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Builder backs out, need legal language

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MichiganMommy
Frequent Contributor

Builder backs out, need legal language

I am not sure that this is appropriate for this strand, so Mods, please let me know if this is out of line.
 
I am posting here, because I know many of my fico friends have not heard from me lately AND many of my fico friends are in the process of buying a home and may have this happen to them.
 
So, as many of you know, I closed about a week ago. Everything was going smoothly (with the exception of the normal bumps in the road) until two days before closing. To keep this email from being two pages long, I will simply say that the LO officer got some numbers wrong and the final approval was halted. Then, the day before closing, he realized that he had highly overestimated my taxes and this brought everything back in line and I was good to go. What I did not know until the evening prior to my closing was that the appraisal came back lower than the price of the home, so they also had to lower the price by 10K which helped out all of the numbers and final approval was given and my docs were sent to closing.
 
The morning of my closing (I was to close at 11AM) I received a phone call from the builder sales office lady and she asked me had a received her call from the day before and I said no. She went on to say that there was a problem with the appraisal and the house came back 10K lower. She said that this was causing a big mess with my closing and that there was a problem. She indicated that they wanted me to bring 17K to closing to cover the cost they were losing in the appraisal and to pay for the upgrades of granite and a deck that I was given as part of the purchase agreement. I flatly told her NO, I did not have it. We went back and forth and she said she would call me right back. I called my realtor and explained to him the issue and he indicated to me that he would call them and see what could be worked out. Everyone knew that I had to be out of my condo by the 22nd of August and that I was under time constraints since it was now the 18th of August. An important point to mention here is that I did my walk-through of the new build on the 19th. WHILE WE WERE THERE conducting the walkthrough, the appraiser was appraising the home. This means that they waited to the LAST minute to have the home appraised. Had they appraised the home when I was first conditionally approved (about two week prior), this never would have unfolded this way.
 
When the sales person called back, she indicated that she had got her numbers wrong, everything was on track for me to close at 11,  but that the builder would not be willing to put the deck in (I had previously been made aware that because of permits, the deck being constructed would likely be complete a week after closing).
 
It is also important for me to point out two key things here:
 
1. The builder salesperson asked me did I receive her call the night before closing. She left a message on my home phone which she KNOWS I never answer. In addition, she never tried my cell (which is how we communicated almost daily, nor my email). Don't you think that is a little odd?
 
2. I have the written addendum signed by both myself AND the sales person that I was being built a deck as part of my options/upgrades package. In addition, I have the original change order docs that I signed for the deck. They made me sign a removal of the deck change order at closing, but at this point, if I wanted to close on time WHAT CHOICE DID I HAVE?
 
I guess, what angers me the most is that they want me to pay for the fact that:
 
1. They waited to the 11th hour to have the appraisal done and
2. That the appraisal came back under value
 
Neither of these are MY fault.
 
In addition, the builder super told me that he was told by higher ups to go in and remove the granite and put the original counter tops back in the night before I was to close. He told them they were CRAZY and that it would cost more money to do this and that the granite had been cut custom for my kitchen lay out and would really be of no good anywhere else.
 
So, now, I am moved in, loving my new home and having to be reminded of this entire mess anytime I go into my garage and look at the new deck furniture I purchased with no where to put it...
 
Some of you might think, what is the big deal, do you really NEED a deck? Well, the house is three stories with a view out basement because it is somewhat on a small body of water. You CANNOT open you patio door without a deck. I have a two year old AND even if I put a slat of wood there, I still fear that she could fall out if she gets back there when no one is looking.
 
Finally, whether I need a deck or not, it is the principle of the matter. NO WHERE in any of the docks that I signed (and I have read them all) does it say anything about my options/upgrades, etc. are contingent upon the final appraisal price of the home.
 
So, I turn to my fico family for help. I also send the message to my home buying friends....READ EVERYTHING, keep good records of EVERYTHING and don't fall for EVERYTHING.
 
Now, I need advice on how to write a strong letter and what should I say in this letter to stress that they breached their contract agreement with me and I am not having it.
 
Thanks everyone!!! Sorry for the long post. I look forward to your advice.
 
MM--
Updates scores...inching along. Waiting for 7 recent medical collections to fall off!! (seriously working since END of May): EX 519 TU 576 EQ 449
8-02-08 EX 644 TU 647 EQ 575...650s here I come....700club, get ready!!!
Message 1 of 7
6 REPLIES 6
ShanetheMortgageMan
Super Contributor

Re: Builder backs out, need legal language

I am sorry this happened to you, sounds like you weren't fully informed of everything that was going on and the order things happen in... as you've already learned, you need to read all documents presented to you and make sure you have a full understanding of everything.  If someone says "oh just sign it, it's nothing to worry about" then that probably means it's more important than the other documents.
 
The appraisal is the responsibility of the buyer to make sure it happens, it is up to the buyer's lender to order it, but if the buyer's lender is lagging it's up to the buyer to make sure a fire is lit under their butts to make sure that happens sooner rather than later.  It's not the seller's responsibility to make sure the appraisal is done, nor is it the seller's responsibility to make sure the value that the appraiser gives is at least the sales price of the home.  If you told the lender repeatedly to do the appraisal, and they refused without an explanation that made sense, then that would've been a sign that you needed to back out of the transaction sooner than later.
 
There should be language in any contract on what would happen if the appraisal value comes in less than the purchase price - here in California if that happens there are a few options, #1 the seller, if willing, can reduce the sales price to meet the appraised value (but is under no obligation to do so); #2 the seller can refuse to lower the purchase price and the buyer can bring in the difference between the appraised value and purchase price on top of the down payment on the value the lender uses (lower of the sales price or appraised value); #3 the transaction can be cancelled and the buyer and seller can walk away, buyer gets a refund of their earnest money deposit (as long as the appraisal contingency hasn't been removed) but any other expenses (such as the appraisal, inspections, etc.) are not refunded to the buyer (it's the cost of entering a real estate transaction).  Your state might be different, but most of the states follow those options pretty closely.
 
If you didn't sign anything that agreed on the deck not being a part of the home, then in my opinion (keep in mind I am not a lawyer, I just play one on TV), the deck should've been installed.  If this is indeed the case, then you should be able to contact the division/department that governs real estate transactions in your state and get them involved.  Might even need to hire a real estate contract attorney.
 
If you did sign something stating the deck would not be a part of the home, I don't think you have much of a leg to stand on in order to get that deck installed.  It sounds like in trade for the builder reducing the sales price to meet the appraised value, they removed the deck from part of the home.  It doesn't need to say that the deck/options/upgrades to the home is contingent upon the home appraising for the sales price - because it's not.  As pointed above, if in California, when you said "No" to not bringing in $17k to cover the difference between appraised value/sales price + the down payment on the value, the builder/seller had the right to back out of the contract and sell the home to someone else.  They got creative, and proposed an alternative solution, which ultimately everyone agreed upon.
 
You are right though, all of this could've been avoided if the appraisal was just done earlier rather than the 11th hour.  Even if the home wasn't complete, an appraiser could've come out to the home during construction, appraised it, and then when the home was complete, go back out there and do a form 442 completion cert (if conventional financing was used) or a form 92051 compliance certificate (if FHA/VA/USDA was used)... certifying the home has been completed.
 
So I guess the $64,000 question is... did you, or didn't you, sign something stating the deck would be removed from the home?
Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 2 of 7
MichiganMommy
Frequent Contributor

Re: Builder backs out, need legal language

Thanks Shane... I think what complicates things in my understanding is that the seller and my lender are the same.... The home was built and financed through Pulte so they handled both ends. In fact, they demanded this unless they would not honor the options/upgrades. So, yes....I did inquire about the status of the appraisal with the lender, but the lender was also the seller, hence the reason (I believe) for them lagging.
 
Since the time between the purchase and the closing was short (3 weeks), I was told the appraisal was ordered and that the timeframe in which it was being done seemed reasonable. There was so much confusion with other matters, I did not hound them every day about the status of the appraisal, clearly my fault.
 
The options that you listed for what could happen when the apprasial comes back less. I can understand why the builder would request the buyer to bring in the difference, BUT NOT in less than 3 hours to the closing should they expect you to bring 17K.
 
I DID sign the change order taking the deck off of the home AT THE CLOSING table. But, I argue, what choice did I have. I had to be out of my home in two days OR pay an enormous amount. I know they don't care, but that was the stress that I was being put under at the closing table.
 
I still feel like like I should express my concerns to them. Even if it does not result in a deck being built for my home.Smiley Sad
Updates scores...inching along. Waiting for 7 recent medical collections to fall off!! (seriously working since END of May): EX 519 TU 576 EQ 449
8-02-08 EX 644 TU 647 EQ 575...650s here I come....700club, get ready!!!
Message 3 of 7
ShanetheMortgageMan
Super Contributor

Re: Builder backs out, need legal language

Yeah it is unfortunate when the builder also does your financing, in more ways than just they being able to control the "cards".  However there should be a distinction between Pulte Mortgage & Pulte Homes, there shouldn't be any blurring of the lines on which is which.
 
I agree that you should put all of your grievences in a letter to Pulte's CEO and also send a copy to the the important staff members (sales manager, super, etc.) in the subdivision you bought in.  I do think it'll get you something, at least an apology but maybe even as far as could get you a deck built at a discounted price.  I think your story is a good one as it'll serve the future readers of this thread as a lesson on what to watch out for concerning dealing with a builder whose same company is also doing the mortgage.
Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 4 of 7
fishbjc
Senior Contributor

Re: Builder backs out, need legal language

Possible GOOD NEWS to you!  Pulte is a very large builder who values their *solid* reputation.  You will be receiving a survey to fill out and mail to regional office.  They absolutely strive for 100% satisfaction.
 
Get your butt on the horn...call the regional office NOW to voice your displeasure at the way your closing was handled.
 
Are new homes still being built?  If so...consider a lawn sign voicing your displeasure.  We did it in our development over a sneaky little clause telling us we may have to pay additional for sewer upgrades.  Some of our contracts didn't have the clause (mine didnt) but they were hoping we wouldn't notice.  Some contracts did have the clause.
 
Pulte backed off and paid them for approx 40 homeowners ($6500 per site).  Double-check your *upgrades list* as well to make sure they didn't *forget* anything.  Do NOT SIGN any surverys until you're 100% satisfied. 
 
READ YOUR HOME MANUAL AS WELL FRONT TO BACK
Message 5 of 7
Anonymous
Not applicable

Re: Builder backs out, need legal language

WOW-- could you also put in your lender that they sold you a house with  a three story drop out side of it????? that would be BBB terrritory in my book.....just goes to show that a n attorney is a good thing.,
Message 6 of 7
Anonymous
Not applicable

Re: Builder backs out, need legal language

this whole situation sucks, but unfortunately the appriasal is suppossed to be independant of the builder for a reason and if the appraisal came back low, they can not just go ahead with the loan.  It sounds like they were trying to work the figures around with the upgrades and such to get the deal done, and for th emost part did.  This is a huge problem on todays market as home values are changing fast while at the same time costs are rising for everyone.  My guess is the home value had dropped as the market has dropped and the builder had not quite adjusted properly.  That said, your realtor should have also checked local comps with similiar upgrades and such to see what had sold recently.  If recent comps seem to show the value in which you agreed upon, then you might have a case to push hard for an outside review of the comps and get it all taken care of.  In all, it still sucks.  I know several people who have gotten burned on houses that the appraisal came in low.  Unfortunately with all the recent mortgage changes and with the rush to get deal done in August and September I have heard of longer than normal waits to get an appraisal.  2 weeks from first "approval" although a little long, does not seem totally out of the realm of possibilities.
 
In the end, they did not breach the contract as the contract is ALWAYS dependant upon independant appraisal of the value of the property.  Once it was clear that the house appraised for under the agreed upon price, they adjusted upgrades to offset the price difference to make the deal work.  They did give you the option to bring more cash into the deal.  It sucks, and they may have been able to communicate options and the like better and clearer, but it was either that or walk away.  Builders are not likely to take a 10K price cut and still throw in options if the appraisal comes in low.
 
Again, it really sucks and it sounds like they could have communicated better. 
Message 7 of 7
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