Let the Seller Beware

Do you have a custom home or remodel client who repeatedly creates problems for you to solve? Is he playing hardball with you? Is he changing the rules as stated in your working contract? Does he ignore the rules that do not suit him and expect you to constantly adapt to his new rules?

Case in point: About three years ago, I was attending a realtor open house luncheon to promote one of my for-sale homes. One of the realtors commented that she and her husband were in the final stages of planning their dream home. Subsequently, she introduced me to her husband, Steve, who brought his 7,500-sq.-ft. custom design to my office. Steve proudly explained that the home was entirely his vision. He demonstrated an uncanny grasp of all of the details as well as an unusual ability to envision the spaces from the drawings. Clearly, I was on notice that Steve would be heavily involved in all aspects of the project.

Steve signed my open-book construction management contract in 2006 BRC (Before the Real estate Crash).

From the onset, budget discussions were adversarial. Steve insisted the home he designed could be built for $1.8 million and our budgets were in the $2.2 million range. Eight weeks into construction he finally agreed to modify some significant cost reductions, swapping stone details for brick and reducing specs in key areas. After rebidding the house while it was under construction and reducing my builder management fee by 15 percent, we had a realistic budget of $1.75 million.

A pattern quickly unfolded. We proceeded with the building of his home and Steve scrutinized everything, from scheduling to budgets to construction details. Worst of all, payment funding was a consistent problem. Eventually, we completed his home but unfortunately he failed to pay his final bill. That was one year ago.

Since my company was building on his lot, we could not prevent him from moving into his home. Steve persuaded the town building official to issue a Certificate of Occupancy once the home was completed. A week later, I had a glimmer of optimism when he paid one-third of his open balance. After months of double-talk, I reluctantly retained a lawyer to lien his property.

The lawyer and I were successful in placing the liens, but his legal bills came in at four times his original estimate. Since Steve was unable to convert his construction loan to a permanent loan, my liens have yet to yield the next payment to my company.

Over the past several months, I interviewed four lawyers to find the right one to proceed with more legal maneuvers. I have fielded countless calls from vendors who are owed money on his home. I have had more than one settlement discussion with Steve. Recently, I met with him and told him he could have a discount on his balance equal to the estimated $25,000 fee my new lawyer promised he would not exceed in order to prosecute my case. I told him he had two weeks to pay or we would initiate the lawsuit in New Jersey Superior Court. I had my lawyer prepare the lawsuit and brought a copy to make it clear to him that I was committed to suing him. We agreed to let our lawyers talk about him signing a consent order to pay. I remain warily optimistic. I know that a zebra does not change its stripes.

When dealing with your Steve, remember, he will not be offended when you play hardball right back at him. He expects you to and may even think you are weak if you do not stand up to him. My natural disposition is to lean heavily toward compromise and reconciliation. Now that I am living through this saga, I am much more willing and able to respond to any future “Steve” clients who force me outside my comfort zone. I hope you will too.