Some Fla. buyers signing a contract for a newly constructed home are being forced to pay a higher amount later or, in some cases, seeing their contracts cancelled.
As home prices continue to rise and buyers rush to lock in prices, some new home buyers are losing homes they thought they had already secured through a contract.
Increasingly, builders – citing pandemic-related material cost hikes, worker shortages and permitting issues – are using clauses in their contracts to raise prices or even cancel, often selling the home to someone else for a lot more money.
That happened to Delia and Eddie Masone. In February 2021, they entered into a contract with Adams Homes for a house in Wyndsor Place in Spring Hill. The sales price was $297,400. There were delays and permitting issues. Then, in November, they say they were told the slab would be poured and they were excited.
In December, though, they say the builder called with bad news.
“We are canceling your contract unless you give us 60% of your equity,” Masone said they were told. “My husband was like, ‘What?’ We are like, ‘How much is 60% of our equity?’ About 40,000 … $40,000!?”
The Masones wanted the house to help care for Santino, one of their three children, who has severe disabilities. The family wanted room so Santino could have a night nurse and not disturb their other sleeping children. When the family couldn’t pay the increased price, their contract was canceled.
“Being blindsided like this, it is heartbreaking,” she said. “It’s heartbreaking because now it’s like, what do we do?”
What happened to the Masone family is playing out all over the Tampa Bay area.
Jennifer Motsinger, executive director with the Tampa Bay Builders Association, tells Better Call Behnken that homes are taking longer to build, and builders can no longer predict what the home will cost when it’s finally done. So builders are using two types of clauses: an escalation clause that says they can raise the home price if material costs go up significantly, or a duration clause that states the builder can cancel if they are unable to start construction within six months.
Shannon Behnken reached out to Adams Homes Vice President Bryan Adams and he said supply issues and permitting issues have led to the company losing money on some homes. He explained that he decided late last year to use the duration clause with 125 homeowners. Those buyers had the choice, like the Masones, to pay more or walk away.
“It’s not a decision I took lightly, and I and my entire team feel for the families,” he said.
Motsinger, of the builder’s association, said most builders are using similar clauses in their contracts in case they find they can’t build the home for what they stipulated in their contracts.
“I’ve never seen it like this,” Motsinger said.
Realtor Julie Larsen says she also hasn’t seen it like this before. She says she recently had two buyers with similar decisions to make after the builder wanted to raise the price. One buyer chose to walk away because they could not afford the increase, and the other is still trying to make a decision, she says.
“It’s very sad to go back to the drawing board when you already are financially and emotionally invested in a property,” Larsen said. As a real estate agent, though, she says she knows the prices are increasing every month right now, and that’s why buyers want to lock into a contract in the first place. She added that some clients are no longer looking into new homes for this reason.
“It’s just a fact of the game that any property is going to be worth more tomorrow than it is today,” she said.
Meanwhile, the Masones say homeownership is now out of reach because similar homes are now out of their budget.
“What’s the point in a contract if you are going to breach it and you’re gonna break it?” Masone said. “You are not only breaking the contract, you are breaking all of these families’ hearts.”
News Source: Florida Realtors