Greed has Changed the Market #housing
Every new home purchaser must be very aware that some builders who sold pre-construction homes instruct their lawyers to find any way to get out of the deal.
For the first time in my career of watching thousands of deals close, builders are not giving any extensions when bank financing or other reasonable events occur that prevent closing by 5:00 pm on the exact date. This is a disturbing trend that will come back to haunt builders when they need consumer support later, and after numerous Better Business Bureau, complaints will hurt their future projects.
We will be building a list of new home builders not granting extensions in the comments below. Please add a builder’s name if they have not given an extension, as this is a departure from decades of good business practice. Also, find out who their lawyers are, as we have learned that they are receiving instructions to find ways to kill deals. Lawyers who are conspiring to get families out of their contracts to save the builders’ money should be ashamed of themselves…
Why is this happening, do you ask? This is due to the rising building costs and poor planning on the builders’ part. They probably have made pricing mistakes or didn’t anticipate the increasing construction costs. This is not your fault. Your new home contract with them and your deposit helped them get financing for the entire project. But they know that by the time the deal closes, they can sell the property for $100,000 – $300,000 more. You helped them get going, and now they want to screw the buyer out of the contract so that they can resell and take that profit themselves. In essence, you helped finance their project, and they want to take the uptrend in the market away from you to pay for their rising costs. This is a considerable departure from traditional good faith practice in our markets and may be subject to multiple lawsuits.
What can you do if you have a new build residential contract about to close in the next few months?
- Make sure your ducks are in order. The other side will try to subtly delay and blame the inability to close on you.
- Your financing needs to be sorted out early. Make sure your law firm is on top of things and that you trust the clerk working on your file. You should be involved, as there are hundreds of thousands of dollars on the line. Ensure your Bank or Mortgage broker knows that the other side will take every opportunity to kill the deal for any delays and get the financing in place as early as possible.
- We have seen buyers lose their deal because they use cheaper Real Estate law firms who promise an easy close but don’t assign good people to work on the file. Then when issues arise, they are absent because they are juggling too many cases at once. Big Toronto firms promise easy real estate deals, but that is only the case when the seller/builder is working together to close the deal. If they are trying to get out of the deal, you can’t rely on an out-of-city name that doesn’t understand the situation on the ground in our community.
- Be very aware that we believe in good faith. A few builders in town have sold a large number of lots, have taken all the deposits, and have decided they can’t afford to build what they promised. In these cases, they may be thinking of taking the deposits and running. Once they declare bankruptcy, it is tough to recover your deposits or the lost value and need to re-buy at a much higher market.
- Speak to other buyers and form groups so you can improve your bargaining power and protect your interests. We are creating lists of people who have been screwed and intend to launch multiple actions and possibly class actions against dishonest, greedy builders taking advantage of issues that in many cases arise from COVID-related administrative delays.
If you have any questions about your real estate deals or possible litigation arising from having a deal ripped from you unexpectedly, please contact us at firstname.lastname@example.org. Someone will contact you immediately. Again share in the comments section builders who have not granted reasonable extensions.