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« Warning Zillow Investors - You Should Give Your Money to Trulia | Main | Gallup Poll Shows Real Estate Industry Image in Freefall »

September 21, 2007

Comments

Apela

I have seen this first hand (homeowner affected by builder sell off) and they were not happy to say the least. I wonder if future buyers will take note of the builders past actions when they go to buy.

Danilo Bogdanovic

Apela - Yes, buyers are taking note. In dealing with new construction buyers, I see that they are more skiddish than ever due to builder's past actions. Unless they feel like they're getting a phenomenal deal, they'll just wait for a "spec" to become available or go buy an existing home.

If the builder drops their base prices inbetween time of contract and delivery, buyers will often ask me to renegotiate their original price with the builder. If the builder dropped the price for more than their deposit and the builder is unwilling to negotiate, some buyers are walking away from the deal completely.

Frank Borges LL0SA- Broker FranklyRealty.com

Did you see the announcement from Parkside at Alexandria and their "first in the area" auction for 30 units. 47% off their top price from two years ago and $100k the price from yesterday.

Frankly

Danilo Bogdanovic

Auctions must be their latest gimmick. But the $100K off is really not much different than if you added up all the incentives they were already offering before this great "deal" came along. Excellent marketing.

I am one of the homeowners affected by K Hovnanian's sell off. I purchased a K Hovnanian home and had not yet closed when they launched their Deal of the Century, I even had a price protection guarantee in my contract but K Hov would not give any additional incentives stating that the increased incentives were only for certain homesites and that our homesite would not have been included. I now wish we would have walked away from the deal even though we would have lost our earnest deposit plus the $10,000 we deposited with our lender for our rate lock. Interestingly enough, K Hovnanian is once again marketing their price protection guarantee but buyer beware it didn't keep us from getting screwed.

Danilo Bogdanovic

I'm sorry to hear that you were one of the consumers affected. You have to really read the fine print when signing a new construction contract because they're completely seller/builder oriented (as you found out the hard way). If you used a real estate agent, did they explain and go over the contract with you in detail?

And let me get this straight...you paid $10K to your lender for a rate lock?! When did you lock the rate and for how long was the lock for? I've had plenty of new home buyers lock their rates in well ahead of anticipated delivery, but it cost them nowhere near that amount. Who was the bank/lender?

I must correct myself, it was $4,300 to buy the builder cap rate through Countrywide and that was all credited back to us at closing, I have no beef with the lender it's just that if we would not have closed on time we would have lost that money in addition to losing our earnest deposit. Looking back now it was a stupid move not to just walk from the deal even though we would have been out a large sum of cash. Yes, we had a real estate agent, our price protection guarantee says nothing about exclusions, it states that the incentives include those offered in the community. There are other issues too, including them lowering the base price of the model we built and then stating that the incentives were lower than we received which we found out after closing not to be truthful. They definitely used deception to avoid following through on the guarantee they gave us. Needless to say we are fighting this, we are giving them a chance to resolve this before we go on a campaign to let the public know what the price protection guarantee meant for us.

Danilo Bogdanovic

Ok, that makes more sense to me now. Yes, hind sight is 20/20, but such is life (unfortunately). Though it looks as though legally they don't have to do anything for you, perhaps they'll do the right thing just to do the right thing. That's an uphill battle though.

And don't be afraid to let others know about your personal experience. Others need to know so that they can try and avoid a similar experience. Please keep us posted.

K hovnanian is not going to do anything for us, as we suspected. We are going to try small claims court, it's more for the principle of it. K Hovnanian is advertising on the website to fearful buyers stating that they stand behind every home they build by offering an exclusive price protection guarantee. Potential buyers need to be aware of what happened to us even though we had this guarantee in place. Thanks for listening and thank you for your feedback.

Danilo Bogdanovic

I'm sorry to hear the news. I wish you the best of luck in small claims court.

You're welcome and thanks for sharing your situation with us and our readers. Please keep us posted as to what happens.

Erica

Thank you for putting this out there and raising awareness!

I am one of the homeowners. I told our the K. Hovnanian sales man, Matt Hernandez, that I did not want to close because prices are dropping in our area, Rancho Cucamonga, California. Matt promised me they were not lowering prices in our community. We were rushed through our walk through and told not to find too much wrong so we can hurry up and close. I was told if we didn't close on time the price would go up! Eleven days later the Deal of the Century dropped my price $250,000! Because of the price difference we are in a different property tax bracket than our neighbors. We pay 1.9% on an over $900,000 house, while our neighbors only pay 1.3% for a $650,000 house!

According to my attorney this is misrepresentation and fraud. This was done to one other neighbor besides me. K. Hov refuses to do anything about it. Pulte Homes had the same problem, but once people got together and got the media on their side Pulte Homes paid out. I will not stop fighting.

Danilo Bogdanovic

That's pretty shady if you ask me regardless of whether it's legal or not. But it does sound like you may have a case, but I'm not a lawyer.

Sure there are others in the same boat as you that would like to know how things turn for you so please keep us posted.

You're welcome and thanks for sharing that with us.

Erica

Just wanted to update on our Rancho Cucamonga house. Channel 11 news came an interviewed us on Wednesday. They are bringing the camera crew on Tuesday of next week and will be airing our story. We found 3 other builders willing to speak out on our behalf. One says they gave money back as much as two months later, much longer than 11 days!

Danilo Bogdanovic

Erica - Thanks for the update. Any idea when they will be airing the story? Would love to write a post on your specific situation. Would you be interested in chatting with me offline?

Erica

I would be happy to. They met with us Wednesday and will be coming back to tape on Tuesday morning of next week.

Reggie

Well, I wish I had read up on these blogs much earlier. A little more than a year after closing on a new construction town house, I figure I take advantage of the interest rate drops and look into a refinance. Problem? Looks like the bank appraisers are having a hard time getting to the assesment value they need since KHOV did some fire sales on several units $100K less than market. Way to keep your community values up KHOV! I had trusted the KHOV name since my first home was a KHOV property that grew in value nicely for the 11 years I held on to it and was one of the last original owners to sell in that community to "upgrade" into another KHOV property. Now KHOV is self erroding their own market values! And BTW, I waited over a year before I contracted for the townhouse unit I moved into and by that time the price had gone down by arund $100K already (plus some credits towards closing and decorator selections) - hey so I thought I was getting a deal - guess not if KHOV could sell like units for yet ANOTHER $100K less!

Danilo Bogdanovic

Erica - How did the taping go? Do you mind emailing me when you get a moment? Would love to hear what's happened since your last comment. Email: danilo.bogdanovic (at) gmail (dot) com. Thanks.

Reggie - I'm sorry to hear about your situation. Builders definitely help pull prices up and help drag them down when times get tough. They're not driven by emotion, just profits and shareholders. But they're also not the only ones to blame. Builders are just one piece of the puzzle when it comes to a decline in market values.

Erica

You have mail.

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