First, houses are built by people who are unlicensed in many states, and unregulated in all states. Builders will protest that they are highly regulated, but in fact regulations that exist are so often breached with impunity that they provide no meaningful protection for the homebuyer. About licensing for contractors, William Marchiony wrote in The New House Buyer's Guide: It is interesting to note that some states, even though they require the licensing of General Contractors, do so only to collect additional state revenue! One would think that if they go to the trouble of setting up the licensing process, they would go the rest of the way and require examinations to test the competency and monitor the ethical conduct of their licensees.

In truth, virtually anyone can call himself a contractor and build a house for sale; a license, when it is required, is a mere formality. There are no tests of competency, financial solvency, or even literacy. If the builder is incompetent in structural matters there is no one to stop him or make him correct mistakes once they are made.

. Second, many local builders are undercapitalized. They build the next house with profit from the last one. Although several large firms build homes nationwide, custom-construction is usually handled by local contractors, and most of them cannot afford expensive mistakes. When confronted with a construction disaster the local builder may reason that his best course is simply to ignore the complaint (unless he is of unusual integrity). If he is sued and loses in court he can always file bankruptcy, a common practice among builders when they are legally challenged. For most builders bankruptcy is nothing more than a temporary inconvenience until they restructure and come back under a new name. Meanwhile, the home owner has lost everything and has no chance of collecting any legal judgment.

. A third reason buyers of defective homes are often out of luck has to do with the nature of the defects. Significant construction problems are seldom functional. Mechanical, electrical, and plumbing systems invariably work in new houses or, if defective, they are apt to be fixed before the homeowner takes possession. Most construction horror stories come from people who, like us, can live in their defective dwelling. The major disputed problem is usually a structural or design flaw such as sloping floors, bowing walls, a leaky roof or an inadequate foundation. In this situation it is all too easy to dispute a homeowner's complaints ("optical illusion" is what we were told about obviously sloping floors), or blame some other party. It's harder for a builder to argue if something plainly doesn't work; a functional problem will usually be fixed, even if the homeowner has to do it himself. (On occasion during our ordeal someone would comment: "Well, you're living in the house so it can't be that bad," or "The plumbing's working so what are you worried about?")

But if the floors slope or the walls bow or the basement floods or the roof leaks, the builder can dawdle or deny the problem or just blame someone else. Meanwhile the house will be unsalable because of the defects, and the homeowner will see his equity evaporate. Find a major defect that the builder won't fix, and you will find yourself out of luck.