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Stat of the Day: The Price of Rot

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August 28, 2013

As of May 21, KB Home spent $15.4 million to repair 297 homes in central and southwest Florida  damaged by water intrusion. KB estimates it will  spend $43.2 million to repair 1,140-plus damaged Florida homes.  Construction defects  robbed Los Angeles-based KB of profit in June, when the company logged a 2.97-million loss, despite a revenue increase
of 73 percent.

 The magnitude of repairs to  defective framing, stucco, roofing, and sealant      installation required prompted KB to add $15.9 million more to the pool,
though they hope to recover some of the $43.2 million in future insurance settlements. Considering the company thinks more defect repairs are likely to be
identified later, there's no way to estimate how much money KB might be able to recover.


Shoddy construction photos litter the internet, archiving horrors of homeowners who invested in a place to build memories.   When those homes start to fall apart, homeowners will remember who built them, and they won't make the same mistake twice. KB Home can be viewed as an example--while construction defect costs hurt, the real cost is
reputation
.  In the long run, a damaged reputation could  be what hurts KB home the most.

 Source: Builder Online

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