Gary here is your guy.

Pool builder: 'Kickbacks' cost homeowners millions

Robert Anglen
The Arizona Republic
Dec. 26, 2007 05:02 PM

One of Arizona's largest pool builders has taken to the air waves claiming that home buyers are being duped into spending thousands of extra dollars to put swimming pools in their new homes.

Ron Ostlund, owner of Riviera Pools in Phoenix, has launched an advertising and Internet campaign to publicize what he describes as a "kickback scheme" between new home builders and several pool companies.

Ostlund estimates that agreements between home builders and pool companies to act as "preferred pool builders" have cost 70,000 homeowners as much as $250 million in overpayments since 1997.

"What the sales person doesn't tell the homebuyer is that they will pay an extra $10,000 to $15,000 too much for the pool," Ostlund said. "The pool company will kick back approximately 12 percent of the pool price to the home builder."

Home builders acknowledge that there is a markup on pools built through "preferred builders," the same way there would be a markup on any product a buyer wants the builder to install in a new home, from appliances to carpet.

But they insist that Ostlund has exaggerated the amounts involved and there is nothinig inappropriate about the practice.

"Everything we put in a house has a markup . . . It is not a kickback," says Kevin Egan, president of T.W. Lewis Homes in Tempe. "Every home builder operates the same way."

Egan would not give a specific price on the markup, saying only that it is less than 12 percent.

What the buyer gets for working through a "preferred builder" is a new pool that is supposed to be filled and ready for swimming on move-in day. Otherwise, homeowners must wait until the close of escrow to bring in their own builder and begin construction.

Egan says homeowners who opt to go with their preferred pool builder also know that T.W. Lewis will manage the pool construction process and back up any defects or warranty issues.

He says home builders face the risk that a home loan might fall through and will be left paying for a pool in a house that didn't sell.

Ostlund calls this smoke and mirrors, saying they are excuses for sticking customers with pools that are worth far less than what they paid for them.

Ostlund says earlier this year representatives of T.W. Lewis asked him to be the company's preferred pool builder. He says the builder demanded 12 percent payment on every pool sold, which would be passed on to the buyer. In addition, he says discussions involved other methods to inflate the cost of the pool. Egan denies Ostlund's claims, saying he is "way off."

In general, Ostlund says, "the home builder, the pool builder, the home sales person and the pool sales person all work together to screw their friend, the home buyer."

Ostlund, who is delivering his message across the Valley in radio and television commercials, has also sent letters to Arizona's attorney general, the real estate commissioner and the state registrar of contractors, calling for an investigation.

Ostlund's company is the fifth-largest pool builder in the nation. He said the preferred builder arrangements have always angered him and now he has the money and the time to expose it.

Ostlund's claims have brought letters and e-mails from the public concerned about their dealings with preferred builders. Some claim their pools took months to complete after move-in, that appraisers wouldn't accept the price of the pool, that pools couldn't be rolled into mortgages and that they were unaware of undisclosed markups.

Jeremy Smith, president of California Pools, says agreements between his company and home builders don't affect the price of pools.

"The competitive nature of the pool business dictates that we must deliver the best product at the best price," he says. "I resent any implication that California Pools, or any other pool builder who works with home builders are involved in anything illegal, immoral or unethical."

Home buyers often think that the only way they can roll a pool into a new home loan is through the home builder, but many mortgage companies will work with pool companies to finance a pool construction loan on a new house.

Jim Belanger, a lawyer whose firm represents the Home Builders Association of Central Arizona, says many of his client's members are outraged by Ostlund's allegations. He said that he has reviewed the preferred agreements and finds them "perfectly appropriate."

Belanger acknowledges the markup, but says it is far lower than Ostlund alleges, "probably 3 percent, 4 percent or 5 percent."

He says he has asked Ostlund to provide proof of his allegations in writing, but Ostlund has so far declined.

Ostlund says all of the proof lies in contracts between the home builders and their preferred pool companies.

"It is not 3 percent, 4 percent or 5 percent," he says. "When all is said and done, it will be as high as a 40 or 50 percent markup."



Reach the reporter at robert.

anglen@arizonarepublic.com.

Good luck

Marlo