Builder defaulted on a new home contract?

Asked by MMN, Pittsburgh, PA Tue Mar 5, 2013

I signed a contract with a builder to build a new basement home and paid the earnest money. Two months after the contract was signed builder's agent called and said a basement cannot be built on a lot. She told due to the topography of land it would be expensive to dig a basement and the builder wants to cancel the contract. My family has spent lot of time and money customizing the home and doing the design selections. We want the builder to transfer the contract to a different lot in the subdivision where he can build a basement home. The builder wants me to terminate the contract. The prices have gone up since I signed the contract. I need to know what are my rights in case of builder defaults? Is the builder liable to pay any damages? Can a contract be transferred to a different lot with same terms?

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12
Kristin Joyn…, Agent, Dacula, GA
Tue Dec 3, 2013
I would sit down with the builder and find out exactly why he can not build. Is there a permit issue, can he not get a septic tank approval or is there sanitary sewer, is their rock on the lot ( that is $$), can the builder not get a construction loan, if so maybe you can do a C&P loan and take the interest carry off the purchase price. The builder will be transparent with you and then you can decide how you can help solve the problem. Have fun building!!!!! It is a blast! Good luck.
0 votes
Scott Hulen, , 64068
Wed Mar 6, 2013
What the hell, why does just about very agent want to say go lawyer up? Really! This is not even the first step! The first step is honest communication between all parties, then all parties work together to come up with a solution to the problem. MMN, do you really want your home built on unstable ground, where you might (no matter what an engineer says) have long term problems? Also consider this if you try to make the builder build on that lot he may be inclined to cut corners elsewhere to balance the books or if you have a change order along the way he might attempt to makeup tons of money. This is an adversarial approach and not the way to build a home. This process is about working together to produce a quality home around a budget, dreams & desires of the future homeowner. Think about this rationally, also read your contract, every builder I know has a flexible contract which addresses issues such as this aka: the rock clause / soil clause / underground spring clause ect… finally read the book “Building a Quality Custom Home” by Dave Konkol this will give you insight to the process of building a home. (Amazon about $10.00) P.S. most builders have an arbitration clause in their contract aka: no one sues anyone.
0 votes
Bill Eckler, Agent, Venice, FL
Wed Mar 6, 2013
This is definitely a legal issue that needs to be presented to an attorney sooner than later. Having someone review your contract and draft a letter early on could be a life saver.

Good luck,

Bill
0 votes
Ken D'Ademo, Agent, Milford, CT
Wed Mar 6, 2013
This is a legal issue, while Trulia gives you the opportunity to ask real estate questions to experts in the field, REALTORS and their brokers are not attorneys and cannot, by law, provide legal counsel about damages, contact your attorney ASAP. In Georgia when purchasing new construction, the "agent" is usually an employee of the builder and is not governed by the Georgia Real Estate Commission. Anyone buying a home should hire a REALTOR to represent them to help avoid issues like this. With that said you should be concerned about the builder, he should know whether or not a lot can have basements prior to marketing the subdivision. If he did not do the proper testing and know the property, what will the quality of the house be? Buyer beware!! Best of luck!!
0 votes
Karen Mastra…, Agent, Cumming, GA
Tue Mar 5, 2013
First seek the advice of YOUR real estate agent (not the one working for the builder), then you should seek the advice of a real estate attorney. Remember that your real estate agent is most likely NOT an attorney and should not be giving legal advice. The answer to your questions will be in the Purchase Agreement that you and the builder signed. That being said, it is not uncommon for a builder to have their own purchase agreement to allow for surprises such as this. Sometimes when digging the basement they hit granite or find the topography unsuitable for a basement. Sometimes the lot may be too small to fit the particular home plan you chose. I would think the builder would be more than happy to build you a home on a different lot, provided one is available. Just be aware that different lots can have varying lot premiums attached to them. Good luck! Feel free to contact me if you need a REALTOR experienced in new home sales in Forsyth county.

Karen Mastrangelo
Century 21 Results Realty Services
404-406-8050
0 votes
Barbara Mart…, Agent, Alpharetta, GA
Tue Mar 5, 2013
Prices have risen but I have not seen a builder back out for this reason. I do not think they can do this as if it is not custom, meaning you buy materials as you need etc, then the builder pays the difference. This is huge difference between the 2 types of contracts for build out. Read your contract carefully and if not a clause allowing the builder out for this reason then get an attorney as you may be able to get damages. Get sales lady to give you reason in writing before you proceed. Good luck
0 votes
Katherine Mo…, Agent, Alpharetta, GA
Tue Mar 5, 2013
Time to get an attorney...you need more than website answers. This is a good example of why you need a good buyer's agent to represent you in purchasing a home.
0 votes
Michael Gian…, , Cumming, GA
Tue Mar 5, 2013
You should seek legal advice ASAP. There are numerous options you can pursue. The best of luck!

Mike Giangiobbe
ProStar Realty
Cumming, GA 30040
770-842-1370
0 votes
Michael Hamm…, Agent, Suwanee, GA
Tue Mar 5, 2013
Talk to your Agent/Broker first, MMN, for their opinion. If you do not have a representative for your side of the table, consider talking to an attorney. Please call, text or email if we can provide further assistance. Good Luck!

Michael Hammond
SellsRealty@gmail.com
404-538-5499

http://www.georgiamls.com/agentsite/index.cfm?SiteID=HAMMONDJOHNM

http://www.chapmanhallprofessionals.com

http://www.SellsRealty.org

http://www.city-data.com/

http://www.greatschools.org/
0 votes
Fred Yancy, Agent, Woodstock, GA
Tue Mar 5, 2013
I never recommend purchasing a new construction home without a Real Estate Agent who does NOT work for the builder, exactly for these reasons. If you did not have an agent, then I would, at this point, contact a real estate attorney to get the advise you need to proceed.
0 votes
, ,
Tue Mar 5, 2013
For contract issues you would need to consult with your Buyer's Agent. For legal advice, you would need to consult with a Real Estate Attorney.
0 votes
Scott Godzyk, Agent, Manchester, NH
Tue Mar 5, 2013
It will depend how it is written, hopefully you had a buyer agent who looked out for your best interest, if not you may now need an attorney to review your contract and write a response to teh buidler. you may need teh attromey so that teh builder honors your contract on this or another lot.
0 votes
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