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I 2nd what others are telling you - see a real estate attorney. I am assuming this is in Texas? Texas puts you in a pickle due to the lack of public information, which has me asking, how do you know this other house sold for 20K less?
Read your contract - read the section that addresses appraised value. What does it say about appraising "fully tricked out" with all of your chosen options? That is your key.
In 2007-2008, I had a buyer walk away from a 20K deposit he put down on a Toll home because an independent appraisal he had done put the value 100K less than his purchase price. Later, the builder wound up selling the home close to 200K less than my guy's contract price. Eventually, builders in the area (not sure about Toll) started renegotiating in an attempt to keep buyers from walking away, at all.
The key here is where are you in this process? And being in Texas, you may not get the full facts. You are just going to have to decide if you are willing to lose 10K to avoid losing two or three times + that amount. Then once you have your answer, attempt to renegotiate. But if you aren't willing to walk away (assuming you have your facts right), be prepared to be forced into a sale.
$50,000 is quite a swing. What is the price range in the neighborhood?
Was there a difference in lot premium for the two houses? It is common for builders to put inventory on the cheaper "dog" lots, so they can get a premium for the presale lots. That could be up to $50,000 in some neighborhoods, although $10,000--$25,000 is more common.
Read your contract, or have your attorney read it, for builder's recourse if you breach.
Is your deposit their only compensation if you walk away?
Or, can the builder sue you to force you to close?
While it is uncommon for a builder to be able to sue for performance, the terms of your contract will rule.
Inventory homes are almost always a better value than presale deals offer. The builder has tied up capital to build, and is usually motivated to cash out, particularly if the house has been sitting for a while.
But, assuming that your post is accurate, that "all other things are basically equal," you may be able to negotiate some of the difference away.
It may be easier and cheaper for the builder to lower the contract price to get to closing, than to keep your deposit, carry another inventory home, and attempt to find another buyer at or near your contract price.
"I love the house, but your sale at 123 Cheaper Avenue really undermined the value. Let's reset the price to 'My $XYZ - $50,000' and we can get to closing."
But, be certain that you are accurate in your contention on the sales price, terms, and features included in the other home. And be clear that you are willing to walk away from your deposit.
You may get a portion of the $50,000, or none of the difference.
And, you may need to decide whether a $10,000 loss is more bearable than a possible $50,000 false step.
$50,000 is quite a swing. What is the price range in the neighborhood?
Was there a difference in lot premium for the two houses? It is common for builders to put inventory on the cheaper "dog" lots, so they can get a premium for the presale lots. That could be up to $50,000 in some neighborhoods, although $10,000--$25,000 is more common.
Read your contract, or have your attorney read it, for builder's recourse if you breach.
Is your deposit their only compensation if you walk away?
Or, can the builder sue you to force you to close?
While it is uncommon for a builder to be able to sue for performance, the terms of your contract will rule.
Inventory homes are almost always a better value than presale deals offer. The builder has tied up capital to build, and is usually motivated to cash out, particularly if the house has been sitting for a while.
But, assuming that your post is accurate, that "all other things are basically equal," you may be able to negotiate some of the difference away.
It may be easier and cheaper for the builder to lower the contract price to get to closing, than to keep your deposit and attempt to find another buyer at your price.
"I love the house, but your sale at 123 Cheaper Avenue really undermined the value. Let's reset the price to 'My $XYZ - $50,000' and we can get to closing." But, be certain that you are accurate in your contention on the sales price, terms, and features included in the other home. And be clear that you are willing to walk away from your deposit.
You may get a portion of the $50,000, or none of the difference.
And, you may need to decide whether a $10,000 loss is more bearable than a possible $50,000 false step.
The challenge with this strategy is that one (or even a couple/few) examples are easy for the builder to dispel. You will be dragged down into a rat hole of detail and you'll lose on this basis because the builder can speak with authority on the house that he built and sold and the OP cannot. Doesn't matter if he's lying or not, he has the authority to speak about every detail of the houses and the deals. You don't. It becomes a peeing contests over this one has granite, and this one has a treed lot, that one was a deal where the buyer backed out and it was full of odd design choices so that had to discount, etc.....endless blah blah that he will back up with facts.
Whenever you negotiate, your opening line sets the rules and basis for the negotiation. The price that one house that you know little about sold for is probably a very weak basis for negotiation when you are up against someone who can go and pull the paperwork and the plans for that house and explain in every last little detail why your house is worth so much more. That's what you need to expect with a strategy like this. If I were the builder, I would be very happy with this basis of negotiation. "So you want to talk about 123 Cheaper Ave....happy to...hang on, I'll grab the file and we'll go through it!"
Every case is different and we don't even know what the buyer's potential exposure is so I would not try to say what anyone should do but I think you might want to consider a more straightforward approach. Something like "these numbers don't work for me any longer and to make it work it needs to look more like _______, otherwise I'm better off walking away". This type of approach keeps it above the weeds of house by house comparisons and just states your position squarely.
For Mike's suggested approach, it would be good to know what the buyer's next move is when backed into a corner and dazed with a million facts and figures as to why that other house is truly worth less? He then needs to change the basis of the negotiation to something else. What's the buyer's next move after the builder's predictable slaughter of the buyer's whole basis for negotiation?
Hi all, Thank you so much for the advice. I found out the sale price from one of my co-worker who is also the realtor. After talking to my husband and reading all of your comments, we have decided to move forward with the contract as we like the location and the builder is close to the closeout on that area. I really do appreciate each and everyone of your advice. One Big lesson learnt for us is to always go with the Realtor. Thank you so much!
Hi all, Thank you so much for the advice. I found out the sale price from one of my co-worker who is also the realtor. After talking to my husband and reading all of your comments, we have decided to move forward with the contract as we like the location and the builder is close to the closeout on that area. I really do appreciate each and everyone of your advice. One Big lesson learnt for us is to always go with the Realtor. Thank you so much!
Might be the upgrades actually. The reason they are upgrades and not standard is because they don't get full or even partial value. If the builder could put them in and make a profit they'd be standard. Swimming pools are a great example where you can spend 25-50k and it not show any increase in value at sale.
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