Can a buyer get their deposit back on a new construction home contract

Jim: Tom, we contracted for a new home in July with a required large deposit, six figures. It was the builder's model and today they are still using it as the sales office and model. Here's my question. Can we cancel and get our deposit back?

Attorney Tom Olsen: Jim, I'm going to give you what is probably bad news, but Jim, the only way for you to know for sure is to take that contract to an attorney and have him or her review it for you. Jim, as many times as I have looked at new construction contracts over my 40 years of law practice, I've come away with one conclusion, Jim. It is those contracts are written to protect your builder. They are not written for your benefit. I would say very, very, very unlikely that you could walk away from this deal and get your deposit back. Jim, the real question is, when will your builder be obligated to close this transaction and sell this, finish the sale to you? That's a better question for you, Jim.

Jim: Yes. Okay. I thought that was the answer. All right, I appreciate it, Tom, very much.

Tom: Okay, Jim, I wish you best of luck. Boy, Chrisy of-

Jim: Okay, thank you.

Tom: -all the years that I've had people bring me new construction contracts, had they been able to get out of them and get their money back? No.

Attorney Chris Merrill: It's very, very difficult.

Tom: Yes. I tell you what? New construction contracts as far as the sales pressure that are put on you as a buyer-

Chris: Oh my gosh.

Tom: -they are right up there with timeshares, folks.

Chris: Timeshares for sure.

Tom: Those salespeople will make you think this is the dream sign on the dotted line. We got specials today, that these specials are only good for today. You want to buy this house, get these specials, you got to sign it today, folks when you hear those words, walk away.

Chris: Run, no, run.

Tom: Yes, exactly.

Chris: For sure. Oh my gosh. Oh, I feel bad for Jim. You know, Tom, how many people have come to you? Of course me some, but you over the years and the one common thread, they may be all different builders. You look at it and you it's the same result, the same sad ending.

Tom: Folks, building a home from scratch is a big pain in the, oh, can I say that word?

Chris: Butt?

Tom: Okay, I'll say that word. First of all, you are going to get a much better price per square foot when you buy a used home. Which's a better deal? Chrisy, a brand new car or a used car?

Chris: Used.

Tom: Yes. Not only are you going to get a better deal price per square foot on a used home, you are not going to have to deal with all these new construction problems and delays that we hear about with so many people. You sign a new construction contract to build a home. Guess what? It gives them 18 months, two years to finish your house. Do you as a buyer notice that fine print? Does that builder promise you? Yes. It says 18 months, two years, but we're going to have it done in six months. Are they fibbing to you? Yes, they are.

Chris: Oh yes. You know, Tom, I actually really do find it fascinating. I'm sure it's happened once in a while for you, but here's what I find fascinating is that you, we get the calls after they've done it. I think I find it really fascinating that we don't have a lot of people coming to us beforehand.

Tom: Yes. That reminds me of, we have some good friends. This goes back a few years, but they brought their new construction contract to me.

Chris: Right? They did do. They did it.

Tom: I laid out for them-

Chris: Why not to.

Tom: -four or five good reasons why they don't, should not do this. They did it.

Chris: What happened? They did it anyway and they got burned. Finally, they got their money back. Am I correct? It was like over a year later and they had to pay an attorney. This is the other thing, folks. It's not that you wouldn't get it back, however, you have to spend more money and has to be an attorney as if you were going to litigation. Now you have to spend more money to get the other money back and it's not as if you're going to get your attorney's fees back.

Tom: First of all, let's have the good news. They didn't buy that new construction, but they found the perfect used house for themselves.

Chris: Absolutely.

Tom: God bless [inaudible 00:04:24].

Chris: All is good.

Tom: All is good.

Chris: However, they went through two years of dealing with it and not sure if they were going to get their money back.

Tom: They ended up getting their money back, but they had over six figures as a deposit.

Chris: Same as Jim.

Tom: What does that mean? Their money is tied up for two years.

Chris: That's exactly, they're not making money on it.

Tom: They got to sit around and see, "Will this happen or will it not?" In the meantime, I can't go out and look for another house.

Chris: Correct. They had to pay money just to even get that back.

Tom: Yes. That's my advice to you, folks. Do not buy new construction homes unless it's like literally built and ready for you to build into. Move into

Chris: Go into.

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