HOT ADVICE

Post-TRCC Advice for CONSUMERS (Builders: see below)

Did you know?

• 6 biggest mistakes homebuyers make (CNNMoney.com) 
• 10 Things Builders Won't Tell You (Wall Street Journal)
• 10 Things Contractors Won't Tell You (Wall Street Journal)
• Advantages of buying an Existing versus a New home in Texas.   
• Lemon Laws protect you when buying a new or used car, but there's no Lemon Law for homes.
• HuttoParke home values were decimated by bad building practices that are as devastating as bad lending practices.  
• Licensing protects the public, elevates professions, 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.
  
  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. 

Finding a Good Builder or Contractor

Current laws greatly favor builders, remodelers and contractors rather than homeowners. So use the resources in our HOT Links section to check out a contractor and prepare yourself for asking tough questions. You can also do a simple Internet query to see what others say. Google the builder's name and “reviews” or “complaints”, but note that more  people complain when there are problems than complement when satisfied, and large volume builders may 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 you a sense of a company’s business practices and reputation. 

Emergency Repairs

Many Texas homeowners are ripped off by unscrupulous contractors after Hurricanes and hail storms, that's why we call these guys "storm chasers." Although many contractors are reputable and can easily handle emergency repairs, unscrupulous ones show up en masse after disasters to pray on people desperate to fix their homes.

Please protect yourself and consider this advice please when hiring a contractor to fix your home.

• Ask your insurance adjuster for contractor references.  
• Contact the local Chamber of Commerce or Better Business Bureau to check contractor status.  
• Angie’s List is another good reference since it has both good & bad consumer comments. Although there’s a small fee, it’s probably worth it.  
• Make sure your contractor has a local physical address (not a P.O. Box).  Check the Yellow Pages since established companies advertise there and tend to have the bigger ads. 
• Ask potential contractors for customer references and call them. 
• Don’t pay anything up front, not even for materials, since it’s common for a contractor to do one good job and then canvas an entire neighborhood referring to the first and getting up-front payments before disappearing.  
• Carefully read the contract, or write your own, and avoid contracts with a mandatory binding arbitration clause. Arbitration of disputes almost always favors the contractor. 
• Thoroughly understand your contract and get help from an attorney if you don’t, because the contract defines the rights of each party. 
• Make sure the contractor has workman’s comprehensive and liability insurance  .  
• If you can, require a performance bond since that provides a source for collecting damages if problems do occur, even covering cases where the contractor files for bankruptcy or skips town.  
• Contact us with any other suggestions you have to share.  

Protecting your Legal Rights

We repeat this since it's that important. 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, as described in "Home Court Advantage," an excellent paper by Public Citizen. We also recommend these HOT News articles and NPR's report on arbitration in a rape case. Here's our summary:

• Arbitration is a secretive, kangaroo court style adjudication proceeding that can cost 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 of the "gift" 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. 

Finding 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 limits the damages and expenses that homeowners collect from a lawsuits, and most binding arbitration clauses prevent class actions. 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 you 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 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 stand between families in need and solutions that make them whole.

Finding Trustworthy Contractors

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.

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 others and the whole 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 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.

Post-TRCC Advice For Builders

HOT proudly presents this Business Week book excerpt, which pinpoints the insidious (and often invisible) problems that send great companies, industries or nations crashing to earth. It seems to explain the decline of the Texas home building industry and the institutions (companies and political system) that fueled it. Here are some highlights.

Based on the article, HOT offers this advice for the homebuilding industry:

1. Know that past success is one of the biggest impediments to innovation and future growth. It can reinforce traditional ways of doing things. 
2. Rather than competing with shoddy builders on price, embrace builder licensing and regulatory oversight to weed them out and keep them out. 
3. Take this economic downturn and low market demand as an opportunity to retool your organization's skills and culture. Work to develop construction trade schools to feed the pipeline with qualified workers. 
4. Become a better citizen* and repair your industry's reputation, which was severely damaged by the strong-arm tactics of your lobbyists and attorneys and the TRCC. Whether justified or not, many homeowners and legislators have come to hate builders in general because of those tactics. 
5. Rather than shielding yourself from customer lawsuits, discover and fix the underlying cause of disputes. Rely on insurance, including performance bonds for each home, to help mitigate risks. And work with the insurance industry to lower their risks too, because that will help lower your rates. 
6. Rather than dismissing customer complaints as frivolous, listen in an unfiltered and unemotional way to what they're trying to tell you. With this information, you can learn from past mistakes, understand changing market needs, and work toward building better homes with fewer defects and more value. 
7. Rather than spending millions on lobbyists and attorneys and fighting advocacy groups like HOT, work with us and other stakeholders to improve building standards and the homebuilding profession so buyers feel as safe buying new homes versus existing ones. 
8. Respond to this article with your own advice for other builders, because "a rising tide floats all ships." 
9. * Sorry! - From Bloomberg News: Everywhere you look, there's a CEO apologizing for something. Toyota's boss Akio Toyoda, Morgan Stanley's John Mack, Goldman Sachs' Lloyd Blankfein, Citygroup's Vikram Pandit and John Reed, and Bank of America's Brian Moynihan. They may not like it, but top execs had better get used to the idea of owning up for mistakes. [That includes homebuilders.]