America's Largest Homebuilders Shift the Cost of Shoddy Construction to Buyers
hntrbrk.com71 points by impish9208 6 hours ago
71 points by impish9208 6 hours ago
I don't usually recommend Instagram accounts but I've been following CyFy Home Inspections[1][2] for quite some time now and you get a real first hand glimpse at what this sort of shoddy construction looks like.
The thing that absolutely blows my mind when watching his content is how a lot of American homes are made out of a wood frame, foam, chicken wire, and plaster.
I would have thought that regions that don’t have winter weather would just cheap out on insulation, but they cheap out on the whole thing.
It got me thinking that the mere existence of winter weather kind of sets a minimum standard of quality.
I once asked a colleague why this was the case, and the responses I got were basically "Wood is cheap, durable and we have lots of it. Other materials will price houses out of most Americans and there's no tangible benefit to using them anyway."
Which is both wrong and short sighted, but I could not get them to budge on acknowledging that other materials would actually be better for houses than wood and some foam.
You can actually search around on the Internet for this query as well and American stubbornness (/ exceptionalism?) once again rears it's head.
The weird thing about these foam and chicken coop wire homes is that they’re not cheap at all anyways. All the CyFy ones are ridiculously priced. Largely because you’re not buying a home, you’re buying a location (with a cheap home on it.)
>I don't usually recommend Instagram accounts
He has a lot of content on Youtube, too.
When the builders treat you horribly for asking if you can have an inspector come in and then put a bunch of rules for what the inspectors can do, massive red flag.
I was interested in a Lennar community before I knew how bad they were and everything from their advisors mouth made my (new to it) real estate agent and I feel icky. They said you can inspect but can only report issues if visible from six feet away, can’t open drawers, can only test one outlet, no roof or basement access. I passed on them and a year later some of the houses flooded because of Lennars negligence when to modified a riverbank.
WTF. I'm fairly certain that would be illegal in my state.
The riverbank or the inspections?
The trick for the builder is that THEY are the owner until final paper sign - so anything above final pre purchase inspection is not something they have to allow.
Which is why you don’t use them, or go in expecting shiny crap.
The inspections. Actually, I think it would be legal to do so, but if the builder sells the home and they don't disclose problems with the house they'd likely be opening themselves up to a civil suit, and having a contract which severely restricts the kind of inspection you do would be strong evidence that they knew, or should have known, that something was fucked up. Lennar certainly has a team of lawyers that know more about this than I do...but a lot of this sort of thing depends on legal action costing more than it's worth...and one or two odd cases they do get might just be settled out of court and chalked up as an operating expense.
Scumbags.
Which is why I encourage pro-se suits against those types of businesses.
You’ll probably lose, but you’ll harm their bottom line, and if everyone reliably did it they’d be out of business.
Was in Oregon and my inspector said it’s sadly legal and very common to have restrictions like that.
Last I heard they were being sued over that community at least.
Theoretically new homes should have warranties, at least in some jurisdictions; e.g., Ontario, Canada:
* https://www.tarion.com/homeowners/the-new-home-warranty
Of course big(ger) builders have legal departments that can stonewall you and cause all sorts of delay. Further, depending on what the problem is, it may basically be 'unfixable' short of tearing down the house and re-designing/building it taking actual building science into account.
An example for the latter case, a homeowner couple spent six years fighting the builder before finally settling (the day before the trial began) and taking a buy out. A video with the building science consultant (Corbett Lunsford) they hired to debug the issue:
The builders the article is talking about do offer warranties, both of them.
Having a warranty is one thing, exercising is can be an entirely different challenge. There’s typically a one-year workmanship warranty and then longer warranties on HVAC/plumbing and structural/foundation. Materials and equipment in the home will have varying warranty periods on the item in question.
Here is a recent Lennar warranty brochure: https://photos.harstatic.com/384985574/supplement/pdf-4.pdf?...
> Having a warranty is one thing, exercising is can be an entirely different challenge.
Which is the point of the second half of my comment and the link to an interview with folks that had this exact problem. (Also why I started with the word "theoretically", as how actual legal coverage works in practice can be different.)
I was attempting to move the discussion from a theoretical one to a concrete one by looking at an actual warranty document from one of the builders named in the article, it’s not hard to google “Lennar warranty” and paste a link to it so we’re discussing an actual tangible warranty instead of theorizing about hypotheticals.
The quality of everything has gone to pot and, of course, that fact does not show up in the inflation numbers in any meaningful way.
I purchased a dresser from Restoration Hardware back in 2001 as a recent grad and it's quality is unbelievable by todays standards: dovetail joinery, excellent wood, etc. Now I go and look at furniture and I'd have to spend (what I consider to be, lol) a car's worth of money for anything close to it.
I will only buy "antique" furniture, for precisely this reason. When we were looking for a house, I prioritized homes built before 1933 (when asbestos materials became widely used). We bought a house built in 1929, and the materials and workmanship are phenomenally good. It wasn't like a custom build or anything, either: the surrounding three blocks were built at the same time by the same developer, and they were originally owned by working-class families. It's just, as you say, everything has got worse.
The majority of people I know who had homes built in the past 15 years are miserable or sold the houses after only a few years. Builder buries the homeowner in paperwork, contractual litigation, and passing them around subs, and ultimately they are left spending a fortune fixing glaring issues or finishing tons of incomplete work (I had a friend where they didn’t install an entire bathroom and then argued it was added late by the customer even though it’s on the blueprints for all the houses in the development).
Heads up on this media source: part of Hunterbrook's business model to give investment funds early access to the news, so they can trade ahead of it [1].
Now that is not to say that this story is false, or even that the business model is necessarily bad, I will leave that up to you to decide. But this media source has a different set of motivations than most readers are used to. You'll notice that the news is about two US companies that are easily shortable, DHI and LEN.
I've learned that no home is perfect but some of these are a total nightmare. I've been through a number of homes over the years in the Texas market. Anything built after 2012 or so drops off like a rock in quality.
I intentionally bought one with minor foundation and drainage issues because the trade off was that everything else is perfect. You can fix landscaping, concrete, insulation, plumbing, etc. with incremental expenses. You cannot fix your location. That requires starting all over again each time.
It’s funny, foundation and drainage was the very top of the list of what I avoided because those issues are very expensive to remedy and will slowly destroy your home. Oh and roof issues, too.
Drainage is especially difficult to fix if the topography is to blame. You can’t move your home out of a low spot or off a floodplain.
Drainage is super annoying, but noticeable actual foundation problems are more solvable than people realize. Some real bargains can be found there (save $100-200k on a house needing an $80k repair).
There's deals to be had anywhere that a problem looks or is big, for sure. But I'm wondering what kinds of problems a home might have that are harder to deal with than a failing foundation. I guess major mold issues? Someone else discovering and claiming mineral rights under your dwelling?
A foundation issue might seem totally beyond reach for someone who has never owned a home before, but it's still a lot less painful than living in a bad location. Once you spend some time learning how the foundation systems work, it gets a lot less scary. There is a solution for everything.
Pier and beam foundation issues are essentially a non-event in my view. If you can literally crawl underneath your house and touch everything, it's basically like cheating.
With slab-on-grade things get more challenging, but installing piers on the perimeter and fixing internal slabs is not really a crisis situation. Concrete work has a huge advantage at repair time in that it can be polyjacked. This is easily the least intrusive form of concrete repair that is available. You can raise a slab of arbitrary weight in 15 minutes with a half inch hole. This repair technique will last ~indefinitely if you also have a tough talk with your landscapers about getting water away from the house.
> If you can literally crawl underneath your house and touch everything, it's basically like cheating.
Maybe this is part of it. Where I live, the crawlspace under my home is a fully finished basement with my office and such.
But the more these comments get me thinking, the more I recognize that it’s more subjective than not. I weighted for problems I could tackle slowly over five years, many of them myself, because I worked from home and had two kids under 2. So the home is on a hill with a sump pump that’s dryer than the desert, a solid foundation and new roof, and a few dozen smaller issues like flooring, new carpet, replace lower deck with patio, etc.
Foundation has a limit - the cost to raise the house as if moving, removing the whole foundation, and building a new one.
Other structural issues can be much worse (mold is one, but think cross beams that miss the load beam).
The only thing builders have to do to block your home warranty claim is lie. This has happened to me with a new house.
There is a reason lying is popular. Its easy.
If you want to investigate it, you can cause them more billable lawyer-hours than whatever they lied their way out of by suing pro-se.
They HAVE to respond with a lawyer, even if you get it thrown out eventually they’ll have spend thousands.
And I will still get nothing. Except a waste of time, endless stress, and a big lawyer bill.
How do you get a lawyer bill from being pro-se?
The point is not to win, the point is to cause financial pain. You can’t admit that, but it can be so.
Sir,
Wasting someone elses time and money for no achievable outcome is the same waste of my time and money and accomplishes nothing. I would get more out of putting a quarter in a pinball machine.
In the UK it's been prevailing wisdom to not buy new for a while already.
Developers know people are desperate at the moment and they shoot for quality standards commensurate with that.
> ... [M]any avoidable defects are caused by business practices that focus on building and selling quickly, with minimal concern for repeat business or quality control, according to Robert Knowles, president and founder of the National Association of Homeowners and a licensed professional engineer who said he has inspected thousands of new builds.
> “There is no bonus for building the house to code, for quality,” Knowles said, to his knowledge. “There’s only bonuses for speed … and volume.” Knowles estimated 100% of all new builds probably have multiple code violations.
This leaves the home buyer having to very quickly assess the quality of the structure and account for this in their offer price. It feels like there's a business in here somewhere... Perhaps do a video call with a home inspector while you attend an open house?
> There is no bonus for building the house to code
Why in the world should there be a bonus for following the law.
If you want to talk incentives this is one where a stick should be used.
I don’t think the person quoted is implying that it should be that way, merely pointing out a discovery that builders have made: they _can_ get a symbolic bonus. One can skip building to code… do a quick and bad job and move on to the next job, saving cost and moving onto the next paying job more quickly. That “bonus” doesn’t exist if you build to code (and of course it shouldn’t exist, but neither should the bonus that does exist, your stick should prevent it).
It's easier to watch tiktoks of home inspections than to offer this as a service.
Just two hours of doom scrolling you will learn all the cut corners.
You won't be able to evaluate foundation or walls via a call anyway.
And we have a Pulte running the FHFA.
Lots of corner cutting, sometimes literally. I'd stay away from anything with a complex roof. If it's trying to look like an entire village compressed into a single building, it's unlikely they got all the various creases and drainage paths correct.
I'd rather avoid bad builders, if possible, though that's not entirely feasible until we change something.
Hiring your own good builder and having them build to your (and your architect's) specifications is the easiest way to avoid bad builders.
Buying tract homes is hard to avoid the high-volume builders (by definition), but it's entirely possible to avoid bad builders.
The customer is the only one left to squeeze, Lennar and others have already squeezed every penny they can out of their subs and suppliers.
I sell construction work mostly as a subcontractor, and I can definitely tell which of my customers rely on squeezing their subs to maximize their margins (JCI, Siemens, Honeywell and other global multinationals) and those that would like us both to make decent money (pretty much everyone else that doesn’t have a market cap in the billions, excluding some GCs I’ll not name) and while the big boys have a lot of work, doing projects with the latter companies is a lot more enjoyable.
> Many turn to legal action as a last resort, only to find they’ve waived their right to go to court
do people not consult a lawyer before they buy a home? Also, are the credentials of the builders not checked?
Just because you waived your right to go to court doesn’t mean you can’t go to court.
And if you sue pro-se they have to spend billable hours to prove you can’t sue them, and that’s a pain to them.
National Association of Realtors convinced everyone their realtor has their best interests and fiduciary responsibility.
Of course, this is 100% BS. Probably half of realtors lie or turn a blind eye so you will close. 99% of purchasers will never sue their realtor.
What is wild to me is, having a lawyer do your closing is only $500 but having an agent is ~$10k on average.
I bought my first home without a realtor and have no regrets.
If you mean the realtor handling it (with their own lawyers etc), I never even heard of this as a thing - I used my own lawyer, there wasn't any kind of offer or expectation the realtor would facilitate.. but i'm not in the US.
100% this. Realtors (TM) often do everything to make the transaction happen with the least amount of their effort.
I've been in a situation with a "seller's" Realtor (TM) who would just agree to whatever logistical details the buyers were asking, and then tell us how we had to dance to their tune. The attorney set them all straight, but it never should have gotten to that point. The same Realtor (TM) bungled the one house showing that I wasn't around to facilitate, setting off the alarm system that we had warned her about multiple times - including specifically for that showing. I'm sure prospective homeowners love being greeted by a loud siren. There was some other last-minute problem too that I'm not recalling the details of, but we ended up emailing the owner of her agency and told them we wanted someone else to represent us at the closing. She was that bad, but of course she had talked a really good game to get us to sign that lock-in exclusive contract at the start. Getting that contract signed is the Realtor's (TM) chief KPI, and they know it.
Of course Sturgeon's law and all that. I'm sure there are realtors who take their duties seriously. And I'm sure some people have had the complete opposite experience with poor attorneys. The incentives for Realtors (TM) are just much poorer though.
If you’re buying a home be thorough in the inspection. I’ve known a few people who got screwed.
On newer homes you want to look out for shoddy construction. On older homes pay particular attention to water, mold, roofing, and basement and/or foundation issues.
You might still buy a house with issues but you need to know what you’re getting into and price in repairs.
Unfortunately batshit housing prices coupled with ignorant buyers means that in some markets it might take you a long time to buy if you’re prudent. Push back a little on price and someone else will take it and waive inspection.
This isn’t just happening on the West Coast. I live in Cincinnati and have a family member looking and they got front run a few times by buyers purchasing with no inspection at or above asking … on properties they’d visited and that they knew had issues. It’s nuts.
Are there any metros that aren’t fully insane nowadays?
When my wife and I tried to upsize in Charleston, we got outcompeted every single time. We had one seller smartly list on a Friday and announce “All offers welcome, we will accept the best offer on Monday.” We overbid by $30k and still lost to a $40k full cash no inspection buyer from out of state. We bid on a few others and quickly gave up and left the area, the carpetbaggers can have it.
Luckily I work remote and live in the country near a big college town now, but from what I hear of my coworkers in DC, Nashville, Miami, and Texas… it’s the same everywhere and often even crazier. I have no clue how my children will be able to buy a home at this rate.
You can name your price in the Houston market right now. The same is likely true for ATX and SA, but I don't have active properties in those markets.
The winds shifted about a year ago. Pull up any property in the north Houston area (Conroe, etc) if you really want a punch in the gut relative to your current desired market.
Teach them to build their own house. Built one for ~$60k recently, to buy anything comparable on the market in my area is $300k+.
The market prices an absolutely insane premium on being the guy that takes the risk to build a house.
A good project might be a little cabin that is under the sq ft to need a permit.
I had a local around Cincinnati say all the Ohio sucks memes are part of a concerted effort to convince people it's terrible here and they shouldn't come. A friend from Portland said they tried this years ago, telling everyone it did nothing but rain in the Northwest, and it didn't work.
Really though... this is a result of three things working in tandem: chronic underbuilding of housing especially in some areas, a prolonged period of low interest rates, and financialization of housing. The underbuilding of housing is driven by both NIMBYism and a particularly bad boom-bust cycle in housing a few years ago that scared off a lot of builders.
> all the Ohio sucks memes are part of a concerted effort to convince people it's terrible here and they shouldn't come.
This is completely true. Speaking of, I can connect you with a number of long-term Ohio residents who would be willing to execute a sale-leaseback agreement that expires when their youngest kid graduates high school. For a fee, since you’d be getting such a great deal and early access to prime real estate. I can even get you hundreds of acres of prime farmland, if your budget stretches that far. Let me know!
I wish I could leave comments on the property on Zillow about all the structure and area defects.
I'm glad you can't. Unverified comments would be such a nightmare that potential buyers should ignore them while not really being able to (not to mention sellers), while I distrust both the competency and alignment of Zillow or similar to have verified comments that are more beneficial than unverified comments.
I would like a way for serious problems to not be covered up, but I believe you're going to need to do this by tying it to a home inspector's license, such as obligating "severe problem" reports to a registry which anyone could query for a fee that would be nominal for any serious potential buyer. Perhaps 0.05% of the property's highest-ever sale price, or $100, whichever is higher? Maybe some of that fee goes to the home inspectors who did the reports, to encourage severe-problem-free reports. Still lots of problems and abuses to mitigate, the least of which is how to define "severe problem", but that has the potential to provide a net benefit, unlike comments on Zillow.
I would also not expect buyers to normally avoid their own home inspection by using such a report, it would simply be another fee -- which I dislike -- though as a nearly-instantaneous result, I see a way to structure it to fit after the contingent offer is accepted (or perhaps just before submitting the offer) and before hiring their own inspection. The buyers now have a chance to address their specific concerns about the severe-problem report by what they ask from their inspector.
You could provide aggregate statistics on home inspectors to show competency. "Within the past 5 years, Harry the Home Inspector has submitted [X] reports. Of those, [X] were also reported by other inspectors within [12 months] of Harry's reports, and Harry is [in the top third / above average / below average] when ranking for not missing severe problems that were reported by other inspectors." But now you have to track repairs that explain why one inspector didn't report what another did, have some way of vetting severe problems for being correctly reporting (or setup an appeal system...), you have to track the scope of inspections to know if a severe problem would have been expected to have been found, and it continues.
From my armchair continuing to think this through, I don't see how to control the complexity on any of this in a feasible way for what would need to be run by a government licensing agency so that society has a net benefit.
Good points. Would be nice if inspections were public. Something like a Carfax for homes.
If this feature/app were viable it would definitely already be a thing.
The incredible range of perspectives in real estate makes this kind of feedback even more pointless than amazon product reviews.
There are homes that are catastrophic for a family but absolutely perfect for an individual who is doing things like working off shore or remote. Lifestyle is probably the most important factor.
True that everyone's taste differs, but it would be nice to leave a note that says "buried oil tank in yard". It could be a fake comment, but at least the buyers would ask.
Me too! But then again, when competition gets worse, you're incentivized to not give free info to your competitors.
Might be an opportunity to make such a site?
I wonder if any private entity can provide this with a net benefit.
Architects, engineers, and doctors, among many others, have ethical obligations tied to their professional affiliation. I would approach this problem from the same angle with home inspectors.
It would be flooded by malicious bot comments to try to game the system.
What is "it"? If you mean comments on Zillow, that's exactly what I was talking about. If you mean a registry tied to a home inspector license, then it sounds like you don't know how those licenses work -- or they aren't required where you live, in which case this wouldn't be an option there.
> got front run a few times by buyers purchasing with no inspection
This is enabled of course by agents whose primary goal is not to get the seller the best price, but to collect their commission percentage, right now, and move on to the next prospect.
> got front run a few times by buyers purchasing with no inspection at or above asking
Yeah, I observed this in the Boston area during the post-Covid easy money real estate rush.
Two simple changes in the law could fix this.
1. Require an independent home inspection as a condition of every sale, with a penalty of losing the right to live in the largest building after six months.
2. Make the report of every home inspection part of the public record, kept with the deed registry.
As a serial home owner, I don't think this would help the process overall. The home inspection I got on my first home was something like 16 pages of absolute nonsense. "Dishwasher is of unverified age and might fail soon." "Refrigerator is of unverified age and might fail soon." ... "Cosmetic scuffs on cabinets in kitchen." ... and on and on.
As a buyer, I don't need you to tell me that an $800 dishwasher or $1200 water heater might fail someday; you might as well tell me that the water coming from the faucets is wet. I want to know about the major systems. That particular inspection was "no ready roof access, so a visual inspection was conducted from the ground with nothing obvious detected; if you're concerned about roof condition, have a roofer come out." No, the roof is one of the very few things I care about from hiring you.
Most recent inspection was better, but still included a dozen pages of ticky-tack nonsense that no one should care about. I suspect that makes people feel better that they got their money's worth by someone pointing out that a kitchen floor tile had a visible crack in it, one kitchen light bulb was burned out, and an HVAC filter was overdue for changing, but that crap doesn't even need to be in the report let alone become a permanent part of the registered record of the property, nor should it be forced as part of the purchase process.
Requiring it as part of every transaction would be a massive giveaway to the home inspection industry. Adults are capable of making adult decisions, and if they want an inspection as part of the decision, they can choose to get one. Likewise, sellers can choose to go with the buyer who best fits their circumstances.
Also needs to have state set requirements first what counts as an inspection as companies like lenar set their own rules about what can be inspected.
How do you envision this helping?
There are limits to home inspections, and many types of defects you're just not going to see. For example, that leaking water line causing a brown spot on the wall that reappeared after a week could be slightly slower (or in a drier season) and only appear after a few months. Many problems take time to manifest as symptoms, and especially with a newly constructed home there just hasn't been enough time. (also why code inspectors check at separate stages of progress, while many more problems can be visible without having to open walls)
Furthermore, home inspectors don't actually have any skin in the game. They're not giving you any kind of representation or warranty, but rather more of a quick look from the perspective of someone who knows how houses are built and have a list of common problems to look for. And they can certainly succumb to the same type of normalization of deviance going on with the contractors in this article.
That's not even getting into the types of ongoing scams I've heard of where builders/sellers do things like "seal" the attic access door for "energy efficiency" reasons, and then assert that home inspectors cannot inspect the attic (eg the roof!) because opening the door would be causing damage. Or that a seller can easily cover up many types of problems a home inspector would notice, it's just generally illegal.
I'd say the real problems here are the high pressure sales funnel, and the complete lack of legal accountability. Forced arbitration and other onerous terms should be illegal. Heck if we're talking about a professional developer with an inventory, liquidated damages themselves should mostly be illegal. And newly built homes should have mandatory warranty periods longer than a year, probably at least 5 years, culminating with an independent inspector at the end to help notice any still-developing problems.
Then, claims for defects shouldn't be going directly to the builder who's strongly incentivized to trickle it down to some disempowered guy in a van, claiming to have solved the problem with whatever he had on hand. Rather the homeowner should be able to choose any contractor to fix the problem and file a claim on the builder's insurance - just as if it was home insurance claim, with a different responsible party.
In my country, an inspection is required for the mortgage lender, is this not also the case for the US?
An appraisal is required, to ensure the property is worth enough that the lender will be OK in the event of a foreclosure.
I've never had an inspection requirement as part of purchase initial financing nor as part of a refinancing.
I had a survey, and a valuation. The survey looked for signs of problems, though they didn't tear up and walls, but I guess shoddy work outside is a sign there may be problems inside?
I asked the appraiser what he was looking for on one of my refinances. "I pretty much just verify the house is real, measure the foundation [for square footage], count the floors, bedrooms, and bathrooms, then find some local comps to justify the appraisal."
I don't think any of the appraisers were inside for even 10 minutes.
Very recently a record portion of houses were bought with cash, and you couldn't even get a house if you wanted an inspection because you'd be outpaced by those who weren't going to do one.
I believe it depends on the lender, though it's going to be effectively required by all.