Dallas (1080 KRLD) - For a growing number of Texans, building their dream home has turned into a nightmare.
It's becoming more and more prevalent these days -- home builders either significantly raising the price of the home after the contract was signed or even canceling the contract altogether.
"I've been doing this for almost 23 years now, and I will tell you, I have not seen anything quite like this before," says Robert Lovein, managing partner of Grapevine-based construction litigation law firm Lovein Ribman. "They've entered into a contract, (and) they believe that they're going to get this house built for that price. And what they're finding is, that's not necessarily the case."
One factor that Lovein attributes this to is a sharp increase in material costs.
"These builders are experiencing unforeseen material costs, and they're not in a position to actually absorb these material costs, which have been anywhere between 25% and 300% (higher than normal), depending upon the material," Lovein says.
Another factor is the soaring price of real estate that has affected homes of all price points.
"We've seen on the eve of closing, the builder canceling the contract, leaving these people without that house," says Lovein, "and then turning around and selling that house to a new buyer for anywhere from 20 to 30 to 40% more than the original contract price."
At issue here is a clause in the often-lengthy construction contract that allows builders to recoup added costs or to cancel the contract.
"(They) included provisions in there that essentially say that (if) building costs increase up to or over 25%, then they can pass those costs on to the purchaser," Lovein says.
And that's leaving buyers with no recourse.
“Generally speaking, courts will enforce contractual provisions unless they are unconscionable or if other contract defenses do not apply,” says Lovein.
Lovein says while these moves by builders were once the exception, they are quickly becoming the rule.
"I think for moving forward, we're going to start seeing this provision in most new home building contracts," Lovein says.
Lovein urges everyone purchasing a new construction home to read over the contract carefully or even hire an attorney at the outset of the process.
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