new home - question about negotiating after the purchase (Austin: sales, credit)

[austinnj]

Hello,

My wife and I are moving to Austin in the next 2 months when our house is done being built. We've been a little nervous with the way the market has been and with our current house not selling.

I'm wondering if we can leverage any discounts with the builder even though we are already in a contracts as of the middle of this year. Here is our reasoning. Prices now are different that they were when we purchased. We did not use a Realtor so the builder is saving 3%. My thought was to find out what the recent resale homes have been closing at price/square foot. Do we have any negotiating potential if the market price of recent homes sales is lower that our price/square foot? Also, do we have any negotiating potential on the Realtor fee not paid by the builder?

The next question I have is how long can we push out a closing date regardless of what the contract says. Can anyone help here?

We have stellar credit, and I'm sure the builder would not want to lose us as a customer. Any help you can provide would be very much appreciated.

[llkltk]

I think it's too late for that. You already have a contract. The builder doesn't see it as saving 3% if you don't have a realtor. That money comes out of their marketing budget so they pretty much would laugh at you if you brought that up. The closing date should be negotiable though. The builder really doesn't worry about losing you as a customer if you back out, many specs in my area have sold right away after buyers backed out.

[achtungpv]

On the one house I had built, I could walk at anytime and just lose the earnest money. If that's the case, I'd personally gladly walk away from a couple of grand instead of being underwater $50K+ the instant I sign on the dotted line.

[FromCalitoSteinerRanch]

Originally Posted by austinnj

Hello,

My wife and I are moving to Austin in the next 2 months when our house is done being built. We've been a little nervous with the way the market has been and with our current house not selling.

I'm wondering if we can leverage any discounts with the builder even though we are already in a contracts as of the middle of this year. Here is our reasoning. Prices now are different that they were when we purchased. We did not use a Realtor so the builder is saving 3%. My thought was to find out what the recent resale homes have been closing at price/square foot. Do we have any negotiating potential if the market price of recent homes sales is lower that our price/square foot? Also, do we have any negotiating potential on the Realtor fee not paid by the builder?

The next question I have is how long can we push out a closing date regardless of what the contract says. Can anyone help here?

We have stellar credit, and I'm sure the builder would not want to lose us as a customer. Any help you can provide would be very much appreciated.

How much do you have you paid for the upgrades? If the Earnest Monies and 25% towards upgrades is less than what the current comps/sales are, it may make sense to walk. See if they give in.

If they don't, and if the numbers are significant, split the difference between "then vs. now" 60/40, with the 60% favoring you, and see if you can get a 50/50 deal if you really love the place.

[FalconheadWest]

Builders aren't going to "renegotiate" when they have a contract. Contracts are legally binding, and you've agreed to all the terms within the contract. Walk and leave the earnest money if you want, but your price is your price.

[austinnj]

Thanks to everyone for responding. The Realtor fee would have been in conjunction with an argument if the relative comps are lower than what we paid for. I find it difficult to believe that the Realtor would sell the home right away. I know spec homes in this area that have been on the market for the same time since we purchased. Not everyone has the credit worthiness and cash for 20% down. Also, not everyone would necessarily like our choices.

I'll find some comp data and compare to what we have. If it's significantly off we'll try to negotiate. Our earnest and upgrade money is less than $9K. It's painful but not as painful as a sharp decline in our home value.

[johnrex62]

I always try to look at both sides of the situation, and in the case of this scenario I tried to imagine what the situation would look like if the conditions were reversed. This is what I came up with.


Housing prices are rising significantly due to low interest rates and significant tax programs favoring home ownership. A homebuilder has signed a contract on a home with numerous custom upgrades and special touches. The home is near completion and the homeowner is anxious to move in. Since the signing of the contract, the estimated value of the home has increase by 25%. The builder decides that it is worth while to renegotiate the deal and delays the closing and the lawn installation until the buyer agrees to raise their price by at least 20%.

I suspect that in this situation to say the buyer would not be happy might be an understatement. Considering the investment they have in the home at this point they have to decide if they should bite the bullet and renegotiate, walk away from their investment and start over, or sue the crap out of that b***d of a homebuilder! Depending on their mood, I would guess walking or suing would be the top contenders on the list.

Back to the actual scenario......You can try to renegotiate your contract using the threat of breach as a negotiation tool. It happens all the time. Depending on your builder's mood, he can capitulate, or he can tell you to kiss your EA goodbye and sell it to someone else (He might even happily sell it to them at what you wanted to pay just to tick you off), or he could hold you to the contract and sue for specific performance and get the whole contract price plus court costs.

I have the gut feeling you would get much farther asking for upgrades or similar concessions than you would repricing the contract. As a builder I would much rather give you $5000 in landscaping which might only cost me $2000 than reduce your sales price which comes straight out of my pocket. Plus, you never know how insulting or irratiting the person was that he saw just before you came in. He might have just gotten primed for a fight.

[austin-steve]

The Realtor fee would have been in conjunction with an argument if the relative comps are lower than what we paid for.

1) A good Realtor would have negotiated a better price than you accomplished on your own, so any "savings" from the builder standpoint are not from saved commission but from the higher price you paid.

2) When running comps, you can't compare resells to new. It's apples and oranges. For example, if I'm running a CMA in Belterra, or Steiner Ranch, I remove the sold comps that were new sales. They don't count. You only look at what other new homes sell for. New homes almost always sell for more than resells (in better neighborhoods) due to psycological reasons that make no economic sense, but which nevertheless rule the decision making mentality of buyers.

If resale were such a better deal over new, why did you buy a new home instead of used? Your answer is the builders response to your argument.

To answer your original question, it's a legal question of contract law. You should call an attorney, or read the contract nad see what your walk-away penalties would be. It's all spelled out there. The builder may in fact be willing to work with you, but has no obligation to do so.

Steve

[RandyAH]

Originally Posted by johnrex62

I always try to look at both sides of the situation, and in the case of this scenario I tried to imagine what the situation would look like if the conditions were reversed. This is what I came up with.


Housing prices are rising significantly due to low interest rates and significant tax programs favoring home ownership. A home builder has signed a contract on a home with numerous custom upgrades and special touches. The home is near completion and the homeowner is anxious to move in. Since the signing of the contract, the estimated value of the home has increase by 25%. The builder decides that it is worth while to renegotiate the deal and delays the closing and the lawn installation until the buyer agrees to raise their price by at least 20%.

I suspect that in this situation to say the buyer would not be happy might be an understatement. Considering the investment they have in the home at this point they have to decide if they should bite the bullet and renegotiate, walk away from their investment and start over, or sue the crap out of that b***d of a home builder! Depending on their mood, I would guess walking or suing would be the top contenders on the list.

Back to the actual scenario......You can try to renegotiate your contract using the threat of breach as a negotiation tool. It happens all the time. Depending on your builder's mood, he can capitulate, or he can tell you to kiss your EA goodbye and sell it to someone else (He might even happily sell it to them at what you wanted to pay just to tick you off), or he could hold you to the contract and sue for specific performance and get the whole contract price plus court costs.

I have the gut feeling you would get much farther asking for upgrades or similar concessions than you would repricing the contract. As a builder I would much rather give you $5000 in landscaping which might only cost me $2000 than reduce your sales price which comes straight out of my pocket. Plus, you never know how insulting or irritating the person was that he saw just before you came in. He might have just gotten primed for a fight.

A logical well thought out response... I like it, furthermore it makes sense.

I am not knocking the original poster, as it is human nature to want to come out on top. However if you think of the builder as a normal human being that has started a business to feed his/her family and live the American dream, and not just some Power Monger of a company with no names or faces, you will see that what you ask makes no sense at all. You signed a contract for better or for worse, you knew you had a house to sell, and anyone not living under a rock for the past two years could see the price of houses declining at a steady rate. (of course not as bad in Austin as in other parts of the country) Yet now that the deck is no longer in your favor you want to renegotiate?

If this is the home that you want, and you will live in it for a long time, then don't worry about it losing a little value right now. That in my mind is like all of the people dumping stock because it fell...It will go back up, you don't lose unless you sell for a loss..Make sense?

Again, nothing against the original poster, just I think people need to think about there actions before acting. Part of what's wrong with this country today...