This article is excerpted from the Homebuilding Consumers Guide, from www.ownerbuilder.com

Part of a consumer advocate’s job is presenting the basics of better buying and selling. We look for information about products and services and the people who provide them to consumers.

Our goal is to inform, enlighten and educate both consumers and the businesses they frequent about their mutual problems and concerns.

The bottom line is helping people—both those who buy and those who sell.

It’s become clear that a consumer advocate can create advantages for those on both sides of the issue. What does a group of angry homeowners do when they feel they have received shoddily built homes for their lifetime investments? Do they picket the builders’ sales offices? Sue the builder for repairs and damages? Sometime they do, and sometimes they do even more.

When an unscrupulous business or questionable business practice is exposed, it helps honest merchants. It eliminates unfair competition by companies making false claims and promises, and builds consumer confidence in the legitimate businesses.

Consumers benefit, too. They better understand the actual costs to get a job done right the first time; they develop greater faith in decent business practices; and they learn how to differentiate between a real bargain and a scam.

Unfortunately, scams and rip-offs still exist. People continue to believe they are protected from wrong-doing by vigilant government agencies, and honest business owners think laws keep their competitors from operating unfairly. Homeowners Against Deficient Dwellings is a consumer protection group for homeowners and home buyers dedicated to promoting better building practices and standards. National Association of Home Builders and National Association of the Remodeling Industry are professional builder associations dedicated to promoting better building practices and standards.

But no guaranteed protection exists, nor do assurances that the law will halt scams and rip-offs. That’s why it’s important for us all—buyers and sellers—to work together.

Whether you choose to work with an architect, general contractor or act as an owner/builder, there are many buy – sell decisions to make.

Not including all the preparatory work of acquiring land, putting in sewer, gas, electrical, and water hook-ups and pouring a foundation, you will need the following products and materials to build an average 2,000 square-foot home:

• 13,000 board-feet of lumber
• 6,000 square feet of sheathing
• 14 tons of concrete
• 2,300 square feet of exterior siding material
• 2,400 square feet of roofing material
• 3,000 square feet of insulation
• 6,100 square feet of interior wall material
• 120 linear feet of ducting
• 15 windows
• 15 kitchen cabinets
• 1 kitchen sink
• 12 interior doors
• 5 closet doors
• 5 exterior doors
• 2 garage doors
• 1 fireplace
• 3 toilets, 2 bathtubs, 1 shower stall
• 3 bathroom sinks
• 2,000 square feet of floor covering
• 7 appliances
• 1 furnace

There’s plenty of opportunity for the criminal mind to take advantage of a home building or remodeling endeavor. Despite years of publicity and considerable law-enforcement activity, consumer scams are still thriving.

A new survey by state consumer protection agencies and the Consumer Federation of America shows no slackening of the pace and imagination of these schemes. Complaints about home building and remodeling rip-offs are becoming more numerous. The amount of money involved indicates consumer fraud remains a gigantic problem for the American public, draining billions of dollars from consumer pockets.

Once we’ve employed dishonest or incompetent people, there’s little most of us can do to protect ourselves against them because the problem has already been created and all we can do at that point is control our losses. Visit the Star Inspection Group’s collection of photographs by Roger Robinson showing actual defects found during inspections of new and old construction.

Home Building and Improvement Scams Often Work Like This

• A "contractor" knocks on the victim’s door and offers to sell real estate, repave a driveway, improve your home, or provide materials for a discount. They solicit you for business instead of you finding them.
• Fall for a home building or improvement scam and the end result is a poorly done job. With no company name, telephone number or address, victims can’t locate the con artists to get back their money.
• Here’s a few examples of scams and rip-offs…
• A plumbing company requires customers to pay $75 and agree to pay "office" and "legal" fees before any evaluation or work is to be done. If customers refused to sign, or signed and later refused to authorize repairs, they were billed $700. If they complained to a consumer office or local police, they were billed another $200.
• A remodel contractor takes money for a bedroom addition then leaves the job unfinished. The individual moves throughout a three state area continuing to take money for home improvement work he fails to complete. A criminal warrant is issued in relation to the illegal home improvement operation but authorities drop the charges after deciding not to pay for extradition.
• A homeowner is offered the opportunity to put sealer on a roof for a very reduced price. After a substantial down payment, two men proceed onto the roof and spray a liquid on its surface. While the owner is distracted by the roof work, a third worker asks to enter the home—on the pretext that he needs to use the bathroom—and steals cash and jewelry from the residence.
• A consumer purchases a set of stock plans from a plan design service only to discover that the house was intended to be built in another geographical region. When application is made for a building permit, they’re informed that additional information is required from a structural engineer to bring the drawing into compliance with regional building codes and local ordinance issues.
• You can’t live your life being afraid of everybody but here are a few tips on how to avoid consumer fraud. The time spent in shopping around for honest, competent residential designer, contractor or supplier pays off in the end.

Red Flags to Look and Listen for

• You have won a prize or opportunity but you must send money for shipping or taxes.
• No written information is available about the company or group represented.
• You are offered unsolicited design or construction work.
• Your credit card or checking account number is requested.
• You must sign up now or never.

Here’s a Few Ways to Protect Yourself

• Never allow anyone into your home that you do not personally know.
• Never give out your number of your credit card, bank account, Social Security, Medicare or any other numbers or identifying information.
• Never go with a stranger to any location. A suggestion is often made to go to your bank to withdraw funds.
• Forward any suspicious mail to the postal inspector.
• Ask for full business documentation then take a few days to verify all details such as license, bond, insurance and references.
• If it sounds too good to be true, it usually is.

In addition, here are some consumer tips to keep in mind as you do research and investigate the architectural and construction possibilities for your project:

Do a background check on your existing lot or proposed building site to be certain it meets federal, state and local laws and ordinances governing the issuance of a building permit based on your complete satisfaction. Why proceed with a remodel job or new home construction project if it’s illegal to do so? What will the cost be to hook-up to utilities? What will be required to access the addition or new home location on the existing lot or proposed building site?

Consumers should not allow themselves to be rushed into making a deal—ask each business owner to make a presentation about the service or product they offer. This should be your practice for both design and build professionals. After their presentation ask for an estimate in writing prior to a formal bid proposal. When the time arrives for their formal bid proposal, be prepared to think about it for a few days then make a counter-offer.

Imagine a home style which fits your life style. As you think about a change to your existing home or a creation of a new home, go through each room, mentally placing your family in it and then act out how you would live in the space.

Pretend you’re working in your new kitchen—loading and unloading the dishwasher and preparing a meal—you’ll quickly determine whether the new arrangement fits your life style. Do the same mental activity with your new bathroom and other living areas.

As you go about your daily chores, think about light switches and electric outlet locations. Where should you place new electrical fixtures? Where will lighting be required? Do the same analysis for water spigots and sink requirements. Where should you place plumbing fixtures? How will faucets be utilized?

When it comes to the house design itself, be sure the amenities add value— not merely line the builder’s pocket or aggrandize the designer’s services. Real estate appraisers say that options add value only if subsequent buyers are willing to pay for them at resale. As a general rule of thumb, the more functional the option the more likely you’ve added value.

Create a complete set of drawings and specifications for your project. A graphic representation of your design accompanied by a written set of instructions become the basis of what and how work will be performed. Since the length of the list and the degree of detail are likely to overwhelm even the most conscientious buyers, utilize checklists and models provided by the Home Building Consumer’s Guide & Video.

Review precepts of sustainable architecture and building green practices. Methods and materials which enhance environmental and personal health are worthwhile considerations. Issues to be considered are energy efficient methods, non-toxic products, and recycled materials which are useful for either remodeling jobs or new construction projects.

Unless you have unlimited resources and love buying expensive power tools and sturdy equipment, don’t expect to save time or money by doing the hands-on labor of construction yourself for a single project. This is not to say that do-it-yourself endeavors lack value…but the value added is not measured in time saved but by skills gained and pride in personal involvement.

Visit a designer’s or builder’s finished project for another customer. Much trouble, expense and emotional turmoil can be avoided if you check out the designer or builder before getting fixated on specifics such as floor plans and location. Much more important than the house itself is the person who will design or build it. If your new home doesn’t satisfy your aesthetic taste or incorporates poor workmanship, it won’t matter how good the layout or location is.

A crucial part of your homework is checking out the designer’s or builder’s reputation. The serious professional who plans to be in business for many years depends on referrals from satisfied customers and will stand behind their work should problems arise.

Building site superintendent’s performance is critical. Savvy consumers know that checking on a home building firm’s reputation is important, but few know how much this assessment rests on the diligence of a firm’s site superintendent. The "super" oversees the construction of each house. The same is true for the residential architecture firm. Will one person work on your design or will the firm pass your project from person to person in their organization?

Besides interviewing homeowners who’ve had work completed by a designer or builder you are considering, do a credit check on the firm and insist on written proof that the business (and the architect, if you hire one) have errors and omissions insurance or bond coverage for the full replacement cost of your work. Ask friends who they have used for design or construction work. Talk to local retailers who’ve had similar work done at their home and inquire regarding who they’ve used. Check with the local Better Business Bureau for a list of members in your area.

You need to know a great deal about construction contract law. The success of the job often depends on the contract documents, so understand what makes design and build work contractually unique. Don’t sign an agreement unless you understand each word and feel comfortable about it. Contracts always favor the writer—in this case, the designer or builder—and most firms will make changes in their standard contracts but this requires negotiation. Go into any deal with your eyes open and the absolute commitment to do your homework before signing anything.

Since official plan examiners and field inspectors inspect for minimum code compliance standards instead of workmanlike standards of performance, consumers should also consider putting powerful pre-construction remedies of building compliance standards, independent performance quality inspections and possibly longer warranties into their contracts. The buyer never has more power than when the contract is being negotiated.

Assuming that you can hold a designer’s or builder’s feet to the fire should some aspect of the contract be breached, this can prove to be frustrating and time-consuming. It also can be expensive if you end up in litigation; even then, the problem may not be rectified to your satisfaction. Become familiar with the services offered by the American Arbitration Association prior to signing any agreement.

The more money you pay a designer or builder, the less leverage you have over the deal. Instead, make progress payments for services performed or products delivered on the basis of what’s been completed or installed. By doing this, you’ve increased your chances of seeing the work completed or product delivered in a timely manner. One way to ensure quicker service is to refuse to make any payments in advance. What are your rights as a consumer regarding your state’s lien laws? Is it appropriate to issue a dual-signee check to both contractor and supplier?

The significance of warranty laws governing architecture and construction practices in your state cannot be over-emphasized. Become familiar with your state statutes by contacting your state’s attorney general for consumer information. How long does a warranty provide against defects in design or workmanship? How long does a warranty provide against major structural defects? How long do you maintain your right to bring an action for breach of contract? When is the date of substantial completion? What happens if your discovery of a defect is delayed by concealment or misrepresentation? Do your state’s laws allow you to recover attorney’s fees and costs? Does your state maintain a contractor recovery program to assist consumers in recovering from insolvent designers or contractors?

There are many potential problems in doing residential architecture and construction but there are solutions if the proper planning is accomplished. Whether doing a remodel job or new home construction work, the onus is on the consumer to be prepared.

The flip side of the coin is that there are also consumers who refuse to be pleased and withhold money from designers or contractors far in excess of "punch list items" that need completion or correction. This is an abuse of consumer power. Don’t become the customer from hell!

Experts say that if you receive a suspicious phone or mail inquiry, or think you’re the victim of fraud, get as many details as you can about the business or person and the pitch. Report it to the Better Business Bureau, your state’s Department of Consumer Affairs and local law enforcement. For more information, visit the National Consumers League’s National Fraud Information Center.