Home builder files for bankruptcy, homeowners left with few options
The dream of buying a Medallion Home is what pushed John Chadwick through college and several odd jobs. After six years of saving, that dream finally became a reality. "We knew there were issues around here,” Chadwick noted. “But, in my mind, I thought it's a Medallion Home, we're not going to have problems." John’s home was built in a new neighborhood off I-35 and FM 1103 in Cibolo. The soil it was built on is known as “black gumbo”. It's a clay make-up that expands and shrinks like a sponge when water is added. After just the first eight months inside the home John noticed doors wouldn't close and cracks started to show up in the walls.

Home builder files for bankruptcy, homeowners left with few options
Reported by: Mireya Villarreal
 In the last 46 years Medallion Homes built nearly 300,000 houses. But in late 2010 the construction power house quietly filed for bankruptcy. For more than a year they’ve been drifting through bankruptcy court, contacting debtors and filing financial documents. Several people that are considered “debtors” are homeowners that have been left with big foundation problems and very few options.

"I just thought to myself, one day, when I make it, that's what I'm going to do; I'm going to buy a Medallion Home,” John Chadwick told us.

The dream of buying a Medallion Home is what pushed John Chadwick through college and several odd jobs. After six years of saving, that dream finally became a reality.

"We knew there were issues around here,” Chadwick noted. “But, in my mind, I thought it's a Medallion Home, we're not going to have problems."

John’s home was built in a new neighborhood off I-35 and FM 1103 in Cibolo. The soil it was built on is known as “black gumbo”. It's a clay make-up that expands and shrinks like a sponge when water is added. After just the first eight months inside the home John noticed doors wouldn't close and cracks started to show up in the walls.

“We kind of had expectations that may be somewhat normal. But they had to keep coming out to refix them and refix them, to sand more off the door,” John remembered. “And finally they had to cut them out and rehang them all together.”

John hired an independent engineer to check things out and confirmed his foundation had failed.

“The slab has split the width of the house. It's not deflecting, it's staying true. But I have a crack in the middle of my home,” John said.

Medallion Homes' owner, Will Worth, promised John he'd fix the problems. But when sprinkler systems and soaker hoses didn't work, John thought the company would completely redo his foundation. But instead, Medallion Homes filed for bankruptcy.

Danny Kustoff, a San Antonio based lawyer that specializes in consumer law cases like John’s, noted, "It is a tough, frightening position for homeowners."

Kustoff says companies like Medallion Homes were use to mass producing neighborhoods and selling houses quickly. But when the economy tanked, so did their business model and eventually their profits.

"In our society, if you get in that situation, bankruptcy is an option. It's totally legal, there's nothing wrong with it,” Kustoff explained.

If John ever wants to sell his home he'll have to fix his foundation first. That could cost $60-90,000 dollars. And even though he's hired an attorney and is fighting Medallion Homes in bankruptcy court, he's realistic about what he might get.


Here are some of Kustoff’s suggestions:

• If you're thinking of buying a home make sure to check the details of your warranty
• If you're considering an older home, make sure your warranty covers more than just the "small stuff" (for example: appliances)
  
• If you see a problem, make sure to get an independent expert to look things over, instead of just trusting the builder
• If you see problems with your home, make sure to notify the home builder in the first two years of purchase