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Nick and Kim Letizia decided to kill time on a cold day last fall by house browsing in an upscale Johnston neighborhood.

One home in the Augustine addition caught their attention because of the quality of the design work. It was spoken for, but an Iowa Realty agent put them in touch with the builder, Jennifer Makovec, owner of Vecman Architectural Homes LLC.

Makovec, who also was an Iowa Realty agent at the time, directed them to a new development near Camp Dodge. Northwood Estates was destined to be the site of this year’s HomeShowExpo, an annual event sponsored by the Home Builders Association of Greater Des Moines as a showcase for the area’s custom builders.

The Letizias liked the layout, and Makovec, who contracted to build a total of three homes at Northwood, had the right design: a home with handcrafted wrought-iron railings and artistic plaster work in the shape of magnolia trees.

“It would have been one of the top homes in the home show if she had pulled it off,” Nick Letizia said.

She didn’t pull it off, not for the Letizias nor for two other people who bought lots on the property, including Tom Dean, the pharmacist-turned-developer who owns Northwood Estates.

Dean took over the contractor chores on his home. The Letizias doubt that they will ever move into theirs. In fact, they say that Liberty Bank is threatening to foreclose on the house, which today is about three-quarters complete, to collect on a $700,000 construction loan it issued last year.

For her part, Makovec is out of the home building business. Iowa Realty revoked her license. Her family will move out of its Ankeny home at the end of the month after Wells Fargo & Co. won a foreclosure judgment in Polk County District Court.

“I’ll never have the love for building that I had because of this,” she said.

The Letizias have been left with a “suitcase full of nightmares,” Nick Letizia said.

Their credit is under attack. Subcontractors have not been paid. Liberty Bank is playing hardball on the loan, Nick Letizia said.

“We won’t have any credit after this,” he said.

This is a story with a familiar ring, one that has sounded in Polk and Dallas county courtrooms for more than a year as prominent home builders have run afoul of lenders after overreaching in their dreams to cash in on a housing boom that went bust last year.

Smaller builders hoped to take advantage of the glory days, especially in 2005, when a record number of homes were being built.

When things went bad, a lot of the “bodies in the graveyard” of the economy were those of builders who couldn’t build and sell enough homes to cover their costs, said Steve Dallenbach, a custom builder who was featured in this year’s HomeShowExpo.

Many were inexperienced and didn’t understand the complexities of the business.

In fact, the number of home builders who are members of the Greater Des Moines association has dwindled from 700 to 550 during the recession, although 15 new builders have been added to the group’s rolls in the last two months, said David Vollmar, head of the Home Builders Association of Greater Des Moines.

The association pulled Makovec-built homes out of the home show, Vollmar said, adding that it was the first time in a “long, long time” that a builder has not completed a project for the high-profile event.

Dallenbach noted that he, like Makovec, was a designer when he first entered the business. “I didn’t even have a pickup,” he joked.

However, he soon learned that construction loans had to be followed up with a commitment to paying bills and obtaining lien waivers from subcontractors proving that they had been paid as a project progressed.

“We go through all that hassle to protect the customer,” he said.

Dallenbach said the experience with Vecman Architectural Homes cast a pall on an otherwise successful event.

“There were so many positive things about that home show that really helped us,” Dallenbach said. “The people that came through were really interested possible buyers, and it was difficult to explain why there were unfinished houses in the neighborhood.”

Dean, who had hired Makovec to build his home but ultimately finished it himself, said the fact there were unfinished homes in the development has not dampened enthusiasm for the Northwood Estate project.

“There were six positive success stories; they were all custom builds,” he said.

However, he also foresees problems in the housing industry if builders are not held accountable for performing on the contracts they sign with home owners.

“Just putting a sticker on the side of your truck doesn’t make you a home builder,” he said.

As for the home builders, such as Dallenbach, who were able to show off their homes, they represent the top of the heap, businesses that provide quality and have established trust with their customers, he said.

Nick Letizia has built speculative homes in the past. However, he found that he was not prepared for the experience with Makovec, whom he continues to praise as a top-notch home designer.

He maintains that he drew down 100 percent of the $700,000 construction loan, with the money going to Makovec to pay subcontractors.

However, early in the construction process, he found that checks were bouncing. Subcontractors were signing lien waivers, saying they had been paid for their work, before cashing checks issued by Makovec. She would have issued the checks after receiving payments from the Letizias.

“We’re 100 percent drawn out on that home,” Letizia said.

As a result, he said, the couple has paid between $50,000 and $60,000 to subcontractors out of their own funds, separate from the construction loan.

Letizia also believes that Iowa Realty should have stood behind the project. He notes that an Iowa Realty agent directed him to Makovec, who at the time also was an Iowa Realty agent.

Brennan Buckley, Iowa Realty’s vice president of marketing, said the dispute basically is one between a home buyer and home builder.

“She was not the listing agent nor the selling agent on this transaction,” Buckley said. “She was serving as the builder only.

“We have some wonderful builders who are good reputable builders who have their license with us; this clearly wasn’t the case.”

Several Iowa Realty agents also run home building operations, he said. This is the first time the company has received a complaint as the result of a referral to a builder who is also a real estate agent.

As a result of the controversy, Makovec no longer is licensed through Iowa Realty, he said.

For her part, Makovec said that she has not benefited personally from money that she has received from the Letizias.

“I would never take money out of a project before it was completed,” she said.

In addition, she said she received “less than half” of the construction loan to use to pay subcontractors.

Makovec said that her attorney, Jeff Lamberti, has ordered an audit to determine what happened to the money.

“We’re very close to having this resolved,” she said.

Makovec said she entered the home building business at the urging of real estate clients who admired her design work.

Although her business was founded in 2005, the complexity of home building did not overwhelm her.

“I’m a very confident woman,” Makovec said. “I’ve been in real estate for more than 13 years, so I don’t think it was that at all.”