Builder purposely slowing down progress to get out of contract

3 Replies

I'm trying really hard to not put on my tin foil hat, but here's the situation:
We are under contract for a lake house in a VERY hot market (Lake Hartwell, SC/GA).  Houses are listed, immediately a multiple offer situation occurs, and are under contract over ask.  It's wild, and we missed on a few deals before finally getting under contract.  It was weird when it happened because the house was listed in the middle of construction but would be sold completed.  No big deal, in this market we were hopeful this may drive a few offers away and up our chances.

We got under contract and construction progress is REALLY slow.  I'm legit concerned that it won't be done before the close date.  Normally I wouldn't really care, except I have this sneaky suspicion that builder (who is also the seller) is slow walking this to get it to fall through.  Important construction tasks are not being done, vacations being taken, documents not being provided that are normal and I need for my lender and stonewalling my agent.  My agent informed me that our property is probably up 10% from what we're under contract for a month ago and we have a over a month to go until closing.  She said it's not unheard of for less-than-reputable agents to use this as almost a hedge in rapidly increasing markets.  Essentially get under contract in a hot market during construction of a spec property, and if the market keeps accelerating do something to get out of the contract and be able to re-list when the property is complete assuming a greater price.  Flip side, if the market cools off you've already go your contract in place. 

I feel like a crazy conspiracy theorist here.  I'm typically pretty even keel and this is certainly not my first real estate deal.  The whole thing has felt "off" from the start but I chalked it up to listing agents being lazy as hell when houses are flying off the shelf instantly.  

So the questions are: 
1) Is this a real strategy or is my imagination just running wild.  It's pretty genius.  It's a real a-hole move, but its genius I'll admit.  
2) Do I have ANY legal recourse if this happens?  I obviously would get my earnest money back, but we've been dropping cash on other things along the way (dock, furniture, etc) in order to be able to use this property as soon as we close.  What in the world do I do with a dock an no lakehouse haha?  

Thanks!

Thoughts:

1. I deal with engineers and builders every day. Everything on construction right now is dragging. From municipal inspections to parts delivery. Keeping workers is a joke. So the fact that your construction is not proceeding quickly is no surprise.

2. A lot of builders use subs and the good subs are worked to death. My siding company won't even take a siding job for me and I've done a dozen jobs with them, they are that far booked out. My handyman guy who uses 3 or 4 guys is juggling 4 projects at the same time, squeezing one of my bathroom remodels in on the evenings after his bigger jobs. I have a sunroom I want to build at my house and it took me 3 months just to get a quote.

3. Unless the builder is a one and done guy, there's no financial incentive for him/her to get out of your contract and sell it to someone else. Most builders work on credit and they rely on closing these deals to stay in business or they need to extend their LOC timelines. 30 days net is pretty common so there's a good chance everything in your house is paid for, either out of the builder's pocket or out of his/her bank financing, which then carries the note payment. A 10% increase will just be ate up by slowdown costs. Most builders depend on turning product as fast as reasonably possible, not dragging out your one house just to have to start the closing process all over again.

4. Don't buy stuff for the house until you have the house, especially when it's specific to the house. I wouldn't pay for boat docks or jet skis unless I already had a house to put them in. Anything can happen, including some of the things you're worried about and other things like the bank suddenly dropping your financing or jacking your interest rate and *you* walking. 

Appreciate the response, and totally agree on #4.  I knew the risk in pulling the trigger on that stuff and balanced it with the desire of wanting to have the property ready to rent as soon as possible to capitalize on summer rates.  As you reference, everything including furniture, docks, etc is super backlogged and in order to grab a hold of the whole summer we needed to make those purchases now. 

Regardless, thanks for the sanity check.  

I worked for a builder and am a contractor. There is huge demand for tradespeople and they set their schedules and pricing is increasing on raw materials. The pandemic also greatly slowed delivery of every little part needed as containers in ports are stuck and electronics from China... no way... Find a refrigerator in my market, the wait is four months. Therefore seller can provide proof in court that they didn't cause delays, it's beyond their control.

What is in your contract? Did your agent write in deadlines and penalties for not meeting deadlines? IF not, and you signed the boiler plate contractor agreement you are in for a wait.

DO NOT lock your loan, you will pay in cash for extensions and be under stress.

Do Not buy anything specific to this house that cannot be returned in a year.

Keep sending your lender your bank statements, pay stubs, and STAY ON YOUR JOB.

Do everything to keep the deal moving ahead. Do you have a notebook where you are tracking progress daily? Time for a photo a day with notes as to who showed up at the site. Is the house secured from burglary, squatters, partiers, animals, fire? 

I've built many houses. I've picked up carpenters, painters, masons at 6:30 with breakfast burritos in my truck to get them to work, hung over or not. Have lunch delivered - doesn't need to be fancy but hearty is good. What can you do to sweet talk the builder to care about your job? He wants to get paid, but he's overworked I am sure. Is it a material supply chain problem? Find out without being angry or paranoid. Fix the problem by helping.