I was asked a question on Trulia.com today I felt worth sharing with our readers on Urban LIfe. The subject was rights when buying a home from a new home builder. I’ll post the actual question below and provide our thoughts about the subject and how to protect yourself when buying a new home from a home builder.
The Question Posted on Trulia.com:
Two weeks after signing to purchase a new home from Pulte I was told that I was losing my job here in Arizona or move to California to keep my job. With the unemployment rate of 9.6% in Arizona I had no choice but to take the offer and move. I contacted Pulte and cancelled the purchase agreement. I had no time to finish up with the approval process so figured it would be no big deal I'd be able to get our deposit back. We had not been approved anyway. Now Pulte says I got approved and will not refund our deposit of $3,000. I have requested the approval documentation but Pulte has not provided it. After sending a certified letter demanding our deposit back or proof of approval, we received a letter stating Pulte may retain any Deposits up to the maximum amount permitted by law due to cancellation or default. So, they keep our whole deposit?
The Problem:
Home buyers, like most everyone, are living in a time of uncertainty and change. Lots of people are facing job loss and other economic insecurity. Here we have a fine example of how the economy changed a home buyers circumstances and he thought the home builder would understand return his deposit.
The problem here is we are dealing with a contract between two parties and the language of the contract can determine the outcome rather than what may be perceived as the socially right thing to do.
Our advise to this home buyer, since he as working directly with the builder and did not have his own Realtor, is to have the contract reviewed by an attorney and move forward once his rights are determined. If he has a background in contract law, he may be able to do this on his own, yet professional representation is the optimal course.
How To Protect Yourself When Buying A New Home From A Home Builder:
Don’t buy a new build home without representation! That is the simple answer. However, the problem is few people do this when buying a home from a home builder. The normal scenario is as follows:
A couple take a weekend drive and find a new home project and stop to take a look. A nice sales person takes them on a tour, they fall in love with one of the models and that day or a few days later they sign a contract and put down a deposit. Often they believe the sale person is representing their interests. However, in most cases, the sales representative works for the home builder and has an agency relationship with them... not the home buyer.
Our constant recommendation is to never ever buy a home without having your own own representation. This can be a seasoned Realtor with lots of new home experience or a qualified attorney. This is true whether it is a new home or one on the resale market.
If you buy without representation, as with the person quoted above, you are on your own. Home builders have contracts drawn up by their attorneys and often emphasize protections for the home builder verses the home buyer. If you have your own representation, the contract can be amended to offer you extra protections.
In addition, a good Realtor will read the contract with you and help clarify your rights and responsibilities under the contract. Understanding your obligations, in advance of a problem or emergency, can help you determine how best to get your deposit back and cancel the contract.
BIG NOTE HERE: Never ever go into a hew home project without your agent. If you can’t help yourself, tell the sales agent at the project that you have a realtor and secure, in writing, confirmation they understand you are represented. Home builders often have you sign a “welcome to our project” that precludes you, the home buyer, from using your own agent. We have seen lots of home builders enforce this stipulation... really!!
Hope this helps a bit and protects people buying a new home from a home builders. A little care upfront can keep nightmare real estate transaction from happening to you.
Gene Urban
The Urban Team at Realty Executives
602-234-5777