Thanks to horrendously shoddy construction and the lack of building permits or city inspections, homes compete in a “Race to the Bottom” as falling values affect the entire subdivision.
CHECK BACK OFTEN – Last updated 06/09/10, this page collects breaking news from around the nation and the world about this important story, which emphasizes much of what’s wrong in the Texas homebuilding industry. Following our summary below are links to over 75 video broadcasts, 75 print articles, and 60 photos (see photo slide show).
WHAT HAPPENED – On January 24, more than 90 San Antonio homeowners in The Hills of RiverMist subdivision were displaced when a 40-foot tall retaining wall collapsed. For many, their lives have been ruined. The culprit is both the builder and developer – Centex Homes. Centex, which was acquired by Pulte Homes, installed the failed retaining wall and also built the homes, including those above and below the wall. Centex charged a $10,000 “lot premium” for the majestic views on lots above the wall.
EVIDENCE DESTROYED? – Centex was quick to bring in its own engineers to do forensic analysis and to bring in their own crews and heavy equipment to remove tons of fill dirt (and evidence). The police kept others out. The homeowners association did hire its own geotechnical engineering firm, but what happened to the fill dirt? Isn’t evidence tampering a crime? Where was Texas Attorney General Gregg Abbott?
APPEARED RESPONSIVE? – Pulte and the City of San Antonio were quick to do Damage Control – both PR-wise and structurally before forecasted rains came. They issued press releases, held public meetings, created websites, and even put displaced homeowners up in hotels. Such public relations containment makes good business sense, but will it last until the homeowners are made whole? Will they ever be whole? What do you think?
ASSIGNING BLAME – According to news reports, Centex said the wall was engineered to comply with city codes, but where’s the proof? Apparently there was not since no building permit was obtained. Where are the engineering plans with the required engineering stamp? Who did the design work? If Centex knew a name, wouldn’t they have pointed the finger there instead of at God? With no building permit, no inspections were done. So even if the wall was engineered properly, which we doubt, it apparently wasn’t built to spec.
SHIFTING BLAME – After the wall failure, Centex called it a “soil shift,” a “slope failure,” a “land slide,” a “sinkhole,” and “deep soil movement” – all in veiled attempts to blame God or Mother Nature or anything other than shoddy construction. We even saw news reports saying Rivermist was built on a fault line to imply that it might have been a “mild earthquake.” Yeah right.
BLAMING BUYERS – Homeowner Travis Watson called Centex after noticing his 3-month-old home had shifted several inches. “I was told that I wasn’t watering enough,” he said.
SOIL ISSUES – Our analysis of the USDA’s Web Soil Survey data for Rivermist shows that over 90% of the subdivision is build on highly expansive clay soil that’s described as “Very Limited” for building retaining walls or homes without “major soil reclamation, special design, or expensive installation procedures.” Expansive soil, as described in our “Soil Issues for Residential Construction in Texas” paper, has high shrink/swell characteristics and can swell in volume up to 30% when saturated with water. It can exert up to 15,000 lbs/sq.ft. of pressure on structures such as concrete foundations and retaining walls.
LOT GRADING – Mark Eberwine, a well known TREC real estate inspector tells us that careless or greedy builders will often re-grade lots and slab-sites so they can charge more for lots with desirable views or so they can save money on steel and concrete. Too often what was once a stabile and unmolested building site becomes an improperly re-contoured site with improperly compacted soils and slab footings that can’t withstand soil movement that’s to be expected under such circumstances.
PERMITTING – Engineer Gene Dawson Jr. of Pape-Dawson Engineers, which designed the lot and street layout of Rivermist, said retaining walls for commercial developments require permits. He said he’s never heard of permits being needed for walls in residential developments. Don Durden, an engineer in San Antonio since 1977, also said he didn’t know of the permitting requirements either. We find that disturbing since homeowners can buy a do-it-yourself book about installing retaining walls at Home Depot. The book makes it clear that walls above 4 feet tall almost certainly require a building permit. Maybe these guys didn’t read that book either.
2ND WALL DESIGN – Centex says Engineer Russell Leavens of Enterprise Engineers Inc. in Fort Worth drew the plans for the wall. A company aptly named Gravity Walls Ltd. was the contractor that did the work. Leavens’ design was titled “Retaining Wall Rebuild,” because it replaced an earlier wall at the site that Centex replaced in 2007 after it too collapsed. A cross-section of the replacement “gravity wall” design looked like a slice of pie that measures 4 feet thick at its highest point and widens to a base that is 7 feet thick. The base was supposed to be buried about 7 feet underground to provide a base of reinforced concrete. The plans called for weep holes to allow water behind the wall to drain. But the photos show a wall that was only as thick as the decorative rocks, with no evidence of debris other than those rocks.
3rd WALL DESIGN – Centex now plans to rebuild the wall yet again and submitted a set of “Cadillac” design plans and computer animation in hopes of getting a permit this time. HOT submitted its own analysis of the plan and believes the design is still insufficient because of our “water balloon theory,” which says saturated clay soil will simply ooze out between pilings and underneath the wall as described by Professor Dave Petley, a landslide expert at Durham University in England.
RISKY STANDARDS – Centex told the San Antonio Express-News, “It’s the company’s belief that Centex followed industry standards.” But they wouldn’t tell them why they didn’t follow city code. Unfortunately, without regulatory oversight and legal accountability, the “industry standard” among Texas builders is to cut corners anywhere possible, and even once reputable builders adapt in order to compete. These bad building practices emphasize profit over home quality that retains value and includes using substandard materials and unqualified and unsupervised workers rather than following building codes.
INSURANCE & WARRANTY COVERAGE – Most home insurance policies won’t cover structural defects or soil issues, and neither will the home warranties. Statewide warranty standards developed by the TRCC include important exemptions that make them nearly worthless. One such exemption is “soil conditions.” So with no insurance and no ability to file a civil suit due to forced arbitration, these homeowners have nowhere to turn.
GENEROUS BUYBACKS? – Centex Homes offered to buy back 27 homes that lost their Certificates of Occupancy and plans to spend $4-5 million to rebuild the wall. Centex said they’ll also pay attorneys’ fees for the cost of reviewing the buyback documents but said it wouldn’t cover large contingency fees.
CONTINGENCY FEES – Most attorneys won’t take cases against Texas homebuilders on a contingency basis unless the fee is 15-40% of the settlement. It’s too risky since the laws in our state are stacked heavily against homeowners and limit the damages they can collect. For homeowners who already hired an attorney, this unfortunately means it could cost them $30,000-80,000 to accept a buyback offer on their $200,000 home. The big builders got RCLA (Residential Construction Liability Act) passed to give themselves an “opportunity to repair” any construction defects and to replace much of the Deceptive Trade Practices Act. DTPA, in addition to allowing for actual damages, gave homeowners the ability to recover consequential damages (e.g. lost wages, personal property damages, mental health expenses, and pain & suffering) as well as punitive damages (of up to 3 times actual to deter future bad behavior). But RCLA took that away, and the toll as been profound. The stress of dealing with construction defects and builder disputes, for example, can affect a child’s school performance and a parent’s work productivity, even causing them to lose their jobs or promotion opportunity. The stress can destroy marriages, livelihoods, and entire lives. People don’t sue builders for profit, and now they likely can’t sue at all.
AVOIDING LAWSUITS – Rivermist residents are being forced into binding arbitration rather than having the options of filing lawsuits and joining class actions. Nearly all Texas builders use sales contracts with arbitration clauses and refuse to let buyers opt-out. Big builders like Centex use internally-developed contracts. Small and medium builders join builder associations to gain access to boilerplate contracts. Even the “free” home warranties that builders give to the buyers as a “Thank You” gift at closing often have arbitration clauses.
RESTRAINT OF TRADE – The widespread builder practice of refusing to negotiate contract terms and allow buyers to opt-out of arbitration is, in our view, an illegal restraint of trade. Builders like Centex want lawmakers to think buyers have a choice of signing the builder’s contract or not – of buying the home or not. They say that if buyers don’t want to be bound by binding arbitration, they can simply go to another builder. But can they? According to a 2009 study of builders in The Woodlands, a Houston suburb, all 13 of them had binding arbitration clauses in their contracts and none would allow buyers to opt-out. That effectively means you can’t buy a new home in The Woodlands without being forced into arbitration.
HOT testified in front of the House Committee on Judiciary & Civil Jurisprudence, asking for a ban on Pre-Dispute Binding Arbitration clauses in matters relating to Texas homesteads.
HOMEOWNERS ASSOCIATION – Centex does not own the property that retaining wall resides on. The Rivermist HOA owns the property and must approve any Centex construction plans and retaining wall designs. An attorney for the HOA told us that the association hired its own independent geotechnical soil analysis firm, which did a more thorough job than Centex. Rather than just drill core samples, they drilled holes large enough to lower a man into for closer examination.
THE BIGGER PICTURE – Centex may be at the center of this Hills of Rivermist crime scene, but the Texas home building industry is at the center of a much larger crime scene – one that helped cause a Great Recession. See  Who’s to Blame for the Financial Crisis?,  Texas Homebuilding and the Global Collapse, and  CRUEL HOPE.
Related Information, including Video & Print Stories
Official Centex & City Updates:
* Centex/Pulte info site: www.rivermistinfo.com
* City of San Antonio Planning & Development site for Rivermist
* City of San Antonio Daily Activity Reports for Rivermist
* Site Plat showing topology before wall & fill dirt is added
* See also: Rivermist HOA website, PoorlyBuiltByPulte.info, HOT Blog, Arbitration news coverage,
and our 1-page Arbitration flyer.