Binding Arbitration Bites Builders' Buyers; Hearing "A Kangaroo Court," Says One Homeowner Feeling Screwed Over In Purchase Of New Home

The Atlanta Journal Constitution reports:

• Greg and Kimberly Cole and their three children have slept in cars, in a tent, in a motel, at friends’ houses — all to avoid staying at their $429,000 house in Marietta. The Coles say construction problems at their 3,400-square-foot house led to cracks, leaks and mold that’s sickened them.

• They went to binding arbitration with John Wieland Homes and Neighborhoods because that’s what their home warranty required. Builders require buyers to agree to arbitration to avoid costly litigation when conflicts arise. But the Coles say arbitration failed them. Many of the repairs they sought were rejected by the arbitrator, and the ones that were ordered almost two years ago have not been made.(1)

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• The Coles and other homeowners believe arbitrators are closely tied to home builders, to the detriment of homeowners.

• Bill Clements was involved in a dispute with Sharp Residential over problems with joists and wood floors at his new home in Kennesaw. “It’s a kangaroo court for the homeowner,” Clements said. “We won but it was a grossly short amount of money considering what had to be done. My hardwood floors are a disaster.” And because the arbitration decision is binding, “there’s no appeal whatsoever,” Clements said.

For more, see Homeowners say arbitrators biased toward builders.

(1) Reportedly, the home is in foreclosure because the Coles stopped making payments two years ago. “The roof leaks, the windows leak, the door leaks,” Greg Cole said. “The house is basically worthless.” Inasmuch as it will also be the mortgage lender who ends up holding the bag in this case (as it often is), lenders may want to consider refusing to finance new home purchases that contain builder-prepared arbitration clauses. As long as it's owed significant sums on the loans, the lenders have as much of an interest in protecting the home as the owner does.