Cypress Homes LLC Bad contract Appleton Wisconsin

First off I would like to say that I am truly disappointed that Cypress Homes was not able to build a new home for James and Melody Krouse.  That was always my hope and intention.  The account of how things transpired given by James touched on a wide range of issues.  I will do my best to address each of them below.

Choosing a Home Plan 

Back in April when James first emailed me regarding building he indicated was was looking for pricing for our model plans.  I told him,“I do not have exact pricing for plans as there are many variables that go into the overall price” and then gave him a general price range that our plans were typically coming in at per square foot of finished space.  He responded, “I am interested to see some floor plan ideas. We have an interest for a great room concept, 3 bedroom, 2 bath, unfinished basement, 3 car garage. We currently have a ranch home but we would be open to a 2 story if the layout was flowing. Do you have any lots that would have a hill for an exposed basement? I am thinking that our budget will be $250k.” 

I then sent him over 5 of our plans (3 ranch and 2 2-story) that I felt would meet his requirements and budget of $250,000.  The ranch plans ranged in size from 1,525-1,663 sqft.  Later that night James emailed me saying he and Melody found a floor plan they liked and asked if we had something similar or if we could modify it.  I told them we would be able to draw up something similar to the plan that incorporated his other changes.  The plan he sent me was a 1,962 sqft split bedroom ranch, significantly larger than the models I had sent him.  

When I met with James and Melody a couple days later we toured a few of the current homes Cypress had available and spoke about the benefits our company offered (I will expand upon these in a later section), lot options in the area, and the plan they had sent me.  

When discussing land I explained that lots were generally $40,000-$50,000 in most subdivisions around the area.  James mentioned one potential subdivision in Combined Locks that he had a personal relationship with the developer.  I advised him that if he was able to secure a better deal on one of those lots, he would have more room in their $250,000 budget for the house itself.  He later spoke with his friend and was able to secure a lot for $32,000.  (This estimated $8,000-$18,000 savings on the lot cost is what I was referring to with James when I said I thought we had more in the budget to work with, not from the sale of his existing home.)

During our meeting we sat down and went through what they liked about the floor plan they sent me and what they would like to see changed.  I explained we would need to have the designer work to reduce the square footage in order to make the plan more cost effective and fit within their $250,000 budget. We talked about the changes they would like to see and acceptable room sizes for different areas.  I then gave that information to the plan designer.  I never indicated we would be able to reduce the plan to 1,600 sqft. 

After about 2 weeks I met with James and Melody again to review the preliminary plans we had received from the designer.  The square footage of their plan was 1,884 sqft., which I remember commenting would push the limit of what we could do within their $250,000 total budget.  The designer had reduced the floor plan’s size at much as he could with still keeping the room sizes and general layout they were looking for.  At this point we had to make price conscious selections for the home in order to keep the home affordable. 

Pricing the Plan 

We proceeded to fill out the selections for the home with cost in mind.  Most of the selections James and Melody made were cost effective options.  There were a few items I pointed out that would add to the cost, but they opted to have them included (some of those items included: taller ceilings, additional windows, an exposed lower level, and a central vac system).  I did my best to guide them through the selections process with their budget in mind. 

After an hour or so we had gone through 12 pages worth of questions that detailed the home they were looking to build.  I then waited for final approval from James and Melody on their plan before I submitted the plan and selections questionnaire for bidding with our trade partners.  

The bidding process for our homes is very complex and time consuming.  It usually takes about 2 weeks to receive all of the bids from our trade partners and nearly a full day of work from our office staff to go through all the numbers to create a contract-ready home bid.  Because of this we normally wait until a day or two before the presentation to compile all the numbers.  So when the presentation meeting was pushed back, so was the creation of their home bid.  So when James called asking me about numbers, I did not have any information for him.  Also, company policy requires the home bids be gone through in person before they are handed over to the customer.  This is so that the customer better understands what all is included with the bid and allows us the chance to answer questions right away. 

Bid Presentation Meeting

Like James indicated, our bid presentation meeting got off to a late start.  Shortly before our scheduled meeting I had another one of my customers unexpectedly come into the office with an issue that required my immediate attention.  I was working with that customer to address their issue as quickly and effectively as possible.  Once I saw James and Melody waiting I apologized for being late and said I would be with them as soon as I could.  Unfortunately resolving that issue took some time and caused the delay for the meeting with James and Melody.  I would have done the same thing for them had they been in that same situation.  As James mentioned in his statement, I try to be as flexible and available to my customers as possible.  

As I mentioned before, bids are only compiled a day or two in advance of the meeting.  So I could not have possibly given James and Melody much advanced warning that their plan came in high.  My initial comment about it coming in higher than expected was to help soften to “sticker shock” when we got to the price at the end of the bid.  I also wanted to be as forthright as possible regarding their bid.  So I went through item by item to explain how we came to the price we did. There were a few areas I pointed out that could have additional costs. Many variables are unknown before building and can only be accounted for to an certain extent.  I just wanted to give James and Melody all the information I could.  

During this meeting I did indicate to James and Melody that I wasn’t exactly sure why the bid came in where it did.  What I meant by that is there was no “smoking gun” or any one bid that came back significantly higher than expected.  As I reviewed the bids again after the fact, it was a recurring trend that bids were coming in 5-10% higher.  This trend has continued since that time for any bids we receive for our new homes.  As the economy has recovered and demand for building has increased, so have the costs associated with it.  It was simply bad timing for James and Melody that those price increases occurred shortly before their plan was being bid out. 

In an effort to get the base price closer to their desired budget, we did remove some of the items James and Melody requested be in the bid and moved them to the options page.  James stated we did not offer any options that reduced the cost, but by removing those items we essentially reduced the base price and gave them the option to add them back in if they wished.  We could have had an even higher base price and then had options to remove those items, but we opted to display it the way we did. 

Understandably, James and Melody were disappointed with where the numbers came back.  James made it clear that they could not afford to build the home at that price and indicated that they would now be pricing out other builders.  I asked him if he wanted me to look into ways to try and reduce the price further and he said if we could get the price down to $200,000.

The Follow Up

I do admit, I could have done a better job following up sooner with James and Melody after our meeting.  However, they did not give me any indication that they were interested in hearing from me.  James told me that he was going to go get bids from other builders, which I could understand.  I asked if he would like me to see if I could find ways for us to get the price down and he basically indicated he only wanted to hear if could get it down to $200,000.  In order to get the price to that number it would require major structural changes that would most likely include reducing room sizes below what they indicated was acceptable.  

Since they were looking to price out other builders, I knew it would probably be a few weeks before they had any comparable bids available. So after some time I sent an email to James and Melody to see if they had gotten any numbers back.  I also explained that we realistically would not be able to to get down to the $200,000 they were looking for, but that we could change a few things to get the quote considerably lower than it was.  There was no response. 

After two weeks I sent another email correspondence, this one regarding the drafting fees.  I said, 

“Hi James,

I hope all is well.  Since I have not heard back from you I assume that means you have no interest in looking for ways to get the cost on your new home down and are opting to not build with Cypress.  I am disappointed we couldn't work something out.  I was looking forward to helping you with your new home.   

If you are no longer looking to build with Cypress there is still the issue of your drafting fees.  Per the drafting agreement you signed, if you chose not to build with us for any reason you would assume the cost of drafting your plan.  Attached is a copy of this agreement and the invoice for your plan.  We have made the payment to Wisconsin Building Supply, so please make your check out directly to Cypress Homes.” 

Again, there was no response.  

So after another 3 weeks, we then sent a letter by mail explaining that payment for the drafting fees was still needed and included a copy of their agreement and their invoice.  Again there was no response.

Only after a certified letter stating Cypress would be starting the small claims process if we didn’t receive payment for the plans did I get any response from James.   It was at this point that James called and said that they would only pay for half of the cost of the plan or if they had to pay the full amount they would file a complaint with the Better Business Bureau.  

Selling Existing Home

Help selling a current home is something we like to offer our customers whenever possible. Since our company is also a full real estate company we can list existing homes for customers as an additional service.

In this case however, their home was located nearly 100 miles from our office and was part of a different MLS region.  I explained to James that is didn’t make sense logistically for Cypress to try listing a home so far some our Appleton office as we would not be available give him the service. I suggested that they would have better luck selling their home with an agent and firm located closer to Sun Prairie.  This turned out to be the case since their home was on the market for less than 2 weeks before they received an accepted offer.

Short-Term Housing 

This program is something we began offering a few years ago as another service to our customers.  Initially Cypress had a few rental units available to customers at no charge, they would just pay the utilities.  However, over time this program has evolved as those units were not always available for use when a customer needed them and other customers were choosing to stay in other housing options that better fit their individual needs.  The program has since turned into a standard credit for those customers who need to rent as well as our assistance in finding a place to stay.  The line on the website that stated “Free short-term housing” has since been revised to read “short-term housing assistance” to better reflect the current program.  

In regards to James and Melody’s situation specifically, I explained this program to them when they asked about it at our first meeting.  This was before they had committed to anything.  Once they sold their home we did everything we could to help them locate a rental option that met all of their requests.  Due to the high demand in rental properties it was difficult to find something on such short notice that was available on a short-term lease, allowed pets and was within the area the Krouses wished to be.  We continued to send them potential rental options until James informed me that they were able to find something that worked.  

Refund Request

In response to James and Melody’s request for a refund of their drafting fees, we respectfully decline.  While we can empathize with their situation, we stand by our original agreement.  The drafting agreement they signed is standard practice for our company and is what we have found to be a fair compromise for both sides when a construction contract is not signed.  As I explained to James and Melody in our response to their initial request to split the fees, the fees charged to them were the exact amount we were billed from the designer who was contracted to draw up their plan.  Furthermore, Cypress is absorbing the costs of the time and effort it took our staff to compile the home bid, which as I stated before is a very time consuming process.