Broken Homes
The American Dream Turns Nightmare
The Valley's construction boom has left some contractors shorthanded and settling for cheap materials and cheaper subcontractors. Can homebuyers make contractors fix their faulty foundations?

Elliot Homes offered the affected homes a repair option, but the Rankins say the contract would have forfeited their right to suit if the repairs were insufficient. Elliot Homes re-poured the cement slab in the garage four times.
Annette Webber and her husband were living the American dream. She worked to put him through college. Then he did the same for her. They were ready to buy their first house
"We were so excited," she says of the brand-new home. "We would come down to see the construction on weekends."

The Webbers had been in their home three days when their dream began to smell-literally. The stench of sewage was so bad the family of three had to sleep in the living room because the builder had forgotten to cap the sewage unit in the master bedroom.

But the sewage problem was minor when compared to the girder in the roof that fell a few months later, cracking the dining room ceiling. "KB Homes would come out to fix things, but they kept making menial repairs," Webber said.

In the end, the Webbers claimed the roof on their brand-new $128,000 home was installed backwards. Soon they learned the entire neighborhood was built on a former crop dusting airport where soil samples were proven to be toxic.

Now, three-and-a-half years later, Webber says KB Homes has offered some options, but none have actually fixed the problem. "All we wanted is for them to buy the house back for the same price. Now there's no way we can recoup our investment," Webber said.

Annette and her husband are one of a growing number of families who have purchased faulty new homes in Arizona and across the nation in recent years.

Faulty Foundations

U.S. homebuyers bought roughly one million new homes in 2003, and industry analysts expect the trend to continue. Experts say that jump in demand coupled with the influx of cheaper building materials has caused a nationwide epidemic in construction defects.

Homebuilders counter, claiming the increase has not come in defective homes, but in lawsuit-happy lawyers.

While no one organization has compiled nationwide statistics about home defects or lawsuits, many experts agree that defects and lawsuits are both on the rise.

As Consumer Reports states, "Increasingly, buyers are discovering that their new dream home has serious defects and that they have more consumer protections for a fickle $20 toaster than for a flawed investment-of-a-lifetime."

In The Valley

Increasingly, new and nearly new Valley homes are plagued with defects. The most common Phoenix-area defects are cracking stucco, shifting foundations and water leaks.

Nancy Seats, president of Homeowners Against Deficient Dwellings, a nationwide coalition of pro-consumer homeowners, said new home defects vary throughout the country, and differ in frequency from state to state.

"Arizona is certainly a leading state in defects," Seats added. "The Valley ranks right up there near the top."

Ken Kasdan, a nationally recognized construction defect attorney, recently expanded his California-based practice to cover the Phoenix area. "We receive numerous calls every single day from owners of homes in the Scottsdale and Paradise Valley area," Kasdan said. His firm is currently working on about 225 home defect lawsuits in Scottsdale.

But Valley builders, like national builders, claim consumer groups and specialized attorneys are too quick to file suit and often lead ignorant homeowners into court unnecessarily.

"A lawsuit is the last thing we wanted. We can't move," says Gilbert resident Michael Rankin as he points to a bulging line stretching the length of a master-bedroom wall. "This is from the sheetrock smashing together," he explains.

The wall in the six-year-old home is dark purple. "We've started painting with darker colors because they hide the uneven walls better," Rankin's wife Michelle adds.

“But the real problems aren't in the Rankin's walls. The shifting and cracking foundation is causing the bulging walls, the uneven floors and the cracking ceilings.

"Elliot Homes was the number one builder at the time these homes were built," says Dee Anne Daniels, who lives four houses down in the same subdivision.

Like the Rankins, the Daniels have doors that won't close, window sills that have pulled away from the walls and cracked cement under their carpet, all due to the foundation slowly shifting and breaking under their six-year-old home.

Like the Rankins, the Daniels are suing Elliot Homes, along with a handful of neighbors in the otherwise normal-looking subdivision. One neighboring house bears a "for sale" sign in the front yard.

Like the Webbers, the Daniels had done their homework before buying. "We found a reputable builder," Daniels says. "But that's not enough," she warns.

Before Buying

"Don't get stuck with a product that you can't resell," warns Daniels. "A lot of people are not disclosing and selling. That's not morally right." Consumer Reports found that many homeowners who discover serious defects simply sell their homes.

Home defect attorneys and state officials both emphasize the importance of hiring a reputable home inspector before buying a used home.

"Don't get enthralled with the interior design, paints or carpeting. Get a very qualified home inspection service," attorney Tom Miller says. Like Kasdan, Miller's California-based home defects firm recently started a Phoenix branch.

"Realtors like to tell you who to use because they have a working relationship," but find your own inspector, Miller advises.

The Arizona statute of limitations grants homeowners eight years to pursue a builder for home defects, meaning even used homebuyers can file suit within the eight-year timeframe. That eight-year period begins the day the home is officially ready for occupation.

New Homebuyers

Though it couldn't hurt to hire a reputable inspector for a new home, attorney Ken Kasdan suggests that most defects show themselves as the house settles.

There are no fail-safe guarantees when researching a builder's track record, but the Arizona Registrar of Contractors' web site offers a search by contractor option that includes all complaints and suspensions within the past two years.

Unfortunately, most large builders have multiple licenses and occasionally use multiple names, both of which complicate searches. Even smaller contractors can change their names and secure new licenses to hide their history.

"We have cases pending against 15 major builders in the Valley area," Kasdan said, adding that some builders have much worse track records than others. "National builders are sort of a national trend," Kasdan warned. "They have more problems with quality."

Kasdan did not single out any one builder as incompetent, but he added that local builders usually pay more attention to detail and self-inspection. "Our firm is also in California, and I have some cases against the same builders in both California and Arizona."

Getting Your Home Repaired

The first step in repairing a defective home is contacting the builder. Most builders carry a one- or two-year new home warranty, and most work hard to maintain their reputation in the industry.

Paula Schulman is an Arizona resident and the national treasurer for HADD, which receives complaints daily from disgruntled homeowners in Arizona and across the nation.

Schulman said many builders go above and beyond to repair or even buy back defective homes.

"One single mother with a son rallied vigorously and got everything she needed," Paula said. "In her case, she happened on a vice president who didn't know about her problems. He drove straight to her home and was amazed at the faulty construction. He had it all fixed within three weeks."

Because general contractors rely on subcontractors, they are often surprised by the faulty work that has been performed. However, the general contractor is legally responsible, even for subcontractor mistakes.

"It's definitely not our experience that all builders are bad," attorney Ken Kasdan said. "It's not appropriate to condemn the entire industry."

Registrar of Contractors

But what if the builder is bad? And what if the contractor ignores complaints?

"If they have faulty workmanship, we can literally order a contractor out there to fix it. It's a significant hammer we carry," said Israel Torez, director of the Arizona Registrar of Contractors (ROC).

Torez took over as director of the ROC about 18 months ago and says he has been working to increase protection for consumers. If the ROC finds a builder negligent, they can suspend or revoke the contractor's license, but the faulty work must be less than two years old. "Facing revocation of their license will motivate a builder to fix their work," Torez said.

Some consumer advocates are concerned that proving the defects to the ROC and enforcing the repairs is far too time-consuming for homeowners, placing an undue burden on them.

The Arizona ROC received about 9,000 complaints in 2003, roughly 25 a day. In light of that volume, Torez emphasized contacting your builder first. "Give them the opportunity to make it right. If you're not getting a response, call our office."

When to Call in the Lawyers

If the home is more than two years old or if the ROC fails to motivate the builder, the courts may be the last resort.

"The bottom line is that somebody's going to pay to fix the house," attorney Ken Kasdan said. "My job is to make sure the builder who was legally responsible and made a huge profit on the house pays for it."

Both Kasdan and Miller take home defect cases on contingency, and both firms front the costs of expert witnesses and inspectors to validate the defects.

"Generally homeowners don't have the ability to fund an attorney at a high hourly rate like a builder can," Kasdan said. He added that working on contingency also keeps lawyers from taking on frivolous cases.

"It filters out the less valid claims, making it affordable for the client to pursue their rights. Otherwise you have the homeowner against the large company. Working on contingency levels the playing field."

Miller and Kasdan both recommend working with an experienced lawyer who specializes in home defects.

"If the builder won't work with a homeowner, they will generally recognize a lawyer who has expertise in that area," Miller said. "Then they take heed. Most developers don't invite lawsuits. They've been down that path. They know they're going to lose. It's just a question of how much and how long it's going to take."