Bad things can happen even to the most reputable builders.
Lexington Homes, the Chicago area`s top volume builder and one of the 20 largest single-family home firms in the country, incurred the wrath of homeowners and village officials when a plague of leaky windows struck a 113- home subdivision in Bartlett.
The wicked leaky window witch also descended on 30 townhomes built by Chicago`s MCL Development Corp. in the second phase of Dearborn Park on the Near South Side, causing considerable buyer distress.
And Detroit-based Pulte Home Corp., one of the nation`s 10 largest builders, got stuck big time with the most talked-about new-home problem of the past several years: fire-resistant treated (FRT) plywood.
Pulte used the product, which can decompose after only a few years, on the roofs of thousands of homes around the country, including some 1,200 in the Chicago area.
When such widespread defects start to occur, what`s a builder to do?
Take care of the problem fast, even if that`s costly, says Carol Smith, Littleton, Colo.-based editor of Home Address, a newsletter for builders on customer sevice problems and author of a building trade book, ”The Positive Walkthrough: Your Blueprint for Success.”
The alternative, Smith told home builders at a seminar at the builders annual convention in Atlanta early this year, is ”residents picketing models and putting signs in their windows and threatening legal action.”
Builders in the Chicago area appear to agree in principle, though the speed of response may not always meet homeowners` approval.
”The best way is to be forthright and honest and get it done as quickly as possible,” said William Maybrook, Lexington executive vice president.
Lexington, which completed its first homes in the Bartlett subdivision in 1988, last year offered to replace the defective windows after rancorous resident complaints and a threat by the village board to bar approval of further Lexington development.
”We identified the fact that the window that was purchased was not of sufficient design to make it easy to install,” said Maybrook. ”We don`t use that window manufacturer anymore.”
The process took ”several months,” said Maybrook. ”There was lots of interaction with homeowners and the village interjected itself.” He said the window replacements cost hundreds of thousands of dollars.
That sum is minuscule compared to the amounts need to take care of the FRT plywood problem, which may involve as many as a million homes, mostly in the eastern half of the country.
Developers around the country have already spent millions replacing defective roofs and the National Association of Home Builders has estimated replacement costs at between $2,000 and $3,000 per roof, which would put the total U.S. tab at up to $3 billion.
Use of the plywood began in the early 1980s, and was adopted as a requirement for townhome construction in communities all over, including some in the Chicago area.
The chemicals used to treat the plywood have been shown to set off a reaction to heat from the sun`s rays that attacks the cellular structure of the wood.
Pulte has stood out among bulding firms in adopting an agressive posture of inspecting its developments and replacing roofs. ”We wanted it to be taken care of before someone got hurt or there were lawsuits. We bit the bullet,”
said Daniel Star, president of Pulte`s Illinois Division.
Pulte is also suing a group of manufacturers, chemical treaters and distributors in federal court in Florida to recover its expenses.
In the Chicago area, Star said, Pulte sent out letters at the end of 1989 to more than 1,200 homeowners, warning of the problem and telling them not to walk on the roofs until inspections were made. The units were townhomes and condominiums in Pulte subdivisions from Orland Park to Aurora to Wheeling.
Then inspectors visited the homes, tooks samples and documented the cases, and the company met with homeowners` associations to offer a plan to replace deteriorated roofs at no cost to the homeowner.
”We ultimately discovered that we had about 600 to 700 that were in the process of degrading, and last year we replaced over 500. The balance will be completed this spring,” Star said.
He noted that the replacements included not only the plywood but new roof tiles, so in some case owners of homes up to seven or eight years old got completely new roofs. In most cases, he added, the replacement took only a day.
”We got many letters from customers and verbal thanks,” said Star.
”Typically, people would come out with baked foods and prepared snacks and beverages. They were so pleased to see what was going on.”
Star said he hadn`t heard of any other area builders taking Pulte`s approach, though he suspected others may have put in the same plywood. ”All lumberyards in the area sell the same product to all builders,” he said. ”I have not yet heard of anybody else doing replacements or even acknowledging a problem.”
Gerry Woody, executive director of the Chicago-area office of Home Owners Warranty (HOW), the major third-party insurer of new homes in the region, said she had heard no complaints from buyers about the problem.
One builder called, and she referred him to Pulte, she said. ”Pulte has been so upfront,” she added.
Pulte`s letter-writing campaign underscores an element of key importance in dealing with home buyers when a major problem surfaces: communication.
”The biggest thing to do is communicate,” said Dan McLean, president of MCL Development, builder of the highly praised Embassy Club project in the De Paul area and one of the developers in Dearborn Park. ”You`ve got to tell
(residents) what`s happening and be honest with them.”
MCL completed 30 $180,000-to-$350,000 townhomes in Dearborn Park last spring and summer and over several months became aware that they had a major problem.
”We started getting sporadic reports of leaks at the end of the summer,” McLean said. ”Then in October it got real rainy, and the problem manifested itself.”
Identifying the real problem, which involved the seals around the windows, took some time, McLean said. Then MCL began negotiating with the window manufacturer and the distributor to work out an agreement for repairs. Over the winter, a solution was worked out whereby the manufacturer is to supply new windows, the distributor is to install them, and MCL is to repair lead damage, McLean said. The repair work began last month.
During the late fall and winter, company representatives held meetings with the homeowners, first individually and then in a group, and also sent out letters to keep them informed about progress toward fixing the problem.
”Initially there was a lot of animosity and skepticism,” McLean said.
”The more we communicated and (the more they) saw we were taking corrective steps, they began to believe we would take care of it.
”There`s always one or two who may be skeptical,” he added. ”Nobody`s happy. It`s an inconvenience to homeowners who have to wait to get the problem corrected.”
Such a widespread problem can have a ripple effect on the whole company, McLean noted. ”It obviously creates extra work for the staff. All the homeowner attention takes away from normal duties. It takes a lot of time keeping everybody informed. It`s very costly to everybody involved.”
Fortunately for both builders and buyers, problems of such dimensions don`t seem to happen very often in the Chicago area. Woody, who has been with HOW`s Chicago-area office since 1978, said she`d never had to deal with anything like that.
”We`ve never had a widespread problem. We have one of the lowest claims ratios in the country and pay the least amount in fees of any place in the country,” she said. HOW has covered 33,219 single-family and 1,060 multifamily homes since it started here in 1976, she added.
Material defects on a broad scale seem to affect primarily windows and roofs, according to Joe Zekas, a former developer who publishes the weekly Real Estate Profile Apartments and Homes newspaper.
He had to replace 300 windows in a De Paul area condominium rehab project he did in 1980 when it turned out the thermal pane seals were defective, resulting in clouding of the windows to such an extent that some became completely opaque.
In his case, the manufacturer went out of business so he had to bear the $30,000 replacement costs himself, he said.
He replaced the windows in unsold units, he said, but 12 residents who had already bought their condos had to pay for their own new windows because their warranties ran out by the time the problem was discovered.
”You`ve got to understand the problems of builders,” he said. ”Systems go bad, and it`s a question of who`s going to bear the consequences. There has to occur some time that (builders) just walk away.”
Defects in a building component coming from a supplier aren`t the only landslide problem that can fall on a builder. An engineer`s or architect`s design mistake can cause a problem to be replicated in every unit in a subdivision.
Widespread problems can also come about when a builder has an inadequate or poorly organized service department policy, or the wrong people running it, according to service consultant Smith. In such cases failures in carrying out the normal warranty and punch-list work (to correct flaws found on the buyer`s final walkthrough) can have the same effect as if there were a major product defect.
”It starts when you have generalized discontent rising among owners, then it takes 45 or 60 or 90 days to do warranty work, it overloads your normal systems and you can`t keep up,” Smith said. ”Then you get strings of insults, threats of legal action, third-party home inspectors, attorneys and citizen petitions.”
At that point, a builder may need to change his service approach. Rolling Meadows-based Sundance Homes, which ran into a major service work problem in a Glenview subdivision three years ago, responded by instituting a tight quality control system operating independently of the construction staff.
Lexington recently reorganized its pre-closing walkthrough system after deciding that its old approach wasn`t working.
”We finally concluded that we had a major problem in having subcontractors come back to handle punch-list items after people had moved into their homes,” said Lexington`s Maybrook.
”The subcontractors . . . no matter how careful we were in selecting them, even when we would hold back their checks, aren`t as sensitive to service as we are. As a result, we had a lot of problems in people having appointments made to have, say, a plumber come back, then people would take the day off and the plumber didn`t show,” he said.
Lexington now schedules two walkthroughs, one the day of closing and one the week before. After the week-before walkthrough, tradespeople on the site building houses can repair defects and the resident isn`t forced to take a day off to wait for a tradesperson.
”It`s reduced the number of callbacks necessary,” said Maybrook. ”Over 70 percent of our second walkthroughs are zero-defect. It was rare to have zero-defect before.”
This kind of response to service problems, particularly large-scale ones, is essential if the building industry is to get and keep a positive image, said Robert Mitchell, a suburban Washington, D.C., builder who is chairman of the consumer affairs subcommittee of the National Association of Home Builders.
”Ultimately the image of the industry is of the individual builder,”
said Mitchell, who appeared with Smith at the Atlanta seminar. ”And no matter how good a builder is, he is likely to have customer service problems.”
Builders have to respond in a way that the problems will turn into opportunities to develop better relationships with buyers, he said.
”Customers with problems corrected can be more loyal than customers who never had a problem,” he said, adding, ”but I`m not suggesting that you make mistakes on purpose in order to correct them.”
