Home Buying in 76179>Question Details

Elizabeth, Home Buyer in 76179

Effects of backing out of a new construction contract?

Asked by Elizabeth, 76179 Wed Nov 12, 2008

My husband and I are first time home buyers with a baby on the way. We rushed into a new home construction contract and ended up signing our lives away on a super high mortgage payment. Since that time, we have found that we can get a lot more house in desirable areas for a lot less money. After reviewing our new home contract, I am thinking we are only out the good faith money we put down, which would be made up considerably if we were to finance a cheaper home. It is worth it to me....but I am afraid a lawsuit would come from backing out of a contract. Our home will be complete in early January. My question is: would it be wise to just stay where we are, or contact our builder and stop construction....we like our new home, we are just getting cold feet and thinking we made a mistake. I appreciate the advice!

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This is an old question but a great one too. Please be careful reading any of these answers, only a liscenced attorney can give legal advice in the state of Texas. If you sign a contract to purchase a home in Texas you have signed a legally binding document and depending on the language of the contract that is used, yes you can be sued. Builders do often avoid this.

If you have misgivings or concerns with a builder or the process of buildng a home the first step you should take is to contact the builder right away to see if things can be worked out, most often they can. If you are using a REALTOR (great idea, by the way) contact your REALTOR and ask them to help! Talk about what is causing these feelings and try to find out "if" you can work through them. Importantly, make certain that everything is in writing, this is the number one area that people get into trouble.

This question was written in 2008 and many people were nervous about moving forward at that time. I sold new homes for almost 15 years before becoming a REALTOR, and I can say many people go through times of doubt during the process of building a home no matter what the economy is. The key to working through it is talking with family, friends, and professionals. Seek out answers to your questions and don't let doubt stand in the way of your dreams.
1 vote Thank Flag Link Wed Aug 15, 2012
With well over 20 years of experience I can almost assure you you would not be sued. It's is virtually impossible for anyone to make someone buy something they've decided they don't want to buy. If you're concerned about he legal ramifications of terminating your contract you should contact an attorney in your area that specializes in real estate. I believe he will tell you all you'll lose is your deposit.

Before you do this however I think you really need to take a deep breath and think things through carefully. The angst you're feeling is pretty standard, it's know as "Buyers Remorse" and is very common. You signed the contract to buy to begin with because you liked the neighborhood, the house, etc. Other than perhaps realizing you might be able to get something else for less, what's really changed and are you really comparing apples to apples?

As first time buyers I really hope you are working with an experienced buyer broker. Every buyer would benefit from doing this and particularly first time buyers such as yourself. Real Buyer Brokers don't have the property listed and don't represent the seller, their sole focus is on doing what's best for you.

Before you make another hasty decision, take the time to think things through carefully.

I wish you all the best.
0 votes Thank Flag Link Sun Jul 15, 2012
I've been reading a lot of bad reviews about DR Horton who is the buidler of our home. I guess something I should have look into prior to having the home built, but now a bit nervous after all the reviews. We are schedule to close in August, what would you recommend?
Flag Wed Jun 11, 2014
Best advice, contact a Real Estate Attorney to review your options, you may lose the earnest money however.
0 votes Thank Flag Link Sun Jul 15, 2012
Elizabeth,

Our best recommendation is to be in touch with a good real estate attorney for their advice on this matter.

Good luck
0 votes Thank Flag Link Tue Dec 2, 2008
If you have cold feet and any worries about the mortgage, don't even think about it. The way real estate is dropping, the agreed price is probably 10% too high anyway.

Also, never buy from a builder near or in bankruptcy, you will have a lien filled nightmare.

I do suggest talking to the builder ASAP. Depending upon how well you pose your situation, you may get your money back. If the builder is nearly broke (most are), this won't happen.

I don't think hardly anyone is ever sued for backing out of a contract. You need some legal advice on this though. Many builders make lots of mistakes and usually miss deadlines, you probably have a basis for sueing them.

Spend a little on an attorney, and good luck.
0 votes Thank Flag Link Tue Dec 2, 2008
Elizabeth,

Tough to tell. You're right...it could just be your earnest money...it could be they sue you for specific performance. If you want to back out, the best thing to do is contact the builder and ask them what their policy is. You should also contact your family attorney and ask them for advice. Backing out of a contract is serious business and above our lay opinions to advise you. You probably need professional attorney assistance to give you the best advice. Contracts are serious business. Probably not what you want to hear, but how would you feel if they came back to you and said ...hey we know we have a contract, but the economy has gone up and we know we can sell it to someone else for more money. Here's your earnest money back and we're backing out of the contract so we can sell it to someone else. You might be upset and would consider a lawsuit. So right now they're on the flip side of that.

As someone else mentioned, one idea is to ask the builder if they can transfer your deposit to another home. Maybe they have a smaller home for you or a home in a different community. Always best to work for a win win situation for you and for them.
0 votes Thank Flag Link Wed Nov 12, 2008
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
Contact
There is no way to tell the effects of backing out of a new construction contract without having an attorney review the contract to see your options. It could be as little as losing your earnest money or they might be able to go after you for specific performance. You might just consider talking to the builder and letting them know the economy has changed your mind and what would the consequences be for canceling your contract?

If the mortgage payment is the problem you might check and see if there is lower cost financing elsewhere.

If you have any other questions please let me know!

Terry Smith
RE/MAX Achievers
Megamerica Mortgage
817-989-3180
Web Reference: http://www.terrysmith.com
0 votes Thank Flag Link Wed Nov 12, 2008
Elizabeth, are you sure your new home will still appraise for it's contract value? Did you guys go nuts at the design center with too many upgrades that you are now re-thinking? It can happen. Every builder's contract is different for new construction. They don't typically use our Texas Real Estate Commission standard contract. Read the fine print carefully to know what is at stake. If you didn't have an agent representing you at the time of purchase, that doesn't stop you from having a conversation with an agent now. There are questions we can ask that would not be appropriate in a public setting to help you determine if this is just cold feet or if you really may have over-purchased. Better to deal with it now - and the sooner the better. I just helped one couple get out of their home (different circumstances) six weeks before their home was finished. They did forfeit their earnest money and almost half of their upgrade money because the house was almost complete. Have also gotten people out of the contract much earlier - in the first few weeks and before the slab was poured - where the builder just handed back the earnest money and wished us well. You never know for sure how it will go, and it doesn't hurt to try to get at least a portion of your funds back.
Web Reference: http://www.judgefite.com
0 votes Thank Flag Link Wed Nov 12, 2008
Elizabeth,
I have represented many clients that have had to back out of a deal for a myriad of circumstances.
You are correct, you will lose any earnest money deposit. The Builder will offer this home (when completed)
as new inventory and will eventually sell the home. They will most likely sell it for less than what you agreed to pay, depending on the upgrades and the market conditions at the time of the Certificate of Occupancy is issued. Most Builders will issue you a time line of events which describes the completion dates in various stages of the new home build. Sometimes the earnest money deposit can be used if you transfer it to a different home built by your builder.
Feel free to call me with more particulars and I will represent you in making this transaction work to your benefit.
Lucy A. Puniwai
214-783-6416
puniwai@hotmail.com
Sans Pareil Realty
Web Reference: http://webuyitwesellit.com
0 votes Thank Flag Link Wed Nov 12, 2008
There are some great foreclosures on the market fairly new construction with equity. It depends on how your contract is authored between you and your builder as right to cancel not continued. If you had a realtor representating when you purchased new construction then have agent review the terms and conditions OR contact a real estate attorney who can review the contract based on an hourly rate.

If we can assist you contact my office I am a realtor and loan officer.
972-699-9111
http://www.lynn911.com http://www.homes-for-sale-dallas.com
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Wed Nov 12, 2008
CAn you get out the construction contract if you signed but didn't put any money down yet???
Flag Fri Feb 7, 2014
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