Jun 10, 22 • News, Real Estate

Builder Contracts

Fox 4 KDFW recently reported that a North Texas family was left all but homeless after their home builder backed out of their contract in the eleventh hour. It’s a consequence of the current seller’s market, and it’s perfectly legal.

According to the report, Tracey and Donnell Brundage had spent nearly a year and a half and thousands of dollars working under the assumption that Glacier Homes/Kindred Homes was building their dream house. However, six days before closing, they received a text message informing them that their contract was being terminated.

The contract included a clause that allowed the builder to “cancel for convenience.” In the Brundages’ case, the builder was able to cancel the contract and put the house on the market. It was then listed at $300,000 more, which they could not afford.

Builders Can Back Out of Your Contract

Homebuyers faced with a builder backing out of their contract under this “convenience clause” have very little legal recourse. The verbiage in this particular contract, for example, stated that the “seller maintains the right to terminate this contract for convenience and without regard to fault or breach.” It also prohibited the buyer from filing a lawsuit by waiving their right to a jury trial.

The contract did state that the buyer could have an attorney review the contract before signing it, which all home buyers should do. Understanding the exact terms of your contract could save you thousands of dollars and the nightmare of being left without a home. If your real estate attorney determines that the contract is not in your best interest, he or she can help you negotiate with the builder.

What to Be Aware of in a Seller’s Market

It is especially important to work with a real estate attorney given the current real estate market in Texas. Houses are in high demand, which means prices are high and construction is booming. Add to that the soaring cost of building materials, which builders have to pass on, and you have a seller’s market in which buyers must be exceedingly cautious.

Attorney Michael Farah advises buyers on what to look for specifically in a builder contract.

“Particular contract provisions to be aware of are the right to unilaterally terminate, mandatory arbitration clauses, and financing contingency waivers,” says Farah. “You should also look for refundability of earnest money, particularly in relation to a low appraisal situation.

“You have to make sure that your contract requires the house to appraise for the purchase price, otherwise you could end up having to pay the difference at closing. That difference is not covered by a mortgage.”

Turn to The Farah Law Firm

Contact the real estate attorneys at The Farah Law Firm before signing any real estate contract. We’ll help ensure that you’re signing a fair contract that won’t leave you surprised down the road.

About Michael Farah

Michael Farah is the founder and managing attorney of the Farah Law Firm. Mike graduated from the University of New Hampshire School of Law and is licensed to practice law in Texas and New York.

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