Thursday, July 02, 2009

Cracked Houses: What the Boom Built - Yahoo! Finance

Cracked Houses: What the Boom Built - Yahoo! Finance: "Because of tumbling real-estate values, those stuck with faulty houses say repairs often cost more than the homes are now worth. Many say they cant refinance their mortgages or sell, and they have no equity to leverage for repairs."
And so they think their only recourse is to sue the builder. Thanks to Fred Pilot for this link.


Beth said...

An interesting, but sad, tale. We purchased a new house in 2000, and it was tough to find a builder with an acceptable contract. (One typical flaw: the contracts required binding arbitration, with the builder reserving the sole right to choose the arbitrator, without even a requirement that the arbitrator have any professional qualifications.)

Then we hired an independent home inspector, and our builder was offended and made the inspections difficult. Fortunately our house has no major problems.

Buyers who purchased during the boom would have found it even more difficult to perform due diligence.

No way would I ever purchase a house built during the boom. Of course, they're all hoa homes anyway.

Anonymous said...

In Texas, homeowners already had no recourse due to the Texas Residential Construction Commission

This commission was created as a result of legislation authored by none other than the attorneys for

This act basically effectively did little more than establish roadblocks for any remedy at all.

From the Texas state comptroller a few years ago:

TRCC was formed after this case started (Cull) and the act was authored by the general counsel for the homebuilder (Perry Homes) in this story. It should be noted that the arbitrators (homebuilders like forced arbitration) found in favor of the homeowners for $800,000. Perry didn't like the outcome of "binding" arbitration so he appealed it to the Texas Supreme Court - all nine justices of which have received large campaign contributions from Bob Perry. The Texas Supreme Court ruled in favor of Perry and now the Culls have to start over again in state court:

Or you might have heard about Jordan Fogal:

TRCC was formed by homebuilders to an already bad situation even worse. Here is an example of pre-TRCC builder conduct. Fortunately, the victim was actress Sandra Bullock who had the resources to go after the builder pre-TRCC:

Fortunately, the TRCC is expected to terminate as a result of the Sunset Act and its own history (unless the Texas Special Session revives it):

Anonymous said...

You may also soon see that developers retaining control over HOAs will use the HOA as the mechanism to limit liability by controlling the HOA to "represent" the homeowners in construction dispute litigation.

DBX said...

If you don't have rules and regulations, you end up with anarchy. What too many conservatives forget is that this applies in the world of civil cases as well as in criminal cases. Just as with banks lending at reckless capital ratios -- to such an extent that non-CRA mortgages are failing at a HIGHER rate than the more tightly regulated CRA mortgages in spite of the fact that CRA mortgages serve a pretty dodgy segment of the population -- we also have cowboy builders either not getting inspected at all or getting by on a nod and a wink.

Without Hobbes, what are we? Cavemen, that's what.

Anonymous said...

The "rules and regulations" were put in place by the people that benefited from them the most. Are you referring to the "capital ratio" of the bank or the borrower?

If you are referring to the bank, then how does the bank's capital ratio have anything at all to do with the failure of the mortgagor with respect to any loan - CRA or non-CRA?

If you are referring to "capital ratio" of the purchaser, what on earth does the capital ratio of some borrowers have to do with the borrowers who are now failing?