When Builders Break Deals: The Shocking Trend of Cancelled Home Sale Contracts for Higher Prices
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- Imagine this nightmare scenario: you’re a home buyer in a red-hot market, priced out of resale homes, but you finally have a contract with a builder for a new home. You feel secure, maybe even excited as your home gets closer to completion.
- The framing and roofing are done, the house looks real, and you’re eagerly waiting for move-in. But then you get that shocking call from the builder: your contract is being canceled, or your price is going up by 25% or 30%.
- Many buyers across the country have experienced this heartbreak. For example, in North Carolina, buyers had their contracts canceled or were asked to pay an additional $30,000 after construction delays.
- Why does this happen? Most new home contracts include escalation clauses or withdrawal clauses allowing builders to cancel or raise prices if costs go up.
- For buyers, this feels deeply unfair. You may have canceled a lease or sold your previous home and now face major disruption, financial hardship, and the possibility of being left without a place to live.
- Builders argue that skyrocketing labor and material costs, land price increases, and supply chain issues force their hand. In some cases, builders even ask for six figures more to cover new expenses.
- Builders sometimes choose to cancel rather than renegotiate because a buyer forced to pay more might become a "high-maintenance" client, more likely to complain, demand repairs, and leave bad reviews.
- It's also easier and more profitable for builders to sell to new buyers or investment funds willing to pay a higher price for a basic, non-customized home.
- Investment companies often buy new homes as rentals, preferring simple "builder-grade" designs that are cheaper and faster to build, avoiding customization headaches.
- Rising labor costs are a huge factor too: trades like electrical, plumbing, and HVAC are far more expensive than before, adding tens of thousands of dollars to each build.
- Builders must adapt to survive. Their fixed costs have soared, and in some cases, the original contract price no longer covers expenses, putting them at risk of going out of business.
- Even if a buyer is willing to pay more, financing can fall through if the appraisal doesn’t support the new price or the buyer’s income can’t handle higher mortgage payments at increased interest rates.
- Sometimes, canceling contracts and starting fresh with a new buyer or cash investor is the only way for builders to stay afloat.
- As a home buyer, be aware and stay flexible. Understand that builders face immense challenges too, and keep these realities in mind when planning your purchase.
- Share your experience in the comments or send in your questions for future episodes!
