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Lawyer alert, lawyer alert. . . disclaimer for the following post





I have to say that I am not a big fan of people complaining about their homes. While I acknowledge that there are many instances where homes are improperly built, a lot of homeowners are whiners. I understand that a home is the biggest investment most people make and thus they are more inclined to complain but it is my belief that most houses are built properly. It is in most builders' interests to build good homes.
 
hmm... K. Hovanian Homes is having a "Deal of the Century" Sept 14th-16th.





Wonder if their homes at Avenue One is being heavily discounted?
 
I went to Serra at Portola Springs to put in my chance to win $500 bucks from their FBI or Mission Impossible or whatever promotion, and didn't see any of you all there. Actually, I didn't see anybody else there, except for the sales people. They were very nice, even when I answered their questions and they figured out that I was just there to try and win $500. How much do you think those model home sales people make? Commission or salary?
 
That may be true for builders with one or two projects but large builders like Lennar or William Lyons have tens of projects going on at one time. They need to maintain a good reputation so that people will want to buy their homes versus another builder. A house is no different than a car or a hamburger.





My beliefs come from dealing with litigation involving homeowners and construction defect. In a CD case, there is usually 10-20 homes (in communities with 100+ homes) with maybe 10-20 percent of them really suffering significant harm. This translates to a defect rate of about 1-5 percent. Plaintiffs' attorneys try to jack up the damages and claim for every problem, real or perceived, and then get a settlement so they get their fees paid.
 
<p>awgee - I will give you the info I have from the builder I worked at. New home sales agents are commission based. They can take a draw on future sales to smooth out the ups and downs of having a neighborhood to work at. On the commission income they make about $100k. They also get bonuses. The bonuses vary from what is the latest and hotest thing corporate wants to focus on. The JD power surveys were big deal and if they got consistent high scores they would get a nice bonus. They also can get a bonus on sales. When it is quarter or year end they can get special bonuses if they hit their sales goals.</p>

<p>IC - Is right most people are whiners. I have stories that would make you want to smack the homeowner over the head with a tennis racket. Some people just have no clue and do not take care of their home. However there are builders whose quality is awful. Each builder is different and even if you find a builder that is high quality it can vary from project to project. Most builders stick with their subcontractors but others will take who ever submits the lowest bid.</p>

<p>For an example most people like StanPac and say that the quality is really good. I checked out Mille Fleurs and thought that the tile work and fixtures work was awful. It was as if a third grader slapped it together. One bathroom had mmmmm granite counters with matching backsplashes that did not sit level or have any sealant. WTF? I saw huge cracks in the tile work in the showers and other various crappy mistakes. So they must have had a cheap subcontractor or one that was bitter but the work was really terrible.</p>
 
No. . .I have represented subcontractors in the past.





Most subs are local businesses and take a lot of pride in their work. It makes sense to do a good job because the builders will hire good sub time and time again. However, there are a lot of exceptions because money still talks. A lot of subs are forced to hire illegals to do the work because they are cheaper. However, some jobs (like electricians and plumbers) are generally union. This is really no different that any other profession.






 
<p>IC - I agree most of the subs take great pride in their work and charge a fair rate for it. Maybe it is because I am aware of some of the changes that are happening at the builders. Take Lennar who has publicly disclosed that they went back to their subs and said "We are cutting your bid by 20% and if you don't like it, have a nice day and don't bother to submit a bid again until you drop the price." I know of other builders who are doing the same and many regular subs are no longer regular. There is also a lot of shady things that go on to get bids or why a certain sub is a regular.</p>

<p>By no means was I trashing a good local sub but more to bring a point that it varies between builders and even between the neighborhoods of the builder. With the layoffs and people moving from one builder to another a lot of changes are happening at each builder. As this happens the quality of the builder will either go up or down. </p>
 
Graphix, I complete agree. . .money is still king.





I do think that the quality of homes are going down in general but still pretty good overall. I think some of the builders will get smart and keep quality up. If not, someone else will come in and do it. Very similar to the computer or car industries





If it gets really bad, us mighty and noble lawyers will keep them in line
 
Why don't some of these subs vertically integrate? In more traditional manufacturing vertical integration is a NO NO!!! However, here it sounds like they would have alot more control over cost and then be able to really stick it to the "builder" or even buy the land out right themselves.
 
<p>IC - Your point on quality is spot on. What is funny is that some of the builders do not think that way. The builder I worked for took great pride in their quality but now according to their CEO they will return to the basics and be a manufacturer of homes. There are others who are making the same changes and then there are others like Lyon who continue to strive for quality. Of course Lyon doesn't have shareholders to answer to anymore, so that makes a difference. </p>

<p>Yes, I have a feeling you will not have any trouble finding business for the coming years. </p>

<p>As for KHov I have no respect for Ara Hovnanian their CEO who said two months ago to other builders "To raise prices. People aren't buying because they think you will lower prices again. And quit giving discounts." Then he has this sale of the Century and slashes prices. What an asshat! Then he has the audacity to state in their latest 10-Q that they are trying to pay down debt but they tapped nearly $500bil of their $1.2bil credit line. Today he says that KHov will not go BK. Really, I mean really what kind of fool do you take people for? The only reason your company is still functioning is because of that credit line. You failed to mark down your current inventory at the "sale of the century" price or the land you hold at the price you are trying to sell it for. If you did you wouldn't have that credit line to tap into. What a joke. </p>

<p>{diatribe over}</p>
 
I have no respect for Ara Hov. either. He goes on CNBC and keeps telling people about how great everything is and then one day basically begs the Fed to cut rates.





Ara was the also the one that state that his industry had learned from previous mistakes and that a bubble could not happen.
 
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