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Builder penalties

I recently represented a couple who purchased a new construction home from a major builder in the Seattle area. In the builder’s addendum (which the buyers must agree to and sign), there were several clauses that I found disconcerting to say the least!

The first clause had to do with the buyers’ choice of lender. If the buyers did not use the builder’s lender for financing, they would be charged an additional $350 fee at closing for “seller’s additional time and expense involved when working with a non-preferred lender“. My question is this: What additional time and expense is involved for the seller? In over 10 years of selling real estate, I have never had an instance where a seller incurred additional time and expense by a buyer’s lender. For that matter, I’ve never heard of a seller having any contact with the lender at all! I admit that when selling a new plat of homes, there may be some additional paperwork involved since the homes have no prior recording documents on file, but is it really that much more difficult working with a non-preferred lender? Maybe this is just another way to pad the builder’s pockets?

The second clause in this builder’s addendum had to do with closing delays. It stated that if the buyers were unable to complete the transaction by the closing date, they would be charged a penalty of $250 per day until it closed. But, in that same addendum it stated that “Seller may at its option extend the Closing Date with no penalty whatsoever… up to 60 days past the original closing date“. Where is the fairness in all of this? This smacks of a double standard!

With housing inventory at an all time low, many builders believe they can bully buyers into submission. Unfortunately in many instances, they are right. But, just wait until the pendulum swings back in the other direction and it comes back to bite them in the …

What are your thoughts?