As a real estate attorney I saw many clients who were in nightmare scenarios with bad builders. It is much more common than people realize. I talk to people regularly who have had horrible experiences with their builder. I recently called the Washington State attorney general’s office, and they told me they don’t handle such issues, that I should call the Department of Labor & Industries. I called L&I, and they said they don’t have jurisdiction, that I should call the attorney general’s office.

No one wants to touch this issue, but where is consumer protection when you need it? Literally 100′s of innocent victims are getting hurt in the State of Washington, and the state rule is, “caveat emptor,” or “buyer beware.”

I will attempt to address this issue with public education in several ways:

Since January 1, 2005 through December 31, 2007 this chart shows total home sales in Sequim and Port Angeles, Washington in all price ranges at 2,310. The majority of homes sold were priced below $300,000. Homes priced above $300,000 represent 40% of the entire home buyers’ market.

Here’s where the mistake is often made. Building a spec home and listing that home at a price above $500,000 means the market for that home is only 9.0% of the entire buyers’ market. The challenge is selling to that 9%, because that 9% is 100% of the market for that home.

I showed a home recently that was a spec home built by a first time builder and priced at $699,000. Let’s round that off to $700,000. That home only has 3% of the buyers’ market. Wow! That’s a very very small segment of the buyers’ market.

If you were building a custom home to put on the market as a spec home, would you target 3% of the buyers’ market, or would you first want to know where 60% to 80% of the buyers’ market is?

There is another challenge in finding the one buyer at this high price range. Buyers at this high price range will want a floor plan that is ideal for them, but the spec home only gives them one choice, a choice they may or may not like. Building a spec home for 3% or 5% of the entire market is a very risky proposition for a builder.

For the one buyer who falls in love with such a home (assuming one is found within a reasonable period of time, and in this price range a home like this could sit on the market for over a year), their negotiating power is far greater than they might realize, since they may be one in a hundred who find the home suitable in every way. Unfortunately, the builder has poured his heart and money into building a beautiful spec home, so his cost is going to be $175 to $220 per square foot, which brings us back to the buyer. At that price per square foot, a buyer may just choose to purchase a lot and have their perfect dream home built.