Building a new house is exciting and challenging. With a production builder like Richmond American, you have little control once the contract is signed. You can monitor progress and leverage the contract to get desired changes but you have virtually no control over the quality of the building materials or workmanship.
After four months, Richmond American has provided almost no response to the punchlist provided before closing. That's why I'm writing this letter to Richmond's CEO, as now there are less than 8 months to resolve all open issues.
Letter to Richmond America CEO
September 14, 2019
Mr. Larry Mizel, Chairman and CEO
M.D.C. Holdings, Inc.
4350 South Monaco Street
Denver, CO 80237
Dear Mr. Mizel,
I am writing this letter to summarize concerns about your building process, a lack of construction quality in my home at West Haven, Orlando and a home warranty process that to date feels like a black hole.
First some background information:
- Bought my first home in 1976 and this is my 15th home. I've built a custom home, put a 4-story addition on a 100 year old Victorian plus multiple kitchen and bathroom remodels.
- Ran a handyman business for eight years, so I'm familiar with building materials, know what things cost and understand labor challenges that require monitoring for quality control.
- After closing, I gutted your house. Kept concrete slab, doors, windows and drywall but punchlist still had 70+ items. For example, doors will swell when the door tops/bottoms aren't painted!
- Spent $50,000 more on my home versus your gallery pricing that would have been more than $100,000, and got the quality, products and installation, that I expect.
Concerns with Richmond American Contract
The contract was very thorough, listing more than a dozen potential problems that can arise when building any new home. My concern was how the information was presented. Rather than approaching topics from an educational perspective, the material felt overwhelming in an attempt to create a feeling of fear, uncertainty and doubt.
More important, the length of the document made it very easy to bury Richmond American's attempt to contractually commit buyers to use Richmond's affiliate companies for:
- Mortgage financing through HomeAmerica Mortgage Corporation (HMC).
- Closing and title insurance through American Home Title and Escrow Company.
- Homeowner insurance through American Home Insurance Agency, Inc (AHI).
What was more troubling was how your affiliate companies were integrated into the contract, implying that home buyers had no option but to use these companies. Fortunately I've participated in enough closings to know that my right to pick my own companies is protected by a law known as Real Estate Settlement Procedures Act (RESPA).
More egregious is how you offer an “Affiliated Business Promotion” or bribe if a buyer agrees to use Richmond's mortgage and insurance companies. The amount of the promotion is slightly more than the standard items sellers pay in Florida, primarily the document transfer taxes and title insurance.
Finally your process of signing a contract before gallery upgrade pricing is known is absurd and essentially a scam. Let me illustrate what I believe is a 200% markup on cabinets (more details on my kitchen cabinet plans here …).
- First cabinet decision made “on site” was the option to add an extra 6 linear feet with a corner pantry, for $2,100.
- My request at the gallery was “white wood” cabinets which was quoted at $8,900. By asking a few more questions I was able to identify your price at $600/linear ft, representing a profit of roughly 200% over your cost … absurd!
Now I was stymied having signed a contract that included the extra 6 linear ft. By complaining, I was allowed to back that option out and took your “basic cabinets” which were ripped out right after the closing. For the same $8,900 I was able to get drawers in all the base kitchen cabinets, drawers in the guest bathroom plus open shelves and nicer crown molding. My only extra cost was for the cabinet installation.
Problems Observed During Home Construction
The build got off to a good start with Dan as the lead building supervisor, supported by his assistant Paul. Dan had the experience to address my concerns with things like off ridge vents and how the roof shingles were installed using the racking method, something I've never seen anywhere else.
Dan did a good job monitoring the quality of the work being done. This was evident when immediately following the slab pour, Dan had the contractor redo the patio. But here's what also happened:
- Good – the concrete company was fired shortly after these problems occurred.
- Bad – the contractor your company would hold responsible for finishing the concrete work was gone. And sadly, Richmond American appears unwilling to pay someone else to make the repairs. Here's the story in photos:
Richmond American Ownership of Warranty Issues