Being jerked around by spec home builders?

TinyDogsSeptember 27, 2012

Hi all, hope this is okay to post here, and I apologize in advance for the length of this post. My fiance are first-time home buyers in the process of buying an under-construction spec home, and we could use some objective advice. We're under contract on the house based on information about it provided by the builder's own realtor, through our own realtor, whom we used for our initial contact with the builders. There are a number of things giving me pause so far, and since I'm new at this, I'm not sure if what I'm seeing is bad behavior on the builder's part or faulty expectations on mine. Here are the red flags I'm concerned about so far:

1. The builder's realtor gave us information about two properties, both of which are in the same development, on the same street. They are about three lots apart. Both are in the foundation stage right now. One, the house we are under contract on, was listed at $174,500, and the other was $176,500. They have different floor plans, the pricier one being a new floor plan on a bigger lot (by about 2,000 sq ft). Both houses are in the range of 1480 square feet (more expensive house is a tiny bit bigger), 3 bed/2.5 bath. We received two informational emails from the builders through our realtor, one for each house.

The $176,500 house was described as a "selection series" house that was being built with laminate counters/vinyl flooring, and the focus of the main floor was the kitchen with a large island/breakfast bar. The purpose of the "selection series" is to choose only the options that the buyer wants and that fit in their budget. It came with an attached list of upgrade costs, of which one item was a gas fireplace at $3000. (This will be important later.)

The $174,500 house was a "regular series" house with only a floor plan attached to the email, the layout of which I preferred slightly over the other house. The builder's realtor specifically stated in this email that the house would come with granite counters, nicer laminate flooring, a garage door opener, "etc." and that more upgrades were available. The floor plan depicted the house with double sidelights on the front door and stone columns on the porch, with NO mention of it showing any upgrades that weren't included in the base price. Based on this info, we signed the offer that our realtor recommended--$176,000 to include $3000 closing costs and the refrigerator to match the other included appliances. They accepted with no counter-offer. But when I met with them to select color choices, I was informed that oh, no, their realtor made a mistake--it did not come with sidelights, stone columns, granite counters, laminate flooring OR a garage door opener after all! Oh, but they'll give me a discount on the granite (a few hundred $) and upgrade the appliances to stainless to make up for it. Added cost to put everything back the way I thought we were buying the house, EXCEPT the lamanate: $2950. And no, my realtor did not specifically write in the granite, laminate, garage door opener and "etc." into the offer. I am very unhappy with him for this.

2. Suddenly the price of the fireplace is $3500. Based on the two floor plans, this is exactly the same type and size of fireplace, between two tall windows as they show in at least three of their floor plans, with the same stone surround and bump-out. Why the extra $500 from what they showed on the spec sheet?

3. When we made the purchase offer, I read the seller's disclosure thoroughly. They stated that there were NO easements on the property. I expected a utility easement in the front anyway, as most houses have. What I didn't expect was that suddenly, the entire back 35' of the property is storm sewer/overland drainage/public utility easement. That's 2100 square feet of our back yard, and fully 20% of our lot! There go some of my fencing and landscaping plans, among other things!

4. They are nickel-and-diming us to death on upgrades. I figured they would. However, my realtor just told me this (verbatim): "usually upgrades don't have wiggle room. The builder usually makes their money off of the base price of the home and the upgrade pricing is the amount they get charged for what is being done." WHAT... This is opposite of anything else I've ever read about building a house. Am I wrong here, or is he? They wouldn't be tearing anything out to put changes in; as of our last meeting, they hadn't even poured the concrete in the basement.

5. In our initial meeting with the builders for selections, they quoted me "a couple hundred dollars" (her words) for LED under-cabinet lighting. I made sure to verify that she meant LED. Now suddenly it's $300 for fluorescent UCL, but WITHOUT a dimmer or any light rail trim on the cabinetry. Again, WHAT...

6. They are extremely slow to respond to my questions, but want me to hurry up and decide everything RIGHT NOW. This applies to my realtor as well as the builders. I sent my realtor some questions Saturday morning, and he didn't get me any responses to me until Thursday afternoon, after he asked me for my decisions and I told him I needed their answers first.

Does anyone have any advice on how we should proceed? I would like to still try to make this deal happen, especially since we're under contract and have deposited our earnest money into the trust. We can afford the house with up to $9,000 in upgrades (or even a bit more more, but that's our personal limit). However, I'm angry about all the sudden extra costs and what I feel is deliberate misleading by the builders/their realtor. Thoughts?

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It sounds like you have written proof of their original promises. Based on this, you signed a contract which they are now trying to modify. If THEIR agent made a mistake, they own the mistake.

I suggest consulting a lawyer.

The builder has substantially altered the terms of the contract. This almost sounds like fraud and they are hoping you won't call them out on it. If you do hold their feet to the fire over these issues, who knows what other corners they will cut in order to make a bigger profit,

What you will end up with is not the home you thought you were getting. You should get out of this contract and away from this builder.

    Bookmark   September 27, 2012 at 6:39PM
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I would post this question in the Buying/Selling forum, too. There are several realtors there that might be able to give you some professional insight.

So sorry you're going thru this!

    Bookmark   September 27, 2012 at 6:45PM
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Time to consult with an attorney and to review breach of contract and damages. Run, don't walk!

    Bookmark   September 27, 2012 at 6:45PM
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Thanks everyone for the responses. I will cross-post to the buying/selling forum, kelhuck, good idea. Looks like my fiance and I have a lot to discuss tonight...

    Bookmark   September 27, 2012 at 7:06PM
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Agree with responses above. If this is how they're playing the game now, expect worse to come. I'd wager that even if you worked out these current issues and proceeded with this builder that there would be exorbitant fees, upcharges & unexpected cost overruns later on down the line--trust me, the builder will not build this house at a loss or even a break even point--he will get that money back somehow, some way. If it was me, I'd claim breach of contract/misrepresentation and look somewhere else with a different builder--preferably one who doesn't own the lot & isn't in cahoots with the realtor. You really do need to have a realtor that is looking out for your best interests and has no loyalty to the builder in question. Buying the lot yourself then hiring a builder gives you significantly more options and the power to choose which builder works best for you as the buyer and for the type of house you wish to build. There are still plenty of good builders out there and most of them would be more than happy to work with you on your build and give you a fair price for those options you desire.

Whatever you do, DO NOT tell the realtor or the builder that you can afford $9K in upgrades at any time. Also remember that even though the realtor is working for both of you, his/her loyalties will likely ultimately lie with the builder as you're just a one shot deal, but the builder is their bread & butter. Don't share anything with the realtor you wouldn't tell the builder.

    Bookmark   September 27, 2012 at 8:05PM
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Mydreamhome -- The realtor we're using is not the builder's, he is acting as our realtor only. The communication chain is: us > our realtor > builder's realtor > builder's design lady > builder's GC. I'm not sure how much of this mess is legitimate deception and how much is just a huge game of telephone gone wrong, but I'm wary.

We haven't told anyone how much extra we plan or are able to spend, only that we're talking over the charges presented to us and will get back to them. Our realtor is actually the landlord/manager of the townhome we're renting right now, though. Was it a terrible idea to use him? Maybe, I'm not sure.

    Bookmark   September 27, 2012 at 8:19PM
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You were correct....Very long post :)

Well we are having nightmares with our builder and I can tell you know to heed the advice that has been given, RUN...dont walk and get out of that contract asap. If I only had that option know I surely would take it. We can honestly say we would never build with our builder again nor advise anyone else to. I will say exactly what it is and if the builder and builder's agent are lying to you know, believe me it is only going to get worse. It is a good thing if you do have the emails showing what the agent stated to you was included so you do have a paper trail to prove a breach of contract. If the realtor gave you misinformation then that should be on the realtor and builder to eat those cost, not put back on you with a sorry that was incorrect.

You may want to check out other builders as well and see what their cost are for upgrades. Not sure what type of gas fireplace you were getting or where you are located but $3,500 sounds expensive for a gas fireplace in a tract home (not custom). Just for reference our builder charged $1,490 for a gas fireplac. If you look at our blog I do have upgrade sheets and prices listed there just to give you an idea of what our builder charged. The information you received that builders don't make any money on upgrade is a straight up lie. That is exactly where builders make money because they know they pretty much have you where they can increase the cost because a) people want to finance upgrades and don't want to pay out of pocket for them later b) somethings are just easier to add on the front end rather than doing demo/remodeling to put them in later & c) alot of people want a turnkey house that when they move in they don't have to do anything to. For these reasons builders know they can and will charge you more than you would normaly pay. It really seems like its a part of building and thhere is not alot you can do about it so you have to make decisions on what you are willing to pay for.

The realtor quoted you $300 for LED under cabinet lighting? I wouldn't have believed that to begin with just for the fact it will cost more than that for me to buy my own led bars discounted and do it myself. Did the builder not have a pricelist that you could physically see what you were purchsing and what the actual cost were?

I also believe that you need a new agent representing your best intrest as well. Seems like your current agent is more concerned with getting a sale than putting your best interest first. If you do have all the things you mentioned in writing I would see a lawyer quickly before they proceed any further. Building a house is a stressful journey (well it was for us) and to have a builder who doesn't care will only make things worse!

well just my .02 cents FWIW, hope it helps

Here is a link that might be useful: Our home sell/build blog

    Bookmark   September 28, 2012 at 1:28AM
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Are you paying the realtor to represent you in this negotiation or will the realtor get a commission from the seller? The qualifications and duties of realtors is often misunderstood by buyers.

You wouldn't go to court using your opponent's lawyer so why would you use an agent who has no fiduciary responsibility to you?

Unless you know how the game is played you should pay someone who does to represent you and that person can have no other interest in the outcome of the negotiation.

I would talk to a lawyer but I would not tell anyone about the lawyer until it was time to drop the hammer on this elaborate scam.

    Bookmark   September 28, 2012 at 10:08AM
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Brochure and spoken claims that do not make it into the written contract are exactly worth the paper they are NOT printed on.


Unless the contract calls out the brochure it is NOT part of the contract, and I will almost bet money there is a contract clause that says words to the effect is 'this contract is the sole and complete agreement between the parties' and you agreed.

You can lawyer up, but the best outcome is likely to be the contract is cancelled and you may get some money back.
Possibly less the builder's attorneys fees.

    Bookmark   September 28, 2012 at 10:31AM
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Consulting a lawyer does not mean you have "lawyered up"; this is a civil matter and the best resolution may even be in the form of a negotiated settlement.

Telling the other party that you have hired a lawyer would probably cause them to ask their lawyer to write letters to your lawyer and run your fee up until you give up.

What you want is for a lawyer to explain to you the meaning of the current contract and what your immediate options are. The lawyer should only make contact with the other party if you had a clear legal advantage. No one should make such important decisions without fully understanding the issues and no one on the internet will be able to do that for you.

It often happens that the people who perpetrate these bait and switch scams are already in trouble with consumer protection and/fraud laws and you may be able to take advantage of that fact. You can be sure you are not the first buyer to be taken advantage of by this company.

    Bookmark   September 28, 2012 at 12:50PM
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Tinydogs, may I ask, who is your builder?

    Bookmark   September 28, 2012 at 3:10PM
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"Consulting a lawyer does not mean you have "lawyered up""

Only if your attorney is free.

If you do not understand any part of a contract, the time to talk with an attorney is BEFORE you sign and AGREE to the contract terms.

"It often happens that the people who perpetrate these bait and switch scams are already in trouble with consumer protection and/fraud laws"


Far more likely is someone signed a contract without fully understanding it.

    Bookmark   September 28, 2012 at 5:27PM
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Renovater8 is exactly right. Many attorneys would look at this situation for a couple hundred dollars. A pittance compared to the money being spent. I do this kind of thing for clients frequently. If I can quickly tell that I won't be of any use, I don't charge at all.

Even if you look at your contract and it seems to leave you no options, still consider talking to an attorney. I see contracts every day that are unenforceable for any number of reasons.

No one can ever give you advice that it is not worth seeing an attorney or that seeing an attorney will make you worse off. Only an attorney can make that call. (Are you seeing a theme here?)

Bottom line, anytime any conversation online veers into contracts and legal rights and such, the only response should be seek an attorney. It is irresponsible and likely illegal for anyone to try and tell you what your likely outcome is. People on here are experts when it comes to houses and construction, but even the lawyers here can't tell you about your legal situation.

    Bookmark   September 28, 2012 at 8:42PM
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Ok, any communications most likely will be irrelevant.

It is all about contract. This mess is not unusual.

Normally builders make most money made in upgrades. You had a contract there is some misrepresentation. If anything you stating is part of the contract - tell them to eat it.

If it is not negotiate. Tell them you need to stick to the budget. Fireplace $3500 - is a little steep, but I think it extends outside of the house... I would tell them it was $3000 on the spec, when you signed contract this is what you expected to pay.

You need to decide IF you want the house, if yes - negotiate, if no walk away.

> entire back 35' of the property is storm sewer/overland drainage/public utility easement

So? In our area you can have it fenced off. In theory utility company can dig it up for some reason, in the new track subdivision it will never happen. In theory the can demo your fence, in reality - even if they need to, they will carefully remove and reinstall it.

    Bookmark   September 29, 2012 at 6:25AM
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I had a client whose neighbor could drive over the utility easement at the back of his yard and he couldn't build a fence on it. He bought the right to keep people off of it and to build a fence and it cost him more than the property did.

Woulda, Shoulda, Coulda has no relevance in this discussion; the OP is in trouble and needs help.

Talk to a lawyer immediately. Waiting even another day could cost you money and aggravation.

    Bookmark   September 29, 2012 at 7:53AM
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Any follow up as to what is happening?

Also, who is your builder?

    Bookmark   October 11, 2012 at 4:43PM
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