Vote Yourself A Higher-Cost New Home

Arizona voters will have a chance to raise the price of a new home and reduce the choice they have in the marketplace with an initiative on the ballot this November:

The proposed measure, which requires more than 153,000 certified
signatures to qualify for the statewide ballot, includes a 10-year
warranty on new homes and gives homeowners the right to choose which
contractors with a decade-long, complaint-free record do repair work.

Having shopped from time to time for a new home, I can say that such homes with extended warranties from quality companies do exist in the marketplace - some builders offer this kind of warranty, and some do not.  All this bill is doing is reducing choice.  It is requiring that consumers no longer be offered the choice of a new home without a 10-year warranty, and will require that all homes carry this more expensive option.  I am sure that what people voting for this bill will hope for is that they will be getting today's less expensive house but with a 10-year warranty added, but that is not the way it works.

Second, this will virtually eliminates the small independent builder.  Though they do not produce a large percentage of the total homes, small builders, often individual investors with a single property, are still an important part of the market.  You might say, surely this is just an unintended consequence!  Well, what if I told you the AFL-CIO, the largest organizer of construction workers in large home builders, is the #1 financial supporter of this bill?  That information might change this from an unintended consequence to the #1 rationale behind the bill.

Finally, one can easily argue that the law is forcing people to pay for something that may well have no value.  Individuals trying to game the system can easily start a company, build some houses, pay off owners, fold up the tent, and move on to a new entity.  Consumers are left with a 10-year warranty from a company that no longer exists.  Which is how the roofing game is played by the bottom-fishers in that industry.  Which means customers have to shop around for well-established companies with long track records and good products, which, if they did so, would obviate the need for the bill in the first place.

Provisions give homeowners the ability to sue without the threat of
being responsible for a builder's attorney and expert fees and require
builders to disclose their relationships with financial institutions.

Just what we need - another industry where the plaintiffs have zero cost to launch any frivolous suit they want.

Yet another would require that model homes reflect the types of properties that are for sale.

I have no idea what this means.  Are there really buyers who are dumb enough to walk through a model, say this is the house they want, and then blandly accept a home that is totally different?

What I perhaps found funniest about the article was this bit of political positioning:

The campaign, called the Arizona Homeowners Bill of Rights
Committee, formed in the midst of this year's housing-mortgage
meltdown. And the committee has attempted to draw links between
financing and construction troubles.

"These same companies that build shoddily also were involved in the
housing-mortgage crisis. They were on both sides of this equation. They
were financing homes above people's means and selling homes that were
defective," said Richard McCracken, an attorney for the measure's
sponsor, the Sheet Metal Workers' International Association, Local
Union 359.

This is kind of a hilarious stretch - talk about guilt by association.  Of course, the bill has nothing to day about mortgages, but since homebuilders were associated with those bad mortgage guys, we should feel free to do anything we want to them.

  • ErikTheRed

    I would agree that this bill is bad for the home building industry and bad for the economy in general. However, I've had the opportunity to see how the building industry treats its customers (at least out here in Cali, but my understanding is that the situation here is not unique). Simply put, new home builders write contracts in such a way that what warranties are included are pretty close to unenforceable, and the builders pretty much give homeowners the finger when legitimate repairs are needed. Basically, they force arbitration and make the homeowner pay for everything - getting through the process is so lengthy and expensive that it's rarely worth it. Or, they'll simply agree to do the work and then never do it. What are you going to do? Sue them? You already agreed not to. The best way to get warranty work is to get together with your neighbors, make a list of the most egregious examples, and get a story in the local paper or local television station. Even the high-end real estate isn't immune. My wife and I have been renting a new property in the area we want to live (we accurately predicted that unkind things would happen to the market) that's valued in the neighborhood of one million dollars. The builders still don't do repairs, even for stuff that's pretty obvious. I have friends and family in that have had similar problems all over the place.

    On one hand, nobody sticks a gun to anyone's head and forces them to sign these crap contracts. On the other, have you ever actually attempted to wade through the hundreds of pages of legalese involved with purchasing a new home?

    So, yes, this is a bad idea and a bad law, but the building industry has pretty much gotten down on its hands and knees and begged for this sort of treatment by abusing its customers so badly. If prices go up, they'll simply go up to the amount they would be if the warranties were actually worth something. If it makes you feel any better, the few remaining small builders that I know usually don't have these sorts of problems because they actually do good work, check the work of their subcontractors carefully, etc. They're much more sensitive about their reputations as their businesses live and die by them.

  • Rolo Tomasi

    This bill is a big middle finger to people who know how to fix things around the house. In my family, we would never pay for a warranty -- E(cost of repairs)

    I'm glad the government will be able to tell people like my mom not to do what their good at and instead spend more of their money.

  • Rolo Tomasi

    I don't know why parts of my comment didn't print, it should read:

    E(cost of repairs) less than price of warranty. when thing broke my mom would just go to her "how to fix it" book and figure out how to fix it. Which was better than my dad's method of attempting to fix, but ending up just cursing and then breaking it further.

    I'm glad the government will be able to tell people like my mom not to do what their good at and instead spend more of their money.

  • ErikTheRed

    I would agree with you for things you can fix - Loose faucet handle? No problem; most people wouldn't bother calling for that. Often, though, we're talking about things that are beyond what the average "handy" person is capable of - significant plumbing or structural issues that cost thousands of dollars. For instance, my brother's home needed its chimney replaced(!). In the case of our rental units - an improperly-installed dishwasher (a subtle thing, some wiring was incorrect), a water leak that damaged the sheetrock and paint on a ceiling (remove, replace, tape, bed, sand, texture, paint). Certainly not all of these are not horrendous issues, but why should an owner either spend half a day fixing or pay someone to fix an issue that's the result of defective workmanship?

  • It's a crazy, crazy year out there in the electorate. Chaos could happen here or a zillion other ways.

    BTW, wanna bet the trial lawyers are also supporting this?

  • tom

    Does anyone remember how many homebuilders went bankrupt in the last 12 months? Remember Levittown on Long Island... Levitt builders is belly up, and they were an established firm. Bankruptcy every few years may become the pattern for homebuilders. The homeowners policies are worthless. If you have a 19 year old furnace breakdown, it will be repaired with the minimum of parts to make it last through the policy rather than be replaced. If it it totally gone, they will find another old one, and go through the pains to remove and install it rather than do the sensible thing and replace it with new.
    This is just another rent-seeking by someone or some group who wants their industry to get legal power to increase sales.
    Or some ignorant 'feel good' group that is 'protecting us from ourself.'
    Tell the to please go away.
    tom