Taking steps to make sure your builder won't go bust
Housing Scene
WASHINGTON — It's always wise for would-be home buyers to make sure that the builders they choose are on solid footing. But at a time when many companies are teetering on the brink of financial ruin, it's necessary to be as picky about the builder as the floor plans and options he offers.
There already have been 35 "major" implosions and 27 "tiny" ones among the building community, according to the Home Builder Implode-o-Meter. And the website has 15 builders on its "ailing" watch list, including some of the biggest names in the business.
The website's roll call of fallen firms is somewhat subjective because the companies on it may not have shut down operations altogether. Some have filed for bankruptcy protection, while others may still be running but have gone through some sort of adverse change.
Whatever the case, when a builder becomes crippled, his buyers usually go down with him. Current customers often lose their deposit money or end up with a partially completed house. Recent buyers who have already moved in could be left with no one to come back to fix the numerous items that invariably require attention.
It's not always easy to check on a builder's financial stability, but you need to protect yourself. So it behooves you to do some investigating to make sure that the builder will not only be around to finish your house but also to take care of warranty items that may pop up after you take occupancy.
There isn't any precise way to research your builder's staying power, but here are some steps you can take to avoid a sinking ship:
* Check with your local courthouse to see if any of the subcontractors and material suppliers have filed liens against the builder because they have not been paid. It's not uncommon for a builder to use his cash to meet his own payroll before paying any or all of the 120 or so vendors who work on a house, hoping he can use cash from the next sale that comes through the door to pay for the work and materials on the previous sale.
Subcontractors and suppliers often let a builder slide because they want to keep working too -- but only for so long. When it becomes evident to them that the company is in dire straits, they file liens against the builder so they'll be in the line of creditors should the builder file for bankruptcy.
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