I signed a purchase agreement for a home with a builder. They are aware my financing is all in line and approved. In the meantime, they have dropped the price on the larger model homes. Am I obligated to buy the house at the agreed price or do I still have some room to renegotiate the purchase price? Basically, am I obligated to buy the house at the price I signed for on the purchase agreement?
I get queazy thinking I am buying the house at a certain price when they just dropped the top of the line house price to close to what I am buying mine for.
You should always negotiate with a builder that if they drop the price on the same model before you close escrow that you will receive the lower price. You should find out what you are on the hook for before you back out. it depends on your contract. Than once you know call the builder and tell them you want the lower price or you walk. You have left alot out above so I’m not sure all the particulars. Just remeber this if they dropped the price on the new model 100K and you have to pay 10K to cancel the contract it will be the easiest decision you ever make. If you can get out of it rather cheap the builder would be morons if they don’t renegotiate with you as opposed to losing the sale. Good Luck buddy.
Which builder is this? I know many of the builders are offering ‘buyer protection.‘ at the very least, if they can’t drop the price, they will credit you the amount in their designer studio for upgrades. i know its not the same, but it’s better than nothing if you want to try and negotiate that.
now since i gave you the advice, i can rant a bit:
given that the RE market has been in a downward spin, why didn’t you think of this situation beforehand? its always the first thing on my mind when looking at a house. i.e. how much equity will i lose in the next 3-4 years as the market continues to drop?
Sorry to hear about the stressful situation. Would you provide more specifics? Especially the builder and the amount of the price reduction? And where in the escrow process you are! Eg. closing tomorrow OR just signed the contract. Look, nobody likes to look like a fool (and I’m not saying that you are) but more specific facts may be helpful in answering your question OR simply warning others. Of course, I’d advise against specifically identifying the lot # or address.
If you are NOT going to be using the builders financing, I think you are in a better situation - assuming that your contract is contingent upon financing. Getting a pre-approval is NOT financing. Getting your lender to release funds is. If the drop is significant, the first thing you need to do is read your contract and get a good hold on the contingent upon financing langauge. The next thing you need to do is get on the phone to the lender (and the appraiser) and make sure that they are aware of the price reduction- assuming that the purchase is contingent upon securing financing… (this is all my opinion).
I know someone that recently bought… and although subsequent phases had not been reduced… the new home simply did not appraise for the agreed purchase price! The builder tried to pressure the appraiser and the lender… each of whom basically told the builder to “pound sand.“ Ultaimtely, the builder ate the difference between the purchase agreement price and the appraised price to make it work out with the lender just to keep the deal alive.
Most of the salespeople are very reasonable and will work with you… especially the way the market is now.
If they still don’t budge… then ask them how much it will cost you to drop out of escrow and stop the sale. Then measure that against what you are comfortable with and decide if it’s worth losing that amount of money. I think the builder would be more willing to work with you then to have your house back in their inventory.
Have you considered contacting a RE attorney to figure out what your options are?
In the current market you are smart to protect yourself and large financial commitments - like buying a home.
Prior to signing, gasjockey should have gotten an attorney to look through the purchase agreement. Most likely at this point, if there weren’t any edits to the original boilerplate agreement, almost all of the language is one-sided favoring the builder. If gasjockey retains an attorney, he should be prepared to shell out $$ (with no guarantees that he’ll be able to get out of the purchase agreement.)
Again the best bet is for gasjockey to talk honestly with the builder. Be FIRM about the dissatisfaction and even hint about your willingness to lose the deposit and walk. Hopefully both parties can reach a good resolution.
I bought a home with lennar and imagine the purchase contract is similar. If you don’t have a price protection clause in your contract, you really have no recourse but to threaten to walk and lose your deposit. Whether they call your bluff or not will depend on the number of homes they need to sell. If your particular plan is the same price and they only lowered on the plan 4, you have little leverage. Also, if you have a nice lot that was in high demand, they may just let you walk.
I believe IPO tried to negotiate with KB in a similar situation and ended up walking and losing his deposit.
Wow, thanks for all the great advice. I know most on this forum are bears as I am too regarding the market. However my wife and I have been looking for a home for over two and a half years now and we have seen every floor plan out there in the areas we are considering. We are so happy we waited. We really didnt wait because of price though. We waited because it took this long to find the right house. My wife needs x amount of closet space and y amount of kitchen counter space, a very open floor plan, privacy, and it has to face the right direction to let in the most amount of light, etc… We want a newer home too. We until now havent found that house in our price range.
We finally did find this house with most of everything we wanted. However the price was too high when we started eyeing it last year. It has come down $200k from the original base price and it even has all the right upgrades which would have added another $150k. So basically, it came down close to $350k from last year’s price. Also, there are only 2 more of the floor plan left. One is the model which will be way too expensive and it doesnt face the right direction. The other faces the right direction but isnt the right elevation. So our decision to buy now is because it has fallen into the price range we are comfortable with and because of the fact that there are no other homes in the area that we like. We would not even consider the other two because they lack the criteria we feel are important. I know prices will continue to fall. However, there are no other houses that we like and I dont think anything new will be built in the next 4-5 years. We are tired of renting and want to settle down.
When the price came down to it’s current level, someone else came in and took it before we could get our offer in. Fortunately it fell out of escrow. We came in and signed the purchase agreement the same day it fell out. We were very happy with our decision. However, the builder just dropped the price of the house across the street which is a different floor plan (larger than ours). They dropped the price almost $200k. We sent our agent in to try and negotiate some incentives for us today. They basically told him that if we didnt want it at the price we signed for, there is already a back-up buyer ready to take over and they will refund our deposit without any penalty. Not the response we wanted. So we have decided to just accept the price and get the house we want. I know we may lose some equity over the next few years. But since this house is unique, we feel it is worth it to us in the long run rather than settle for something else that we dont like as much. By the way the builder only has about 3-4 more houses in the community and then it will be done. We dont like any of the other houses that are being offered. So we are closing escrow in two weeks.
The sales technique they are using is called “Standing Room Only”. They’ve been using it to sell Corvettes for years.
I’d play hardball for $200K and walk. Trust me, they’ll come crawling back.
No vas, you’re probably right, but it’s not a guarantee. When I sold my house in 2006 we actually DID have three offers come in at the same time, and we used this to our advantage. I saw the offers myself - it was not realtor creativity.
That kind of situation today, of course, is much less likely to occur. But again, you never know. And if their heart really is set on this one particular house, and they have been looking for two years, and they can easily afford the 30-year fixed payments, and they also love the location…it might not necessarily be the worst thing for them to move forward.
The sales technique they are using is called “Standing Room Only”. They’ve been using it to sell Corvettes for years.
I’d play hardball for $200K and walk. Trust me, they’ll come crawling back.
No vas, you’re probably right, but it’s not a guarantee. When I sold my house in 2006 we actually DID have three offers come in at the same time, and we used this to our advantage. I saw the offers myself - it was not realtor creativity.
That kind of situation today, of course, is much less likely to occur. But again, you never know. And if their heart really is set on this one particular house, and they have been looking for two years, and they can easily afford the 30-year fixed payments, and they also love the location…it might not necessarily be the worst thing for them to move forward.
+1. There is something to be said about finding the “right” house. If you are willing to pay a certain amount, the buyers before you were willing to pay the same amount, and the back up buyer is willing to pay that amount, then that is the value of the place as it stands today, regardless of what the property across the street is going for. And if you don’t plan to sell any time in the near future and can stomach continued down trends in the market, I think you’re fine. I rather live in a house that I love, rather than settling for an okay one that can save me tons of money. If your family feels the same way, you’re okay. But I think it might be worth it to take another crack at getting some sort of incentives.
gasjockey,
If I was the backup buyer, I would be leary of the 200K drop in price. Basically, what you could be signing up for is the fact that straight outta the gate you MAYBE in the hole by 200K (if the homes are likewise). Is that a cost you are willing to endure while you enjoy your new home? And really, would you TRULY enjoy the home knowing what you know about what the developer is doing with home prices in your development? 200K could just be the start. This is a tough choice between homeownership bliss and fiscal responsibility.
I personally would walk, especially if they are willing to give my deposit back.
Wow. 200K post-escrow drop right across the street? I didn’t expect that (and lets get real, nobody here would). That’s 500K off peak? (depending on how you count the upgrades). If your deposit was 25K, I’d personally be hesistant to go through with it. What did your lender think? It sounds like the builder waited until just after your appraisal to lower prices so that financing wasn’t an issue? It gets tricky if a builder is in the last few homes of an entire plan… they just want out and things turn into a bit of a fire sale. I see positives either way you go… but what you are describing is not really a reduction in the price of the homes in subsequent phases… it sounds like its just a drop in the remaining few homes before they fold-up shop and get out of Dodge. Keep in mind, you should look for a good value - but don’t kid yourself about being the one person who gets the “best deal ever.“ It’s just not realistic. Focus on getting a comparitively good deal when you look at the entire sales volume. And don’t over-fall-in love with the house.
No, not Villa Rosa, although we did look there. Wasnt too crazy about those floor plans but for the price I think they are a decent deal. I’ll let you know which one it is as soon as we close… since all is still not set in stone.
If they are willing to give you your deposit back, it sounds like they don’t want to piss you off going forward. I’m not emotionally involved with your transaction, but I tend to agree with No-Vaseline.
$200k is a large amount of money, so you are right to work thru this puzzle as best as you can. I know how important the “right house” is and if this is “it”, this is it.
Best wishes on getting the best deal and the best home for your situation.
One other comment regarding attorneys - many will give a free consult to let you know options - even after the fact. ~just saying
One thing… the $200k price drop was for a larger model that is less popular because the floor plan sucks. They have not had any trouble selling the units with the floor plan we chose. I think that is why they are willing to let us out because they are sure they can sell this floor plan.
One thing… the $200k price drop was for a larger model that is less popular because the floor plan sucks. They have not had any trouble selling the units with the floor plan we chose. I think that is why they are willing to let us out because they are sure they can sell this floor plan.
Gas, I’m pretty sure I know what community and plan you are buying but will keep it my mouth shut until you close. I live in the same community and the one you are in contract for was my first choice back in late 2007. However, that plan was going for 1.45 at the time and the builder would not budge because it was clearly everyone’s favorite and in relatively high demand.
Coincidently, I decided to visit the models again yesterday and saw the cut on the biggest floor plan there. There is no comparison to yours and i’m not surprised the builder isn’t budging. Go through the threads here - most people love the plan you are in contract for and the fact the builder is willing to let you walk is pretty solid evidence they are not bluffing.
I may be slightly biased because I bought in 2007, but I am a bear like you and chose to buy anyway because I received 350K off peak pricing and found a house I loved and could comfortably afford. I still don’t regret my decision.
I’ve actually visited every new home community in OC many times and your plan is by far mine and my gf’s favorite. I think you are getting the best price at this moment. Good luck with whatever you decide.
^^there you go. Like I said, there’s something to be said about getting “THE” floorplan you like. You may not be getting a bad shake after all for the more popular plan. It doesn’t appear you are being financally irresponsible. If we followed everything that is posted on this forum, it appears nobody would be buying property in OC in the next two years.
^^there you go. Like I said, there’s something to be said about getting “THE” floorplan you like. You may not be getting a bad shake after all for the more popular plan. It doesn’t appear you are being financally irresponsible. If we followed everything that is posted on this forum, it appears nobody would be buying property in OC in the next two years.
That’s because a lot of people on here track home prices like a day trader trading stock every day. The reality is if you love the house that you buy, don’t get in over your head, use traditional financing like a 15 or 30 year fixed loan, and plan on living there for years then I say go for it. A home isn’t solely an investment, it is a place where you and your family live their lives. Prices of real estate will continue to go up and down in the future and no one is smart enough to figure our when we hit bottom.
Thanks everyone for the advice. We feel alot more comfortable moving forward with this purchase. My wife and I have backed out of 3-4 properties already over the past two years and havent regretted it one bit. I think this is the one we have been waiting for. I was at the models again today. All the homes with the floor plan we have are sold out save for the model. There were lots of people out there today looking. Looks like this builder is almost ready to wrap everything up soon.
Thanks everyone for the advice. We feel alot more comfortable moving forward with this purchase. My wife and I have backed out of 3-4 properties already over the past two years and havent regretted it one bit. I think this is the one we have been waiting for. I was at the models again today. All the homes with the floor plan we have are sold out save for the model. There were lots of people out there today looking. Looks like this builder is almost ready to wrap everything up soon.
Good luck to all!
Good luck gasjockey. It sounds like you are getting the home that you want and others want also.
When we buy, it will probably be the home that no one else desires.
^^there you go. Like I said, there’s something to be said about getting “THE” floorplan you like. You may not be getting a bad shake after all for the more popular plan. It doesn’t appear you are being financally irresponsible. If we followed everything that is posted on this forum, it appears nobody would be buying property in OC in the next two years.
That’s because a lot of people on here track home prices like a day trader trading stock every day. The reality is if you love the house that you buy, don’t get in over your head, use traditional financing like a 15 or 30 year fixed loan, and plan on living there for years then I say go for it. A home isn’t solely an investment, it is a place where you and your family live their lives. Prices of real estate will continue to go up and down in the future and no one is smart enough to figure our when we hit bottom.
+1. Although I don’t want to be a newb whose comments come across the wrong way. I certainly appreciate the collective knowledge that this forum provides. I’m glad I stumbled upon it. I understand the market that much better for it.
