TAMPA, Fla — It’s tough enough to find a house out there at a price you can afford these days. But now, builders are increasingly exercising their option to walk away from some deals because of rising costs or to make more money.
You might say to yourself, "How is that possible. A contract is a contract, right?"
Increasingly, builders are exercising a clause in new home contracts that lets them change the price — especially if their costs have gone up.
“The only thing you can do is go to the customer and say, 'We’ve got a problem. And here’s the options,'” home builder Kim Paschal said.
“Concrete is going up. Electric wiring is going up ridiculously. I mean, it’s just unbelievable,” he said. “You can’t absorb stuff like that. And it’s now in every aspect of building a house.”
Julie Larsen, a Realtor with Corcoran Dwellings in St. Petersburg, says she has a client who recently put down a $25,000 deposit. Now the builder wants to walk away.
“It’s horrible. It’s a horrible feeling. It makes them untrustworthy of the process,” Larsen said.
In this market, she says, escalation clauses are a reality that homebuyers need to be aware of.
Price escalation clauses can go by several different names. They can also be called convenience clauses or cancellation clauses. In some cases, they can be broad enough to allow a builder to simply walk away because they can make more money now than they thought they would when they went to contract.
So, it’s important to work with a professional who can explain the risks and what your rights are as a buyer.
“Do your due diligence. Hire professionals. Review the contract,” Larsen said. “Know the upfront concerns and the possibilities of what could end up costing you.”