Home Buying in Minnetrista>Question Details

S, Home Buyer in

Is it possible to put in an offer on a home that is being built for us?

Asked by S, Tue Nov 13, 2007

We are paying retail price on a lot of the upgrades and feel it is overpricing the home for the neighborhood. We'd like the builder to drop the price about 25-30,000. What do you think? The house has gone 75,000 over the initial 425,000 estimate they gave us, but that estimate didn't include selections like lights and appliances. Bottom line, the builder wouldn't be able to sell it in todays market for the price we are being asked to pay. **It is a slight variation of the model, there is a PA that mentions change order are responsiblilty of buyer, it is non-contingent offer and 15,000 down. The same house with a lot more upgrades was built 2 years ago when market was hot on better lot for 10,000 less.

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NOTES TO QUESTION: The home is about 80% complete -close end of dec. I'd say we probably are stuck with it due to the PA language that says any change orders are our responsibility...but the pricing on them has not been fair in our opinion. I don't want to lose the house, just get a fair price for it. We think the builder is doing a great job, just not fair in pricing.
1 vote Thank Flag Link Tue Nov 13, 2007
Did you use a buyer's rep on this deal? You are right, it is not fair. When dealing with a builder, they hold the power over pricing. Are the upgrades reflected in the sales price? In other words, has the sales price changed, or do you have to pay for the upgrades out of pocket. If the sales price has changed, you may have some leverage with the builder if your contract includes the house having to appraise. If you have to pay out of pocket and you walk away from the deal, you will lose the downpayment, any upgrades you paid for up front, and possibly a lawsuit from the builder (not likely but possible). If it was me, I would close on the house. Enjoy living in it and learn from this experience.
0 votes Thank Flag Link Thu Nov 22, 2007
As a guy who specializes in new home sales, the short answer is no. The builder will simply keep your earnest money and let you "out" of the contract, then put it back on the market. If he has you under contract and the builder addendum spelled out the upgrades (costs, liability, etc.... and they all do!) you're in a bad position. They don't install the upgrades anyway without you being under contract. Put a little sugar on it and ask your realtor to do his job. If it's a site agent, he doesn't want to upset the builder and jeopardize his job. If you have your own agent, he has no clout or pull with the builder. It's a tough spot to be in. Cut back on the upgrades you can before they are installed, otherwise you'll have to bite the bullet on this one and build yourself a really nice home.
0 votes Thank Flag Link Thu Nov 22, 2007
At the end of the day, you have a binding contract. I would recommend talking to the builder about it in the manner you have presented it here.

It is very easy to upgrade as much as you did and since you agreed to these items, you are asking the builder to give up profit on a contract and changes that you openly and willingly agreed to. How would you feel if your boss told you 80% of the way through the year that he wanted to reduce your salary?
Web Reference: http://www.AaronSOLD.com
0 votes Thank Flag Link Wed Nov 21, 2007
As long as you had the option of saying no to the upgrades I don't see how you can try to re-negotiate at this point. This is why having a Realtor represent you who knows the new construction process and what questions to ask the builder before a contract is signed is so important.
0 votes Thank Flag Link Sat Nov 17, 2007
I have the unique position of also being in the process of having a home built for my family here in the Twin Cities. You are right, the real estate value of many homes that are being built have decreased since the initial contract date, especially when it takes six or more months to build the home. Yes, you have a contract price agreed upon already, but the home still has to appraise for that value before you close. The company you are getting your mortgage from will have to have an appraisal completeled before they will commit to the loan and give final approval. If the home appraises for less than the agreed to price, due to the declining market, than the builder will have no choice but to lower the price. My home is not suppose to be done until March, and I am seeing signs already that other homes in the area are selling for less. I have spoken about this to the bank and we are watching the market closely.

Renegotiating the price is not a change order. A change order is if you decide you want to add/take off something on the house and has nothing to do with the purchase price. So look at it this way,you won't get a better deal unless you ask. Contact your builder and discuss your concerns. Ask them to give you a better price on the home, and have them give that number. The person who gives a value first is in the worst position. Once they give you a price, then let them know what would make you happy. Come to a happy medium if possible.

We have a changed market here in the Twin Cities and the builders know it. The last thing they want is you to walk when this house is closing in a few months, so they would be stupid to not negotiate. Oh, and one other piece of advice, take your concerns to a higher person in the company...someone who can make this decision. The model agent will tell you "no", but they have no authority to do so. Speak to someone in management, or a President / VP type.

Good Luck, I might be in your position in a few months. Feel free to contact me if you have any additional questions.
0 votes Thank Flag Link Tue Nov 13, 2007
What does the contract say? What have you committed to?
Web Reference: http://www.iansellsnola.com
0 votes Thank Flag Link Tue Nov 13, 2007
Hello Buyer, you are correct in trying to get out of buying this home because it is loosing value every day. I can't give you a specific answer to whether or not you can get out of the contract. I would need some more specific information. Like: did you use a realtor? Who is the builder? Do you have any contingencies? And some other important information. I would be more than happy to answer these questions if you would like to e-mail me. My e-mail address: TimMurphy@EdinaRealty.com


Visit: JohnsonMurphyHomes.com

Tim Murphy
Edina Realty
E-mail: TimMurphy@EdinaRealty.com
0 votes Thank Flag Link Tue Nov 13, 2007
How have you already committed to the purchase of this home?
How far along is the construction?
0 votes Thank Flag Link Tue Nov 13, 2007
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