A couple of months ago we purchased a new Lennar home. Our house will not be completed for a couple more months.
The cost to back out is $12K + probably some $ to the realtor (if one backs out of a signed purchase agreement, there is recourse. Realtor is a family friend, though, so a few thousand tops).
Prices listed for *ask* are now a couple thousand beneath what we paid - so possibly we're talking about 10-15K of price reduction in actual sales price since we signed our purchase agreement. The inventory within the development we have bought has definitely burgeoned, and having another inventory home that will sell for less than what we paid for will cost them more than our back-out cost.
This is a major homebuilder - Lennar. Lennar doesn't have "options" on their home so if renegotiation takes place, it would be on further landscape credits or price reduction.
Has this ever been an avenue that anyone has pursued and/or does anyone have the background to understand as to whether or not this would have any legs? Or would it simply grossly alienate the people who will be, for instance, standing behind their home warranty and addressing problems that come up with a new home such as ours?
skagen said: The cost to back out is $10K + probably some $ to the realtor (if one backs out of a signed purchase agreement, there is recourse. Realtor is a family friend, though, so a few thousand tops). ! Ok first family friend or not realtor is in buisness and there should be a contract that says what you will owe if you back out. Add up all the fees and decide is it a better buisness choice to get out of teh contract or to fufill the contract.
skagen
Happy Member
posted: Sep. 23, 2008 @ 11:01a
That doesn't really help me.
The main crux is whether or not a major homebuilder is likely to entertain any renegotiation after a purchase contract is signed under the market environment we are experiencing and the fact that their inventory is significant heading into the fall and winter seasons.
I know what my out of pocket would be - and the 10K to backout on Lennar, I am certain, is not significant enough to make it even break even for them to let me walk away - they have a vested stake to keep me as a buyer. One thought might be that a homebuilder like Lennar would stick to their guns under this scenario to avoid setting a precident for others to follow.
The main crux is whether or not a major homebuilder is likely to entertain any renegotiation after a purchase contract is signed under the market environment we are experiencing and the fact that their inventory is significant heading into the fall and winter seasons.
I know what my out of pocket would be - and the 10K to backout on Lennar, I am certain, is not significant enough to make it even break even for them to let me walk away - they have a vested stake to keep me as a buyer. One thought might be that a homebuilder like Lennar would stick to their guns under this scenario to avoid setting a precident for others to follow.
how is this hard?
if you paid 200k, and house is now worth 190k, it makes no sense to back out.
if you paid 200k, and house is now worth 160k, then it makes sense to talk about price.
its not that hard:
new price + cost to back out => price agreed to, do nothign
new price + cost to backout < price agreed to, back out.
Chances are high that it would be cheaper to backout for a reason. Find something small to dispute and get an attorney to fight your way out of the contract.
skagen said: I know what my out of pocket would be - and the 10K to backout on Lennar, I am certain, is not significant enough to make it even break even for them to let me walk away - they have a vested stake to keep me as a buyer. One thought might be that a homebuilder like Lennar would stick to their guns under this scenario to avoid setting a precident for others to follow. So why not call them up and tell them that you're retaining a lawyer to review the contract because you're considering backing out if they don't renegotiate to their current selling prices.
You could just honor your agreement and the contract you signed. At the time you signed the contract, you obviously found a home you liked at a price you were fine with. Just because you weren't able to call the bottom in the housing prices doesn't mean you should back out of your contract. Even if you renegotiate, what says that the new price isn't going to drop a month later?
skagen
Happy Member
posted: Sep. 23, 2008 @ 12:11p
simko1ra said: You could just honor your agreement and the contract you signed. At the time you signed the contract, you obviously found a home you liked at a price you were fine with. Just because you weren't able to call the bottom in the housing prices doesn't mean you should back out of your contract. Even if you renegotiate, what says that the new price isn't going to drop a month later?
Yes, I can respect that POV. And I find it unlikely that I would jeapordize the relationship with Lennar to where they would be less apt to assist the inevitable problems that surface with new homes (the little things that crop up).
I just found it interesting to speculate in my mind as to the possibilities, and thought those at FatWallet might be able to offer their perspective.
This is a major purchase which a successful negotiation would equate to years of Sunday newspaper coupon clipping - so just the magnitude of the purchase makes me think about these opportunities.
There are many elements to purchasing a home that one should consider to save oneself some $ - my question was whether or not this could have been one of them. Others that I have pursued included:
1) Negotiating with realtor - we get 60% of our commission back. 2) Negotiating with title company - we aren't using PenFed's title company so we'd normally have to pay the title company but we asked to have the closing fee waived with Lennar's title company in order to use them and they accepted this. 3) Negotiating with lenders - after locking w/ PenFed and a great rate - the Fannie/Freddie bailout occurred and it initially looked like rates would come down - I was in communication with another good lender, ready to jump to a different lender for a better rate (PenFed would have charged only $72 to leave them).
Since this is a forum geared towards financial information, decisions, and discussion - this seemed to be a valid topic. Sorry if some of you didn't agree.
whirr
Tired Member
posted: Sep. 23, 2008 @ 12:41p
If property values had risen would you have tolerated them coming back to you to renegotiate? As mentioned earlier look at the costs to back out, if it is worth it do it, they offered you that out in the agreement, if not take your lumps and move on.
*edited to add: Negotiation is great and all, but perhaps I am old fashioned, once both parties sign on the dotted line, we have come to an agreement and I expect both parties to honor their respective ends,
skagen said: I just found it interesting to speculate in my mind as to the possibilities, and thought those at FatWallet might be able to offer their perspective.
Do you often speculate with your toes? I try to keep my speculation in my mind, too. (I joke, I joke! But sometimes saying less is more).
The answer to your question is a simple one, but you don't seem to be hearing it: you signed a legal contract, you are bound to it. Back out and lose money, or be happy with your purchase.
You can try to renegotiate and you should retain a lawyer if you go down that route. You can also strip naked and declare yourself president of the world; we won't stop you. But there is no "trick" to getting the builder to lower the price, no legal loophole someone of Fatwallet will know without you sending them all the documents you signed.
NOW. If you post PDF copies of all your documents, then we may be able to help out!
whirr said: If property values had risen would you have tolerated them coming back to you to renegotiate? As mentioned earlier look at the costs to back out, if it is worth it do it, they offered you that out in the agreement, if not take your lumps and move on.
*edited to add: Negotiation is great and all, but perhaps I am old fashioned, once both parties sign on the dotted line, we have come to an agreement and I expect both parties to honor their respective ends,If the contract stipulates what happens if the buyer backs out -- say, losing $10,000 -- then why walking away and relinquishing $10K is not honoring the contract?
skagen said: ..Since this is a forum geared towards financial information, decisions, and discussion - this seemed to be a valid topic. Sorry if some of you didn't agree.you are giving me a headache.
If the question is if one should negotiate a big business tranaction, the answer is obviously yes. But that's not the question you asked. You are asking if someone that we don't know jack about are willing to renegotiate a signed contract. I gave you a honest answer, "maybe".
I can't think of any incentive for the other side to renegotiate to a less favorable term (to them). What do you have to offer them? What leverage do you have at this point?
Why try to help someone who bought a house just a couple months ago (while prices everywhere are dropping like rocks)? The question is so elementary it should be ignored.
OP, Santa Claus doesn't frequent this board.
jayK
Senior Member - JayK
posted: Sep. 23, 2008 @ 4:42p
lostdude said: I can't think of any incentive for the other side to renegotiate to a less favorable term (to them). What do you have to offer them? What leverage do you have at this point?The leverage is for OP to pay the $10K and back out of the contract, adding to the builder's excess inventory of unsold homes.
If you're not comfortable negotiating like this you could always go through your RE attorney.
whirr said: Negotiation is great and all, but perhaps I am old fashioned, once both parties sign on the dotted line, we have come to an agreement and I expect both parties to honor their respective ends,
And one of the things the parties negotiated was a termination fee, which is essentially the seller's insurance against the buyer walking away.
OP: it's simple math. Please just do it and move on.
whirr
Tired Member
posted: Sep. 23, 2008 @ 4:46p
katx said: whirr said: If property values had risen would you have tolerated them coming back to you to renegotiate? As mentioned earlier look at the costs to back out, if it is worth it do it, they offered you that out in the agreement, if not take your lumps and move on.
*edited to add: Negotiation is great and all, but perhaps I am old fashioned, once both parties sign on the dotted line, we have come to an agreement and I expect both parties to honor their respective ends,If the contact stipulates what happens if the buyer backs out -- say, losing $10,000 -- then why walking away and relinquishing $10K is not honoring the contract?
I think you misunderstood my post, I have no problem w/ the OP backing out as per the contract, but that is not the impression I get of the OPs intentions. It reads to me as if the OP is having regrets on the agreement and looking for a cheap do-over, or a way to wiggle out of the agreement for less than stated in the agreement.
As others have said, we need to see the contract. You haven't provided enough information. Do you have a mortgage contingency? If you do, quickly apply at another bank or find another appraiser and make sure he is aware of the current price. You're not supposed to influence them, but if you hint around and let him know you're trying to get out and you're not looking for a high appraisal, maybe you'll get a low one, then get denied by the bank and you can use your mortgage contingency clause to back out and no penalty. Typically contracts only require that you be denied at one bank in order to use the contingency clause. And of course you consult the attorney that you should have.
Of course if the appraiser method doesn't work, just quit your job and tell that to the bank if you still have the mortgage contingency clause. That will kill the mortgage. Or buy a brand new car and load up your DTI ratio so you don't qualify.
Just mention all those and try to renegotiate, the most they can do is call your bluff.
BrilliantPebbles
Member
posted: Sep. 24, 2008 @ 1:49a
Skagen -
It's simple. If you don't want the house unless you can renegotiate the contract down to a certain price then you might as well tell the homebuilder that before you cancel the contract.
If the homebuilder wants that house sold more then they want the $10K - then they might work with you.
It doesn't hurt to ask them for what you want.
You're simply giving them a chance to keep you as a buyer before you excercise your right to cancel the contract and lose your deposit.
Unless you have a relative who's a lawyer who's willing to give you back 60% of their billing - I wouldn't go down that path to try and weasle out of buying it and not suffer any consequences.
Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.
Members of our community may attach files to a post in accordance with the User Agreement. FatWallet is not responsible for the content, accuracy, completeness or validity of any information contained in any attached file. Files have *not* been scanned for viruses. Be especially wary of Excel files which may contain malicious content.
