Cross-post: Being jerked around by spec home builders?

TinyDogsSeptember 27, 2012

Hi there, I'm posting this here on a recommendation from over in the Building a Home forum, 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? If you made it this far, thanks!

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I can only suggest you get a legal opinion. Sounds like someone is trying to get as much as they can for as little as they want to install. Just make sure you get everything in writing. Wish I could be more help.
Oh, by the way is your realtor an agent or Broker? If not, talk to the broker and the supervisior of the house you picked out, not the sales people or agent.

    Bookmark   September 27, 2012 at 9:16PM
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A couple of quick thoughts:

1) If I were you, I would explore what it takes to get your "earnest money" back. Your best leverage is the willingness to walk away from the deal.

2) You should not allow yourself to be held financially responsible for their realtor's mistakes.

3) The rush to have you make decisions is a calculated (or at least well practiced) attempt to get you to make mistakes and agree to things you wouldn't otherwise.

4) You should require your realtor to stand up for your interests rather than (hint, she'll do more if you threaten to walk away from the deal)

5) If you go through with the deal, I would strongly suggest a pre-drywall inspection. I would have little confidence the builder isn't cutting corners on the build.

5) This sounds like a crappy situation with numerous bad actors (the builder, the realtor(s), and likely the subcontractors working on your home), but to get an acceptable outcome, you need to take ownership of the situation.

6) If you're enough of a pain, stand up for your rights, talk about a pre-drywall inspection, lawyers to force builder to perform, they will likely be willing to give your deposit back.

    Bookmark   September 28, 2012 at 10:19AM
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The builder's rep is typically not only not a Realtor but generally not even a licensed real estate practitioner.

In my area, volume builders will not allow a licensed real estate agent or broker to work for them, because of the licensing requirements for ethical & fair treatment & the legal consequences for violation of those requirements.

An old collegue had to put her broker's license on inactive status to work for a builder.

    Bookmark   September 28, 2012 at 11:15AM
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I was visiting Suzanne at her model home one morning when a homebuyer came by to chitchat.

Homebuyer mentioned that she had been telling her mom how beautifl the house was & she was just so smitten with the etched glass door on the pantry.

skip a beat...

"Oh, that doesn't come with the house. That's an upgrade. *Your* door is a 6-panel hollow-core."

    Bookmark   September 28, 2012 at 11:21AM
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Lawyer up!!!

    Bookmark   September 29, 2012 at 11:20AM
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Item 3 in your list would cause me to walk away.

    Bookmark   September 29, 2012 at 10:44PM
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I would walk away from the "deal" and get a lawyer to recover your earnest money.

    Bookmark   September 29, 2012 at 11:33PM
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They are NOT dealing ethically with you.

Definitely start making motions to get out of this deal. The granite, stone columns and sidelights alone would have had me walking. And the utility easement is another potentially big problem.

    Bookmark   October 3, 2012 at 5:00PM
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The utility easement, imo, is the one that will get you out of this deal. That was a written disclosure statement---the one you actually based your contract on. And, they changed the contract without your consent. That is where I think you have a leg to stand on. Find yourself a lawyer and get advice. They will advise you how to go forward and get your money back. And, because you have $9000 in in earnest, it will pay to hire that lawyer. I don't think you'll have to spend that much for them to write up a letter and get it delivered to them.

    Bookmark   October 3, 2012 at 6:03PM
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"They are NOT dealing ethically with you. "

By that definition no builder does.

They do not sell you a furnished and decorated house, just an empty shell.

And almost every model home has at least some 'upgrades' present that are NOT contained in the 'base price.'

It is advertising to entoce you what you COULD have, not what your aregetting.

That os waht the contract is for.

Any builder who has managed to survive more than a few builds has an attorney that write their 'standard' contract to be used by the salesperson (rarely a licensed RE professional).

There s invariably an clause saying that the written contract is the SOLE AND COMPLETE UNDERSTANDING BETWEEN THE PARTIES.

While this is the main point of even having a contract, it is a reminder to the less aware that if it is NOT in the contract it does NOT exist.

    Bookmark   October 9, 2012 at 10:38AM
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