Can you walk away from new construction at closing

Question

Wife and I are building a new home. We had to place a 3 percent deposit. Builder is financing it up front. We are securing with loan at end...

Can we walk away if the market crashes and better deals open up? I know we will lose deposit. But can the builder come after us for more? I’m saying without cause other than value had plummeted.

Any info is appreciated .

Matthew Paul · Answer

@Edward Kanive Look at it this way you are a doctor . Lawyers go after deep pockets . if the house is underwater when you settle things will eventually come back .(hopefully)  Or you can pay your lawyer a lot of money and still lose and pay even more money .  Sounds like you are getting a house you want .

Now me , I am Not a Doctor.I am a contractor wife is a Nurse and back in 06 I paid $450K for a house in a great school district for 2 kids . I layed down $175K so I would have a lower payment just in case . I got a great deal , BUT this was at the top before the crash and I told the wife , I may have thrown a whole lot of money into the wind if things keep dropping . But we have the best schools in the county . House stayed flat for a while and 14 years later houses in the neighborhood sell for $600K .

If you bail on the new house the Contractors lawyer will be on you like flies on defication

Russell Brazil · Answer

A seller, whether a builder or individual, can sue you for one of two things....either specific performance to fulfill your contract terms, or for damages for the delta between your contract price and the eventual sales price plus other associated damages.

Jay Hinrichs · Answer

IN our market here in Portland  deposit is liquidated damages with no further damages  If you check that box.

when we build for a pre sale.. if we do any changes or customizing the buyer has to pay us up front for those items and if they dont close they lose what they spent.. market has been such that very few sale fail.. and if we did no customizing we usually give the EM back since we usually sell it again shortly and many times for more money.  And we dont want ill will with our buyers even ones that dont close Not worth the drama or risk of bad social media .

Tony F. · Answer

If market has tanked the appraisal won’t come in high enough for contract price and you won’t get your loan anyway. Hopefully financing contingency in contract.

Hugo Alves · Answer

Hi Edward,

I would review your contract and speak with your attorney. Every state contract has specific provisions. As a builder myself, I wouldn't mind it if the house isn't specific to you and is being built in a standard design plan that can easily appeal to other buyers. At the same time, with the market changing, he can become upset.

How did the deal come about? Did the builder find the deal and then you connected with them and asked them to build you a home? Did you locate the deal and then reach out to the builder? I'd assume that would play a big part in how they respond.

Again, consult your attorney and review the contract agreement.

Let me know how it works out

Russell Brazil · Answer

Is it an option not to take the deposit as liquidated damages? In our market we have 2 choices, deposit as damages, or not take it and seek further damages.

Jay Hinrichs · Answer

Yes its a check the box  you check the box and the EM is forfeited as liquidated damages if you don't check the box then its all the normal remedies.

However in this case where the builder went out and borrowed money to build these folks a home.. He could be a little tougher on just letting them out.. but without reading their contract I would not know what remedy the seller or buyer has.

EJ K. · Answer

Update: walked away, contingent on a current build. To worried about appraisal in this climate

Jay Hinrichs · Answer

so if we were building that house for you we would require you pay cash for all those upgrades.. or at LEAST give us 50k non refundable and released might take a risk on the rest as long as the upgrades were in line and the house could sell to another party.. there is an upward limit on price a house will sell for upgrades wont take it over that.

Zach Quick · Answer

@Edward Kanive are you planning on living in the house? It wasn’t an investment from the start (unless you can convince otherwise) but now you’re worried about it being a poor investment?

Trying to understand as it sounds like the payment won’t be a problem.

Can you walk away from new construction at closing

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