Misapplication Of Construction Funds Results In Consumers Paying Twice For Unfinished, Defective Homes

Florida Trend Magazine reports:

• "The fallout from the downturn in Florida’s housing market: More than 21,000 new foreclosure cases in June alone — up 144% from a year earlier — and a skyrocketing number of complaints against home builders over construction defects. Meanwhile, home builders in financial trouble have simply abandoned hundreds of customers, many of whom end up paying twice. “Contractors and consumers had both better hold onto their chairs,” says one attorney."

Among other things, the story highlights the practice by some in the construction industry of accepting deposits from customers (new-home buyers as well as existing homeowners desiring home improvements) and/or drawing down on customers' construction loans, and using the proceeds for things other than building the home or home improvement. In some cases, the builder or general contractor will simply "go out of business," stiffing in the process subcontractors or materials suppliers for labor and materials already provided. This results in mechanics liens being placed on the property, ultimately resulting in the customer either paying twice for an unfinished or defective home (or home improvement) or risk losing his/her home or building lot.

For more, see Left in the Lurch (Florida has one of the highest foreclosure rates in the nation. But the downturn in the residential housing market has left plenty of other problems in its wake, including increasing numbers of construction defects).

For related stories, see:

• Is the Bank at Fault? (Some banks release borrowers' money to contractors with little proof that the home under mortgage is actually being built), and
• Cutting Corners (Some owners are paying the price for homes built in a hurry during the boom years), and
• Victims of Great Bay Homes fiasco in PSL hope state comes to rescue.