Frustrated with New Construction

[unistate]

What is the name of your state? PA

Hello. I've posted a few times on this board and each time was very long winded, so I apologize in advance if I ramble. Anyway, my wife and I are having a home built in a small subdivision (9 new homes) which is right next door to our current house. We basically customized the home using the model home as a guide. We signed the contract (and upgrade addendum) in June 2006. The base price of the home is $330,000 and the addendum is for $35,000 ($365,000 total). We put down $15,000 and then paid an additional $2,000 to contractors for items we added after signing the contract/addendum.

The house is about 80% complete right now. We don't have a realtor and have dealt directly with the builder since day one. We haven't received any special incentives from the builder which made me angry, especially in this slow market, but not enough to show my anger because he's not obligated to give us any special perks.

But now I'm hearing through some of the neighbors that the builder is covering "a lot" of the upgrades on one of the other new homes in the development that is almost identical to ours. That buyer has a realtor, so the builder is paying commission AND covering some upgrade fees? We have no realtor and get none of our upgrade fees covered? I'm in the process of trying to find out "how much" the builder is covering for the other buyer. That figure will determine my anger level. Now of course, I understand it's all about the contracts. But we were the first to sign a contract with this builder and get absolutely no incentives?

And now the market is extremely slow and after looking at other sales in the area during the past few months, I'm starting to think we're overpaying for the house. All of this combined with some uncertainty about our current house which we're trying to work out a lease-purchase agreement. That isn't set in stone yet. So after all of that rambling, here's my question. We signed a contract. We customized a good bit of the home. But now I'm having second thoughts. If we pull out of the deal, obviously I'll lose the money we've spent so far. My concern is any other ramifications. I supposed he could sue us for breach of contract, but somehow I'd rather deal with that than overpay for a new house. Any advice, other than what I should've done different? Thanks in advance.

[demartian]

I just got a new custom house myself... You agreed to the contract and you added all those little extras. I am not a lawyer, but I am thinking he could go after you for the cost difference if he has to sell the house now. So, you would still be "overpaying" for a house that now isn't even your house.

My own house went down $10,000 in value the second I bought it. I love every bit of the house, it is exactly what I wanted. We had a small issue with our builder and they have compensated us for that, overall, we are very happy even though we know we overpaid.

[acmb05]

Originally Posted by unistate

What is the name of your state? PA


The house is about 80% complete right now. We don't have a realtor and have dealt directly with the builder since day one. We haven't received any special incentives from the builder which made me angry, especially in this slow market, but not enough to show my anger because he's not obligated to give us any special perks.

Did you ask for any incentives in your contract. If you don't ask then don't expect the builder to just offer you things that are going to cost him money.

[unistate]

Thanks for the replies. No, I didn't ask for any incentives. I guess I thought we were getting a good "pre-construction" deal, but now it seems like we're overpaying.

Another issue I have is with the actual sale prices of the 9 homes. Mostly all of the buyers are paying cash up front to reduce their sale price which will keep their assessments lower. I guess this is a common practice, but it doesn't seem fair. So if owner A is paying $400,000 but pays the builder $50,000, the sale price on record is only $350,000. So for me, paying $365,000 with no money down makes it looks as though I'm paying more than owner A. So when I have an appraisal done, the sale for $350,000 will be comparaed to my house when it's actually a $400,000 home. Somehow that doesn't seem right.

[demartian]

All the buyers will have a HUD statement showing what CASH and what LOAN money went to the builder (all money transferred in the deal). It will indeed show that these people paid more money for their homes. Trust me, the value of your home will not be an issue because they paid cash. If I buy my home for cash at $300,000 it does not show my house as worth $0, it shows as fully worth the $300,000 I paid.

[weenor]

You can sit there and dwell on your "deal" all day. Bottom line is that you have a contract and if you break it, the builder can and will sue you.

[unistate]

Originally Posted by demartian

All the buyers will have a HUD statement showing what CASH and what LOAN money went to the builder (all money transferred in the deal). It will indeed show that these people paid more money for their homes. Trust me, the value of your home will not be an issue because they paid cash. If I buy my home for cash at $300,000 it does not show my house as worth $0, it shows as fully worth the $300,000 I paid.

Thanks for the response. But if this is the case and all money is documented, how will they get away with a lower assessment? Our county bases the taxes on the sale price. I'm under the impression the builder is getting money "off the record." Maybe I'm wrong.

[unistate]

Originally Posted by weenor

You can sit there and dwell on your "deal" all day. Bottom line is that you have a contract and if you break it, the builder can and will sue you.

As Rocky Balboa said in Rocky V, sue me for what? It would be like trying to get blood from a stone. But thanks for the response.

[demartian]

Originally Posted by unistate

Thanks for the response. But if this is the case and all money is documented, how will they get away with a lower assessment? Our county bases the taxes on the sale price. I'm under the impression the builder is getting money "off the record." Maybe I'm wrong.

If they base the taxes on the sale price then the person paying $50,000 up front and $350,000 by loan will get taxed for a $400,000 property.

I am sure there is a miscommunication somewhere, because, IF the builder were to get money "off the record" the builder would be liable for tax and other frauds as would the buyers. The buyers would save what? $1,000 a year, but risk destroying their lives over it? And also lose that equity in the house etc. etc. too many bad things to think of a buyer even contemplating it.

[Mister Darcy]

Bottom line is: You didn't negotiate very well, the neighbors did. Not their fault.

[unistate]

Originally Posted by Mister Darcy

Bottom line is: You didn't negotiate very well, the neighbors did. Not their fault.

Thanks for the insightful response.

[unistate]

Originally Posted by demartian

If they base the taxes on the sale price then the person paying $50,000 up front and $350,000 by loan will get taxed for a $400,000 property.

I am sure there is a miscommunication somewhere, because, IF the builder were to get money "off the record" the builder would be liable for tax and other frauds as would the buyers. The buyers would save what? $1,000 a year, but risk destroying their lives over it? And also lose that equity in the house etc. etc. too many bad things to think of a buyer even contemplating it.

I agree with you. I'll have to ask the builder about this matter because it doesn't make sense. The taxes in my area are pretty outrageous on new construction. So that is why I got the impression he was trying to pull a fast one on the county with lower sale prices.

[Mister Darcy]

Originally Posted by unistate

Thanks for the insightful response.

You are welcome, and thanks for recognizing my wisdom. You were being sarcastic, but consider this:

You are angry about what has happened, but you refuse to confront the one person in this world who can do something about it.

I had a house built. Got a walk-up attic, a huge back deck and hardwood floors. Got them all as concessions, after the contract had been signed. Why? Because I asked for them and I had a builder who recognized that customer good will was one of his most important business assets. Maybe your's does too. You'll never know until you ask. That's the secret to negotiating.

[unistate]

Originally Posted by Mister Darcy

You are welcome, and thanks for recognizing my wisdom. You were being sarcastic, but consider this:

You are angry about what has happened, but you refuse to confront the one person in this world who can do something about it.

I had a house built. Got a walk-up attic, a huge back deck and hardwood floors. Got them all as concessions, after the contract had been signed. Why? Because I asked for them and I had a builder who recognized that customer good will was one of his most important business assets. Maybe your's does too. You'll never know until you ask. That's the secret to negotiating.

I was only being sarcastic because you told me the obvious...I didn't negotiate very well from the outset.

So anyway, you are saying it's not too late to ask for some concessions, even after the contract and addendum have been signed. It's not unreasonable to ask for some of the addendum items free of charge this late in the process? Thanks again, seriously.

[demartian]

Didn't your mother always tell you; "It doesn't hurt to ask"?