reprint this posting with our line-by-line comments to show the need for education and dialog among the various stakeholders if we are to effectively regulate the homebuilding industry and protect the consumer. Wikipedia describes a eulogy as "a speech or writing in praise of a person or thing, especially one recently deceased or retired, given in tribute to a person or people who have recently died." The TRCC does not deserve praise. It earned and deserved its sunset.]

The Texas Residential Construction Commission was not re-established by the Texas State Legislature, which may put an end to county inspections.

[HOT: The Texas legislature was right to abolish the TRCC as recommended by detailed reports from two state agencies and overwhelming public testimony. The TRCC was introduced and established by the homebuilding industry, presumably to protect homeowners but actually to protect the homebuilding industry. The lesson for legislators is to not trust an industry to establish and run its own regulatory agency, since that's letting the foxes run the hen house. Homebuilders have had powerful lobbyists and attorneys to represent their interests. It's about time for homeowners to have fair representation. That's why Homeowners of Texas was formed and why we dedicate ourselves to bringing fairness to homeowners.

We are working with reputable builders and inspectors to promote high standards for building quality and more code inspections. Unfortunately, the TRCC made matters worse by replacing the implied warranty of habitability with warranty standards that were made illusory by their many exceptions and by builders who were allowed to offload their warranty responsibilities to 3rd party warranty companies in the form of "free" extended warranties that were equally illusory.]

Should I lament the passing of the TRCC, or should I be indifferent? I will not cheer though, as some may be doing. Right, I know, a home inspector would have liked this program as a way to make more money, but this was not the case for me. My personal belief is that the consumer in Texas has been injured by this action, and it is a shame that we did not find a way to make this law work.

[HOT: For regulation to work, all stakeholders need to be represented, and the influence of the regulated industry minimized. We believe that industry players make good advisors but should not serve as commissioners that run the agency.]

First, let us take a look at the basic complaint leveled at the TRCC: the commission lacked impartiality favoring the builders over the homeowners it was meant to protect. Alright, can you tell me which commission in Texas is not biased towards the industry it is meant to regulate? We have the Texas Association of Realtors creating forms, which are adopted by the Texas Real Estate Commission as the forms that need to be used for real estate transactions. Where is the oversight in that process of parties representing the consumer? The fact of the matter is that industry needs to come to the table when discussing standards to protect the consumer. Do you want an architect ruling over how your food is grown and processed? The architect is knowledgeable about his craft, but this means nothing when it comes to food production. What I do want is someone who is reasonably educated to have a voice to tell industry that there are doubts or concerns about certain means to produce my food, a representative for the consumer. Commissions in Texas strive to have this balance, but my own feelings are that we do not do that well enough in our state.

[HOT: Agreed, Texas fails to strike a good balance between industry and consumer needs. We prefer the standard contract forms required by TREC for the sale of existing homes over the (often non-negotiable) builder-written contracts for the buying a new home. Nearly all builder contracts force consumers into binding arbitration to resolve disputes and block access to the court system. This is an example of Texas providing more consumer protection for buying existing versus new homes.]

Why did we implement the county inspection law in the first place? There were a few cases where a builder failed to produce homes that met basic standards which became a burden to the homeowners. Our current economic crisis has probably gotten rid of the bad eggs in the building industry. Of the builders that I have met through my work, I would say that only ten percent of them are hostile to inspections, but of that ten percent, only a few were hostile because they were incompetent. My experience is that most builders are trying to do their jobs well. Like any other industry, you have a percentage that do not know properly what they are doing. This happens. The property code 446 was meant to ensure that a standard was met statewide.

[HOT: A few cases? The real issue is that without meaningful mandatory code inspections, the counties attract uncrupulous builders. These three inspections provide illusory protection of homeowners. Inspecting the slab once before pouring concrete, for example, does not ensure a sound foundation. Reputable builders complain about having to compete with the bad eggs who cut corners, low-ball bids, and hide behind laws put in place to protect them from lawsuits. As a licensed real estate inspector, you probably look scornfully upon the unlicensed code inspectors that are beholden to builders or cities and don't properly do their job. Bad work from some builders and some inspectors reflects on others in your professions. That's why we pushed a bill that would have implemented contractor licensing, administered by TDLR as opposed to the TRCC.]

Is there a statewide standard? Yes. I am frequently told that in areas where there are no building inspectors that there are no building codes. You will find that all states have a set of building codes on their books, and Texas is no exception. The problem is that how the state enforces those codes. In most cases, they do not. The TRCC was established to be the enforcement arm. By having three inspections during the course of the building of a home, the buyer could be satisfied that a quality standard had been met through an independent inspection. There was real concern in the inspection community that the inspections be independent of the builder’s influence, and I know that the staff at the TRCC took that concern seriously.

[HOT: During the construction process builders could hire their own inspectors, and if a dispute occured with a builder, the SIRP (state inspection and resolution process) used TRCC-assigned inspectors. In either case, the inspections could hardly be called "independent." The TRCC and its warranty standards, required inspections, and SIRP did not live up to its billing as eliminating the need for an attorney. Homeowners had to hire their own attorney, inspector and engineer to balance the builder's experts, because a "final and unappealable" TRCC judgement would follow them into court or arbitration. As you know, cities like Austin have more stringent permitting and inspection procedures than just the three inspections required by the TRCC. They also use more current versions of the IRC (International Residential Code). We'd like to see statewide building codes and inspections so builders don't simply build in unincorporated areas to avoid city inspections.]

What does the future hold for the consumer? Texas House Bill 2833 does allow individual counties to continue with the county inspection program. To find out if your county plans to keep up these inspections, you will have to contact the county commissioner’s court. Maybe you should write to them to ask that this insurance of residential building quality be maintained. The current law expires by September 1, 2009. All current business has to be finalized before August 31, 2009.

[HOT: Unlike Texas municipalities, counties cannot adopt ordinances that would require more meaninful inspections, thanks to the lobbying influence of builders. That means the counties can't adopt newer versions of the IRC or do more than the three code inspections even if they want to. This makes a mockery out of the building code and inspection process.]

Was the TRCC perfect? No. However, we should have looked to see how we could have made this work, instead of getting rid of it. If the financial crisis has taught us as a nation anything, I would hope that it would be the fact that we cannot allow industry too much freedom that they run rough shod over the consumer. We should find a state of balance.

[HOT: Agreed - Our nation desperately needs regulatory oversight of several run-amuck industries, and not a bunch of bailouts for those same industries. We say "fix housing first," because Texas homebuilding helped spark the global economic collapse.]