What happens when a builder makes a mistake?

A frustrated homeowner from Indiana recently wrote to me asking for help. After reading his letter, I felt you might find yourself in a similar situation when building your new home. It turns out the Indiana man had a builder who didn't install the right vents in an exterior wall of the home. When the mistake was brought to the attention of the builder by the homeowner, the builder simply shrugged it off and said no one will notice and the substitute vents will work just as well as the ones that should have been installed.

Will suing a contractor work in all cases?

The trouble is the someone who did notice happened to be the same person who pays the bills. The story continued to unfold with the builder refusing to rectify the mistake. The homeowner proceeded to talk with his attorney to find out if legal pressure could be used to have the right vents installed. The legal advice was a bitter tasting pill: The cost of litigating the matter was ten to twenty times the cost of the repair. To make matters worse, there was no guarantee that a legal solution would be 100 percent favorable to the homeowner.

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At first blush, this might scare the beejeebers out of you causing you to back out of the new home market. The thought of dealing with an autocratic builder who shrugs off mistakes is most disconcerting. In reality, it would be a nightmare to deal with. The good news is you don't have to deal with people like this and you can insert several provisions in your contract with your builder that give you an option or two in the event your builder makes a mistake he wishes to walk away from.

Should you get a detailed cost estimate of the project?

The first thing you must do is request a highly detailed cost estimate with your bid from each builder. This breakdown might easily contain 150 line items, perhaps more. It is vitally important that the detailed cost breakdown becomes an addendum to the contract between you and the builder. This detailed pricing allows you to attach costs to different aspects of your job and can help initiate discussions as to how much things might cost if they need to be redone. More importantly, the line items allow you to make sure you only pay a given amount for work that is complete and totally satisfactory.

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How do you protect yourself in the contract?

Your contract needs to contain language that allows you to withhold money for work that is not complete and/or work that does not pass inspection and/or work that simply is wrong or poorly done. The contract should contain language that also gives the builder a specific time to begin the repair work. If the contractor walks off the job or drags his feet with respect to initiating the repair, the contract should contain language that permits you to obtain quotes from other builders or tradespeople who will step in and take care of the problem. The cost of the repair is paid for by you but deducted from the amount you owe the original builder.

All of these clauses need to be written by a competent attorney who deals in contract law in the state where your home is being built. You must also talk with the building department before you sign the contract. The local building ordinances may create a sticky situation with respect to who is responsible for work being done on your new home. If your initial builder takes out the building permit and ignores you, find out if there is a way to transfer the building permit to you or a second builder who may have to take over the job. No doubt this will be unpleasant, but failure to look into this probability may cause an enormous headache and legal problem if your initial builder holds hostage the building permit and your final Certificate of Occupancy.

Perhaps the best advice is to find a builder who doesn't treat you like a castoff. I can't emphasize how important it is to actually talk with three or more of the builder's past customers. Ask about disputes. Drill down and find out why they happened and how they were resolved. Ask if the builder ran towards the problem or ran away. You want to hire a builder that sprints to the solution of each and every problem.

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