Angry Homeowners Take to the Web

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Angry Homeowners Take to the Web

As homebuilders struggle and houses get harder to sell, builder-

bashing gripe sites are grabbing more attention and more traffic

BusinessWeek - USA*

by Maya Roney

http://www.businessweek.com/bwdaily/dnflash/content/aug2007/db2007082

_138347.htm?chan=top+news_top+news+index_businessweek+exclusives

The outside of Sabin's house in Lenexa, Kan., is covered with

lemons: lemon-shaped foam cutouts, twinkling lemon Christmas lights,

and a lemon-adorned wreath on the front door. If you go to her Web

site, you can see for yourself. You'll also see photographs of

splintered beams, bowed floors, and a graphic that declares: " Pulte

Homes sold me a lemon! "

Sabin has been called crazy, but she's not the only dissatisfied

customer. The Internet has rapidly become an outlet for frustrated

homeowners to chronicle their bad experiences with new homes they

have found to be structurally defective. Homeowners can now post

complaints, discuss legal options, and warn future buyers on at

least a dozen builder-directed " gripe sites, " with names such as

www.crapconstruction.com and www.khovsucks.com.

Careless Building During Boom?

As home values decrease and home sales slow in many parts of the

country, construction problems seem to have become an even bigger

concern for homeowners. " I notice the traffic has definitely picked

up, " says Andy , a longtime consumer advocate who runs three

sites: www.FightPulte.com, www.FightDiVosta.com and

www.FightDelWebb.com. The three sites serve as national

clearinghouses for those who think they may be victims of shoddy

construction. During the housing boom, builders were working fast to

keep up with all the people gobbling up new properties, and

believes the quality of building suffered as a result. " The pendulum

swung too far in [the builders'] favor, " he says. " The Internet now

is rising to level the playing field. "

For many of the creators and visitors to these Web sites, the

problem is water intrusion and mold, brought about, they claim, by

faulty construction. Dan Wenk, creator of www.levittandsonshome.org,

claims he was not able to return to his Levitt & Sons home in

central Florida after receiving chemotherapy because his immune

system could not tolerate the elevated mold levels. " I was

struggling with my life-threatening illness and now needed to find a

new place to live, " he writes.

Levitt & Sons, a subsidiary of Levitt (LEV), has not tried to stop

homeowners like Wenk from using the Internet as a sounding

board. " Today consumers increasingly turn to the Internet and other

new forums to share their opinions and openly discuss products, "

said Levitt & Sons President Seth Wise in regard to Wenk's

site. " While at times it may be difficult, Levitt Corporation

welcomes this evolution as it creates an open dialogue and enables

our employees and subcontractors to be accessible and accountable to

all of our homeowners. "

In Lieu of Litigation

In Sabin's case, the culprit is a type of soil called fat clay that

swells excessively and has been pushing apart the frame, doors, and

ceilings of the brand new home she bought last summer. The builder,

Bloomfield (Mich.)-based Pulte Homes (PHM), should have tested the

soil before constructing her house, Sabin says. Pulte has come in to

make repairs, but Sabin claims they have proved futile as the soil

continues to exert pressure on her foundation. The value of the home

has fallen nearly $120,000 in the past six months, Sabin writes on

her site. She now wants Pulte to buy back her home, but they

refuse. " I try not to be emotional, but I live in this house every

single day, " Sabin says. " I have a right to be emotional about

this. "

But Sabin doesn't have a right to sue the builder. Not yet, anyway.

Many new-home sales contracts, including Pulte's, state that

disputes related to the purchase of the home must be settled by

arbitration before moving to court. For now, Sabin says she's

content to use her Web site to spread the word and prevent others

from going through a similar ordeal.

Pulte says it provides each new homeowner with a 50-page " Pulte

Protection Plan " detailing a limited warranty in which the builder

agrees to repairs for one year after the purchase on the house is

closed. " We have identified the problem with her home, we've

developed a plan to fix it, and we've made the offer to her to fix

it, but Ms. Sabin refuses to let us make the necessary repairs to

her home, " says Mark mee, a spokesperson for Pulte. " If

Sabin had spent half the energy working with us as she's put into

her Web site, this problem could have been resolved by now. "

Builders Threaten Libel Suits

Builders do seem to be concerned about the effect of gripe sites on

their reputation. Miami-based builder Lennar (LEN) has filed more

than one lawsuit against Mike , a Florida real estate broker

who runs www.defective-homes.net. In a complaint filed July 30 in

ton County, S.C., Lennar alleges that " engaged in a

concerted scheme to defame Lennar publicly with the goal of

extracting from Lennar financial payments. " On July 20, a federal

magistrate judge in Florida recommended a preliminary injunction

preventing from using the word " Lennar " in Web site domain

names.

" They want me dead, there's no way around that, " says , who

claims he is now bankrupt and unable to afford legal fees. " If I

lose these things, it sets precedents for every other group that has

a gripe site. " If you search " Lennar " on Google (GOOG), 's

site, which he says gets 15,000 visitors a month, comes up near the

top of the page.

Builders may be able to win a lawsuit against a poster or Web site

creator who cannot back up a statement they post online about

defective construction. " The angry homeowner who posts messages on

these sites is not protected from libel actions, " says Grogan

Faller, who practices First Amendment law with a focus on media and

Internet for Frost Brown Todd in Cincinnati. " False and inflammatory

statements are not protected. "

Faller says she is unaware of any lawsuit in which a judgment was

taken against a poster on a real estate gripe site. But because it's

such a new area, posters and Web masters may not realize that they

are at risk. " I think people are used to the concept that someone

can sue the newspaper, or magazine, or television station for libel,

but they're not used to the concept that they themselves can be sued

[for posting on the Internet]. "

Paying Complainers to Go Away

Because of the binding arbitration clause in many new-home

contracts, unsatisfied homeowners rarely make a court hearing—or the

headlines. " I think that the problem with construction defects has

been under the radar for so long, " says Seats, president of

Homeowners Against Deficient Dwellings (HADD), a nonprofit consumer

protection group for homeowners dealing with defective

construction. " People just don't understand how many people are just

being financially destroyed by bad construction and binding

arbitration. But now more and more people are going to the Internet

to expose their problems and get back at the builder. "

What happens instead of a trial, Seats says, is that big builders

pay people to shut down their builder-bashing Web sites. It's true

that many links to former sites are now defunct, including the once-

popular KBHomesSucks.com. " This was the most outstanding Web site,

and KB Homes tried to sue them, " Seats says. " The vast majority of

[now-defunct sites] were people that were paid to shut up and go

away. " Repeated calls from BusinessWeek to KB Homes (KBH) have, as

yet, gone unanswered.

Now homebuilders are hurting, leading some angry homeowners to worry

that construction defects may become even more common as builders

try to cut costs. Sales of new homes fell 6.6% in June, to an

annualized rate of 834,000, and builders have been reporting lousy

earnings numbers (see BusinessWeek.com, 7/7/07, " Homebuilders in a

Hole " ). " The builders are in very precarious shape, " says

. " It's a very dangerous period right now in the housing

industry. "

For future angry homeowners, there will no doubt be plenty of new

places to complain.

Click through BusinessWeek's slide show for a look at some of the

angriest real estate gripe sites.

Roney is Real Estate writer for BusinessWeek.com.