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Certifying good builders; Seal: With the state legislature weighing bills to weed out errant builders, a trade group adopts a program to certify the good ones.


It is an idea whose time has come.

For years, builders of new homes in the Baltimore metropolitan area have resisted most pressures to place controls on their industry. Certification. Registration. Licensing. Those were evil words.

Builders would come. Builders would go. And many times in their wake would be a string of harmed homebuyers left picking up the pieces. And there would be an industry apologizing and trying to salvage its image by telling the public that it was just a couple of bad apples ruining it for the good builders.

When he joined the association 10 years ago, Michael DeStefano, a principal of Sturbridge Builders in Anne Arundel County, remembers being surprised that the trade group had no program to hold its members to certain standards.

"Back in 1990, '91 and '92, [those] were very tough times for builders," DeStefano said. "The last thing that we were worried about were things like [certification]. What we were worried about was staying in business week to week and month to month.

"Now, we've had four or five really good years, people are finally starting to pay attention to things that need to be fixed, and this is one of them."

On Wednesday, the association's executive board unanimously approved a "certified master builder/remodeler program" for its members. It makes the association one of the few in the country to offer a voluntary program that requires participating builders and remodelers to abide by specific standards.

Participating members are expected to begin to market and advertise the "certified master builder/remodeler" designation this fall.

"We don't expect that everybody is going to want to jump into this thing right off the bat," said John Kortecamp, the association's executive vice president. "Some probably won't meet the criteria or the test. Over time, as the program becomes extremely attractive and popular, consumers will rely on it more as a decision-making mechanism. Then, other builders will decide that [they] better get on this train. It will in fact help raise the bar of standards and practices."

The builders' certification requires:

Having a minimum of three years in the business.

Submitting to an audit by an independent accountant to determine financial stability.

Attending continuing education classes.

Supplying references from customers, suppliers, subcontractors and lenders.

Disclosing any legal proceedings involving them.

According to Kortecamp, the program will be run as a separate limited liability corporation and "its budget is 100 percent separate and distinct from the association." He added that the certification program will have its own board of directors and be "strictly a service that we are establishing for the membership."

Fees will depend on the size of the builder or remodeler.

In the past, a consumer got only innocuous morsels when he called the association to get information on a particular builder.

"We will go a few steps further," Kortecamp said. "Not only will we tell them which members are part of the CMBR program, but also give them an indication of what it is that these builders have attested to and had to demonstrate to become part of that program.

"We're also going to be drafting a consumer bill of rights that is going to be part of what members of this program will give to their customers that will identify the things that they ought to be looking for and the elements of protection of their interests that will be inherent in the program."

This movement to help consumers comes on the heals of builder registration legislation that is working its way through the General Assembly in Annapolis.

An industry-supported bill to register builders is scheduled to have its first hearing before the House Economic Matters Committee Tuesday. The legislation, sponsored by Republican Del. Wade A. Kach of Baltimore County and Democratic Sen. John Astle of Anne Arundel County, is scheduled to have its Senate hearing March 8.

The bill proposes a builder registration program in the consumer protection division of the attorney general's office. Among other aspects, the bill would require builders to register every two years, list their registration number on all building permits and advertising, and would require builders to arbitrate disputes between consumers.

"The builder licensing at the state level has been coming for a while," DeStefano said. "There have been some pretty high-profile cases of some pretty onerous things happening to people, and it is about time that both the state and the industry respond in its own way."

Democratic Sen. Delores G. Kelley of Baltimore has submitted a competing builder registration bill that is opposed by the association. That legislation, which has yet to be filed in the House, will also have its first Senate hearing March 8.

The Home Builders Association of Maryland program was born out of the frustration of reputable builders that have tired of being bashed in public opinion.

"I wanted to establish something that would make it easier for the consumer to identify home builders or remodelers who have a proven track record of financial stability and integrity," said Bob Ward, who chaired the committee that was responsible for forming the parameters of the program.

"There are a few bad apples out there, and every time something happens with one of them and it goes out to the press -- and even though the good builders and remodelers have nothing to do with it -- it tends to reflect on all of us. So we wanted a way to separate ourselves as good reliable builders and remodelers," said Ward, whose Harford-based Bob Ward Homes is the region's third-largest builder.

But this sudden embracing of consumerism by the home builders' association didn't just happen.

"Historically, the approach has always been an external approach -- regulatory approach, or licensing approach," said Kortecamp. "And time after time of repeatedly fighting those pieces of legislation, it became apparent to a lot of builders that no matter what the politics of it are, when a bad builder turns up in the media and does a number on a consumer or a number of consumers, it reflects on the entire industry and not just the association.

"I think the time has just come when people [in the association] have said, 'We need to take the initiative ourselves, we need to take the responsibility upon ourselves. We are the good guys and we are going to establish a program that makes it easy for the public to find builders who they can be comfortable with.'"

Said DeStefano: "The building community is such a small group of people. We know the bad characters. We know way before they go out of business. Believe me, all of us get very frustrated by being lumped in with characters like that or people who can't financially manager their business."

The move toward a certification program accelerated as more consumer-oriented members moved into leadership positions within the association, said DeStefano.

"When leaders like Bob Ward stand up for [a certification program], and others who are the top three or four builders in the state [do likewise], then everybody else says, 'Yeah it's a good idea.'

"Whereas before, in years past, guys who were bringing forth the idea were smaller builders who didn't carry the cachet that some of the other ones had. Now that a bigger builder really wants to do this, it's just easier to get it done. If Bob Ward thinks it is a good idea, it might be a good idea."

Neither Kortecamp nor Ward would estimate the number of the association's 400 members who would join the certification program. But they hope peer pressure will make the program a success and an industry standard.

"For this area, it's a new concept, so we are looking at a gradual rollout over three years," Kortecamp said. "In the first year we are looking at somewhere between 35 and 50. Those numbers are based on speculation at best. We have not done any straw polling. We are trying to be modest in our expectation of participation.

"We are hoping over three years' time we will begin to approach half of the builders and remodelers that we have in the association who would have gone through the review process."

The committee patterned its program after the one established in 1966 by the Home Builders Association of Louisville.

"In Louisville, literally every builder now is a part of this program," Kortecamp said. "It didn't start out that way [but] it has become such a respected label that if you don't have it, you have got a major handicap."

Not being a member is a liability, says Margie Brangers, who administers the Louisville program. "The developers -- they won't let you build in [their communities] if you are not a member. The banks -- they won't lend to you if you are not a member. We do not go out and actively seek builder members. They come to us."

For builders to be accepted into the Louisville association, the sixth largest in the nation, applicants must have been in business for five years and built at least 10 homes, Brangers said.

In addition, the Louisville association does credit reports on prospective members and requires screenings by banks, suppliers, and customers . An applicant must also be sponsored by two other association members who have seen the builder's work.

All in all, the application process takes 60 days, Brangers said. "Even if builders are turned down, they are constantly coming back to try and get in , so that they can grow."

The Maryland program won't be as stringent but will alter the way builder contracts will be written.

A key requirement is the binding arbitration to help settle disputes, said Ward. Also, builders' contracts would have to adopt the National Association of Home Builders' booklet on Residential Construction Performance Guidelines.

As a part of the review process, certified builders will be subject to a pre-drywall and post-drywall inspections by a committee of the homebuilders association.

And, Ward said, builders would be subject to stricter guidelines concerning a buyer's deposit .

"For a certified master builder, deposits have to be 100 percent protected, one way or another. Either in a certified escrow account or bonded," Ward said. "The way the state legislation is written now -- I could be legally holding more deposits than I am required to bond," Ward said, referring to state law that limits the builder's liability to a $500,000 surety bond or letter of credit.

But even DeStefano knows the program isn't going to be a cure-all for the industry. It's a step in the right direction as far as he is concerned. *"I think you might be surprised to find out that the biggest critic of bad builders are the builders who are good builders," he said.

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