"Speculators "Grabbing At Straws"
A housing report from the Washington Post. "Lisa and Reggie Starr thought they were getting a good deal when they signed a contract to buy a new six-bedroom house in Woodbridge almost a year ago. But after they had trouble selling their own house and wanted to get out of the deal, the fine print in their contract became a very big obstacle."
"'There's no contingency for the sale of your home. There's no contingency for financing. 'No refund will be due to you' -- it's clearly written in the contract,' said Lisa Starr, who admits that she did not fully understand the document when she signed it."
"The Starrs and many other would-be new-home buyers are finding that the sales agreements they so enthusiastically signed just a year or two ago have left them little wiggle room as settlement day approaches. Indeed, some consumer advocates and real estate lawyers who have been fielding calls from remorseful buyers in recent months say few contracts are as rigid and one-sided as those for new home sales."
"The contracts are 'written in a way to give every possible edge to the home builder,' said Allen J. Fishbein, at the Consumer Federation of America. Some developers have added certain provisions that further strengthen the contracts, bit by bit, over the past decade, some attorneys said."
"As a result, contracts became more prevalent during the frenzied real estate boom that block consumers from getting any 'remedy' beyond reimbursement of their earnest money, or that prevent them from taking the dispute to court but instead force them into arbitration, when differences of opinion arise."
"But some buyers are trying to get back their deposits just the same, and at times are finding that persistence can prevail. There have not yet been judgments or verdicts in these cases, but some would-be buyers are getting settlements instead. In one case settled recently in Fairfax County Circuit Court, 16 home buyers in a McLean subdivision sued to get back deposits on homes contracted for a collective $20 million."
"Robert M. Diamond, a real estate lawyer in Falls Church, said some buyers are grabbing at straws, even protesting changes favorable to them, such as when the developer added extra parking in a condominium complex. Buyers and their attorneys have alleged that these adjustments are 'material adverse changes,' even though the contracts clearly permit developers to make certain changes as needed to their projects."
"'It didn't matter what the change was; these are excuses,' said Diamond, adding that many of the buyers who want out are speculators who decided their investments had turned sour or buyers worried that they had overpaid."
"The Starrs said they are hardly trying to slither out of the deal just because they were having second thoughts. They say their backs are against the wall: They couldn't get good enough financing terms, and the builder had lowered the price of nearby homes."
"The Starrs finally got a contract on the home they were selling, but at a price that is $150,000 less than they expected when they bought the new house. Reggie Starr marveled at just how quickly the real estate market had turned. 'It was not even like a slight decline,' he said. 'It was like a big curve.'"
"'You need to have legal representation, and you need a real estate agent,' Lisa Starr said."
"No matter how reputable the builder may be, buyers should seek out a lawyer before signing the deal because new-home sales agreements can be 'loaded with all sorts of hidden land mines,' Fishbein said."
"During the boom, however, many builders refused to pay sales commissions to real estate agents representing buyers because builders could sell the houses without any help. And buyers risked losing out on a coveted contract if they took it to a lawyer rather than signing right then and there."
"Jeffrey Silverstein, a real estate lawyer based in Burke, said he recently had two buyers bring him their contracts before signing. 'When the real estate market was hot, everybody thought they had to sign right now or they'd lose the place. And that was probably true. Lawyers just weren't in the loop anymore,' Silverstein said. 'Now, it's coming back a little. They [builders] listen now. If you have reasonable changes to make the contracts more equal-handed, they're willing to listen.'"