Builders Remorse

First it was the buyers backing out. Then came the lenders no longer approving exotic loans. Now, according to this Sun-Sentinel article today, the builders are simply refusing to finish completion of existing homes under contract unless the buyer pays them additional money.
In the case mentioned, we are talking another $150,000!

Yet another example of how this bubble is out of control. When the builders are trying to cancel because they cannot make money, be warned.


"Most everything was in boxes as Dottie and Gary Sahadeo prepared to move out of their Coconut Creek home to a more spacious, custom-built house west of Boynton Beach.But with construction almost complete, the Sahadeos received an unwelcome call: Their developer was canceling their contract, requesting $150,000 more to finish the work."

"Instead, the Sahadeos are locked in a legal battle to force completion of the five-bedroom house, which was under contract for $590,000 in 2003 but could sell for around $1 million today. Their case illustrates an emerging problem between developers and homebuyers now landing in court to settle contract disputes."

"From the home buyers' viewpoint, developers have been breaking contracts to sell the home at a higher market value. Some developers, though, cite the rising cost of building materials as having forced them to back out. Speculative buyers in the condominium market likewise have been pulling out as interest rates and other costs rise, making their investments less profitable.Experts expect the trend to continue despite the recent slowdown in the real estate market."

""There is a phenomenon going on in South Florida with the skyrocketing in real estate," said Robert Pasin, the Sahadeo's attorney, of Coral Springs. "The time span to build could be two years, and in that span the price goes up. ... In any circumstance, you have a contract and you think you have a deal.""

"Pat and Martin Lenzer have a similar case against Boynton Waters, where they already live. In July 2003, the Lenzers signed a contract for a $736,000 house a few lots down from the their current home.Two years later, they got a call from the developer. Contract canceled"

"Miami attorney Richard Wolfe said his firm, Wolfe and Goldstein, has about 15 contract cancellation cases pending in Miami-Dade, Broward and Palm Beach counties. And it's getting "more cases every day," he said."

"In the next couple of years, McCabe, the real estate analyst, anticipates a "tremendous amount of litigation" -- speculators suing brokers and lenders, developers suing speculators to get them to close and homebuyers suing developers. "It's been a rose garden the last four to five years," he said. "Everyone's been happy because everyone's making money.""