Unscrupulous Builders During Tough Economic Times

 

So what is a Ponzi builder? It is a builder that would make Bernie Madoff proud. And this is how it works.

 

Mr. Unscrupulous Builder is desperate for work during these troubled economic times, so he promotes himself by advertising, “I will beat any builder’s price, guaranteed!”  Wow, that sounds really good, right? But wait.

 

Mr. Unscrupulous Builder asks you to bring him the written proposals you have received from other builders. He takes the lowest bid and beats it by $10,000 or $20,000 or maybe by 2, 3 or 5 percent. (And who wouldn’t want a good deal like that, especially to build your dream house?)

 

But watch out! To accomplish this, his most important job during the building process is to keep his eye on the bottom line—HIS BOTTOM LINE.  This does not necessarily equal quality materials and craftsmanship. It does not often provide for unsurpassed service, especially after closing and you move into your home. And it certainly does not guarantee that this builder will be in business for the foreseeable future.

 

Remember, to guarantee to beat any other builder’s price, Mr. Unscrupulous Builder is not working off of a set of quality standards that he builds into each of his houses. Rather, he is just looking at another builder’s quote and simply beating the price to achieve his goal—“Get the job.”  Price cutting means the builder MUST cut something. This is the classic lose-lose situation. The homeowners loses because something (most likely quality) has been cut from his new home, which will cost him more money down the road. And the builder eventually loses because he is either barely breaking even or he is losing money. This is no way to run a successful business.

 

But Mr. Unscrupulous Builder is more than willing to “beat any builder’s price” and even lose money to get the job, actually to get the lion’s share of jobs. Watch out, here comes Bernie, and his Ponzi scheme. Mr. Unscrupulous Builder does not just want to get jobs, he NEEDS to get the jobs. Why? Because while he is busy beating everyone else’s prices he needs to get the next job to keep paying for the job he already has. Simply put, he is not making enough money to build the house, pay all bills associated with the house, pay his staff, pay his personal bills and make enough to stay in business.

 

So when you sign a contract with Mr. Unscrupulous Builder, he is secretly planning to take your money and use it to pay bills he has accumulated on the house or houses he already has under construction. In then end, after he has beaten every other builders’ price, and the bills are higher than Mt. Everest, and his credit is maxed out—Mr. Unscrupulous Builder will be forced out of business, leaving suppliers and subs unpaid and his last set of customers with half built houses and cancelled checks that were never used to pay for materials for their houses.

 

Tip: Beware of any builder who guarantees, “I will beat any builder’s price.” It may be Mr. Unscrupulous Builder, and it will ultimately cost you more.