Consumer Advice, post-TRCC

Finding a Good Builder

Our HOT Links section has resources for checking out a builder, but you can start by getting prepared yourself and asking tough questions of the builder. You can also do a simple Internet query to see what others say. Search Google for the builder's name and “reviews” or “complaints”, but note that people are more likely to complain about problems than complement when satisfied, and large volume builders will naturally have more complaints against them because of their sheer scale of operations. Also, sites that offer only complaints and no compliments provide a one-side view, but reading complaints can uncover patterns and give buyers a sense of a company’s business practices and reputation. 

Protect your rights

Arbitration - To avoid being forced into binding arbitration, get legal representation up front, before signing anything! Many Texas builders and warranty companies use non-negotiable contracts that require binding arbitration to settle disputes, thus depriving you of your Constitutional right to a civil trial. Homeowners forced into arbitration find little satisfaction. To learn more, read Home Court Advantage, an excellent paper by Public Citizen, see this NPR report on arbitration in a rape case, or read these HOT News articles. Here's our summary:

• Arbitration is a secretive, kangaroo court style adjudication proceeding that often costs far more than a civil suit, carries more risk due to bias of arbitrators beholden to the industry(ies) they support, is subject to minimal oversight or judicial review, prevents class actions, and is often held in the builder's home town, forcing homeowners to travel. 
• Your contract and warranty agreement define your rights and almost always require binding arbitration that favors your contractor because arbitration firms rely on them for their business. 
• Builders often present buyers with an extended home warranty as a Thank-You gift at closing, but the real purpose is to offload their warranty obligations and force you into binding arbitration. 
• We believe the industry-wide practice of including binding arbitration clauses in non-negotiable contracts is a restraint of trade when buyers have no choice, such as in The Woodlands, a Houston suburb where all 10 builders do this. 

Can't Get a Lawyer?

Most attorneys specializing in construction law represent defendants, i.e. builders and developers. Finding one to represent consumers on contingency can be difficult since Texas laws remain stacked against homeowners. Even with the TRCC abolished, it may take a while for attorneys to resume taking plaintiff's cases again. This still leaves families with mediocre or no legal help.

RCLA (the Residential Construction Liability Act), which remains in effect, still prevents homeowners from recovering attorney fees, compensation for emotional distress, or punitive damages, and it prohibits class-action suits. That means individual homeowners are often left to do battle themselves, often facing the legal departments of huge corporations intent on protecting themselves by wearing you down.

Even if your sales contract does not restrict them to binding arbitration and you are able to win in a jury trial and obtain a judgment, too often you may not be able to collect a dime of what’s owed. That’s because builders can hide assets in their own homestead or among multiple corporations or file for bankruptcy protection, all while also shielding their poor performance history from consumers researching builders before buying a home. We need criminal penalties for criminal behavior.

Families that bought new but defective homes are up against the weight and lobbying power of the $35 Billion Texas homebuilding industry. Still facing overwhelming odds, they need professional help and sympathetic legislators and consumer groups. That's because builder-sponsored legislation created laws that still stand between families in need and solutions that make them whole.

Finding trustworthy Contractors

Yes, there are many good and reputable home builders and contractors to work with, and we met with many of them at a recent Texas Builder Association Rally Day at the Capitol in Austin. (See our 1Q'09 Newsletter) Those good builders shared our concern that irresponsible builders have been allowed to damage the reputation of good builders and the entire home building industry. This has driven up the cost of builders’ insurance, housing, and homeowners’ insurance, which remains the highest in the country.

Bad builders create claims and lawsuits, fees for attorneys and expert witnesses, hidden housing costs such as unnecessary repairs, and loss of equity. Less obvious are the lost wages to take off work and deal with construction disputes and liens on property that can result when builders don’t pay their subcontractors. Worse are the numerous foreclosures and financially ruined homeowners, the downward spiral of home values in entire neighborhoods, the tax base that funds public safety and our kids' education, and factors that directly contributed to a global economic collapse. 

How can you know if a builder/remodeler is qualified and trustworthy? Clearly, it's not enough to just ask them. Personal references can help but aren't reliable if contractors use one good job to scam others. BBB (The Better Business Bureau) tracks complaints and has a dispute mediation process, but it has some of its own flaws since contractors pay to be included. Angie's List is a good alternative since companies are only listed if someone submits a recommendation or complaint, but it's a subscription-based service and has far more information on contractors than for builders. HADD.com and HOBB.org have good collections of homeowners complaint sites that can give you insight into a builder's reputation. Or... visit our consumer links page.

You can also do a simple Internet query to see what others say. Search Google for contractor name and “reviews” or “complaints”. Note, however, that people will more likely complain about problems than complement when satisfied, and large volume builders may have more complaints against them because of the scale of their operations. Also, sites with only complaints and no compliments provide a one-side view, but reading complaints can uncover patterns and give buyers a sense of a company’s business practices and reputation.

How can you hold builders and contractors accountable when a few Texas builders wrote the rules governing their whole industry? That's not accountability. It's putting the most notorious foxes in charge of designing the hen house. And it's what H-O-T is trying to fix. Let us know if you'd like to help.

Did you know?

• Wall Street Journal: 10 Things Builders Won't Tell You

  • Wall Street Journal: 10 Things Contractors Won't Tell You 
• Texans have more consumer protections when buying a new or used car than when building a new home.  
• Bad building practices are as devastating as bad lending practices, and unaddressed defects have decimated home values in entire communities, like in HuttoParke. 
• You personally need a license to drive a car or catch a fish, and the person who cuts your hair or tows your car needs a license, but the one who builds you home doesn't, even though it's your biggest investment. 
• Licensing elevates professions, protects the public, and improves the economy. That's why we introduced HB 2243 to abolish the TRCC and replace builder registration with licensing under the unbiased TDLR (Texas Department of Licensing & Regulation), which has 100 years of experience. Unfortunately, HB 2243 got caught up in a parliamentary error and did not get a vote on the House floor.