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Online Extra: Angry Homeowners Take to the Web


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The outside of Susan 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 Martin, 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 Martin 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 Marymee, a spokesperson for Pulte. "If Susan 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 Morgan, a Florida real estate broker who runs www.defective-homes.net. In a complaint filed July 30 in Charleston County, S.C., Lennar alleges that Morgan "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 Morgan from using the word "Lennar" in Web site domain names.

"They want me dead, there's no way around that," says Morgan, 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), Morgan'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 Susan 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 Nancy 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 Martin. "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. By Maya Roney


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