And what kind of quality do you expect to get? Seriously.

Pushing any business-person into a corner on price is asking for nothing but trouble.

jasonmi7, I'm not debating the right-wrong of asking for renegotiating. Price negotiations are a "business person's" life. I want to pay a fair price. Why is it OK for me to take a hit and not the builder?

Quality is a non-issue. 95% of all remaining work is via contractors and not his crew so not much for him to mess with. Non-issue.

Why is it OK for me to take a hit and not the builder?

It's the industry. Don't shoot the messenger.

Non-issue.

You're kidding, right?

So Mr. Builder says, "Sure, I can cut off $10k, no problem." Then Mr. Builder goes to each Mr. Contractor and says, "Hey, Joe Contractor, I need this to cost $2k less than the last house."

Then what do you think that Mr. Contractor is going to do? Take the hit? Doubtful.

Yup. Quality is the ONLY issue; it has nothing to do with how many subs there are.

Truly; if you want to know; approach your builder honestly. Honesty is the best policy ALWAYS. That has not gone out of style. State your issues, and your solution, and see where it goes.

Did I imply anywhere in my post to not be honest? Quality issues by asking for price concession? Houses cost less money today, builders make less money today. Is your builder charging you more for the house you are building today than he would have charged in 2005/2006? Not likely. Is the house of lesser quality?????

My question is how would you approach the builder with the issue. A house is a business deal, not something I am so enthralled with that I'll lose money to get it. I'll bet $$$ I'm not the only one who's going through this as their build progresses.

nc; houses are VALUED less than they were, but the actual cost of BUILDING houses really hasn't declined that much. With a slowing economy, certain costs such as lumber are starting to go down, but really haven't caught up yet, so there is an imbalance in cost versus value.

You really need to understand what this house is costing the builder in order to approach them.

I hear you OP, and I certainly agree that the answer is always no if you don't ask, but flash back to 2002 for a second; let's say your builder is selling houses faster than he can build them...he signs a P&S with you for $xxx to build "y" house...2 months before your house is done, he sells the same house on the lot next door for $10-$15k more than he charged you...does he then have a right to increase your purchase price or back out of the deal if you refuse to pay current market value...??? Of course not...It's the nature of a fluid market, and it's the risk you take when agreeing to the price of something months before you can actually take delivery of it...I'm not implying for a second that I don't think you have a valid point, I just think you need to look at it from both sides...

nc....Appraisers are under a microscope these days. They HAVE to use the comps in that neighborhood which is normal anyway. It's a GOOD thing those houses just sold in the last few months! If those prices are down, your's should come in around the same price per s/f......If you didn't add major upgrades.

I would just wait for the appraisal. If it is out of sync with the neighborhood, challenge it. If the house appraises for less than the contract price, you and the builder will have to agree on a new price, or you can walk away. I don't see a problem here.

I do see a problem if you approach the builder now. You will have put him on notice that you intend to squeeze him. He will squeeze back, perhaps in subtle ways that may not be evident for years, and you will find yourself in an adversarial relationship, whether you know it or not. It is not in your best interest to place yourself in that kind of position.

How much money will you lose if you walk away?

Do you have a mortgage contingent on the appraisal?

What's your builder's financial condition? Will the development be built out soon? (We've recently seen a post by someone whose builder went under before completing their home. They walked, sueing the builder for non-performance. They may never see their money but are happy they are not like two other parties who closed on their homes and are now living in a wasteland of uncompleted houses. Those homeowners not merely upside down, they can't sell at any price.)

nc

you signed a contract and agreed to a price. If the builder delivers the house per the contract you signed, then you need to pay the agreed to price. Asking the builder to take less than the agreed to price, for the same level of goods and services in the original contract, at this point is not a wise move.

You might have a little wiggle room on an option - say he agreed to finish a room in the basement and gave you a price for that option, maybe he would be willing to do it for a little less especially if you were on the fence about whether to exercise that option or not. You might be able to make a deal - maybe the unfinished basement in the contract could be finished off at a great price. I see nothing wrong with this type of negotiating where there is something in it for both sides (he gets a little more buisness, you add value to the house).

I would also ask the bank what will happen if the appraised value comes in 10 to 20K lower than expected (if they are requiring you to have a 20% equity stake in the house, and the appraisal yields a loan to value ratio less than 80%, what will they do?). Probably nothing, but you never know.

sniff, if the house dropped in appraisal value, my LTV would actually go up. Our deal is subject to appraisal. I called our bank and the loan originator said 20% means 20%. Not an issue in our case luckily. Not interested in any more adds as raising my purchase price is the LAST thing I want to do.

As far as agreed price, we can still walk away and just lose the non-refundable ($15k) portion of the deposit. I think we'd both lose in this case since we wouldn't get in the house and he'd have to spend several months selling it.

muddypond is thinking along the lines of where we are at. We'll wait for the appraisal and if it's lower either he drops the price or we're walking.

I also don't see this as "squeezing" the builder. Buyers market and plenty of houses to go pick from.

I am obviously not understanding something. You said that you stand to pay 10 - 15 thousand more than the house could sell for. And you are considering walking away leaving 15000 non refundable deposit on the table? How does that put you in a better position? It does not sound like you are in much of a bargaining position at this point. Maybe you will be in a better position in April? Also if you do wait until the end, and decide not to purchase this house, what will the added costs be to you while you wait for another home to be built? Or will you have to purchase a house that is already built, without your personal choices in finishes etc. 15 thousand dollars is alot of money to hand over to someone to get nothing in return. And if prices stay the way they are the builder can take your deposit enabling him to sell the home for less. It doesn't sound like he is going to lose. That is, if I am understanding your post correctly. I don't envy your position.

mel, it's lose-lose. Sure he can lower the price with my $15k, but I am already an approved buyer with no house to sell. He'll have to list the house, and then wait to sell at ?? for a price. I am laughing so hard my sides hurt that you would consider a seller to have any kind of advantage in this market. He's got serious carrying costs so that $15k will vaporize in the blink of an eye.

With so many people willing to take their lumps, I need to consider a sales career.

i guess you are not a very honest person. when you signed a contract you gave your word that you would make good on your promise to buy this house for x amount. if you dont have the money that is one thing but if you can aford it and just want to stick the contractor it is unethical.

^^^ Just what I was thinking!

The OP signed a contract and now wants out of the terms.
Pretty bad in my book.

I am sure that if the tables were turned, the OP would NOT be so eager to change the contract (i.e., push to pay more if prices increased).

"With so many people willing to take their lumps, I need to consider a sales career."

Um, I think not.

I am just going by the numbers that you put out there. You said that houses were selling for 10 to 15 thousand less than what you are going to eventually pay for your house. So if that is the case then won't he just sell it to someone else? Unless houses are not selling. You didn't put that in your post so I guess I wrongly assumed that houses were indeed selling in that neighbourhood. You did say that houses had sold in the past 3 months though.

I guess I am willing to 'take my lumps' as you put it, when we are talking about such a low margin of profit versus the hassle of going through the process of building all over again. I wouldn't consider it taking my lumps at all. There are other factors to consider like my time spent choosing finishes, time spent finding another house, lawyers costs to set up another contract etc. Putting my life on hold while I go through this process all over again. And who knows, with this economic climate maybe it would happen to you all over again although prices seem to have levelled off in our part of the world. It just seems to me like you are going to go through alot of hassle when we are talking about such a small margin. But that is just my opinion of course.

By the way I am not so sure I would consider a sales career if I were you. What if you find yourself on the receiving end of a person that has agreed to buy something off of you, only to find that the sale was not made at all? At the very least, if you do decide to go in that direction, don't count on the commission until you have the money in your hand. I am talking about sales of real estate of course. Glad I could provide you with a laugh or two.........

You signed a contract, you should honor it or walk and lose the deposit.

You would not be willing to pay more if the price of the roofing jumped during the period or the house appeciated. so why would you expect the builder to renegoiate.

So someone who honors a contract is a sucker?

Not at all. And I think it is sad you think that way!

How about a man of their word? Someone who upholds the law?

Spare me the the moral high road. I can walk, I can buy, or I can renegotiate. Nothing in the contract precludes any of that.

So if I don't buy, I'm not a man of my word? Are you serious? You guys are hilarious. How many RE deals go sour every day of the year?

Stick to the specific question: How would you negotiate?

nc

"if the house dropped in appraisal value, my LTV would actually go up:" Yes it would - and that is the wrong direction as far as a bank is concerned. If the LTV is above 80%, then the bank may require you to put more money down to bring LTV down to 80%. That is an area you need to be concerned about - and it is a legitmate concern.

As far as "negotiating" if you call it that, you can try explaining your argument/options to the builder. I don't think you will get much sympathy from him but who knows.

I would suggest trying to find a way to increase the value of my house (maybe finish off that basement) and see if I could work a deal with the builder so it is a win-win.

If you threaten to walk, be prepared for the builder to say "OK - then walk". And be prepared for "and I will see you in court" added to the end of his response. You signed a contract - and if he sues you for damages - you might los more than 15K!. Once you play that card, your relationship with the builder is going to change and probably for the worse.

sniff,
Let's do some math. In may case the 20% threshold is not an issue but suppose it was.
If the house was worth $110000 and my lender would give me 80% of the value, the loan is for 88,000 (ie, 20% or $22,000 down). If the house appraised at $100000 and I put the same $22,000 down, I have put down 22%.

As I wrote before, our deal is subject to appraisal so if it stinks, I can walk but lose the 15k. That's the "cost" of making selections, etc.

As far as lawyers, I have one of those in the family ;) I think we're pretty secure in our position.

Of course people want to make this a debate, lecture whatever. All I asked is how would you negotiate. That's how we'd like to work it without being adversarial. There's no doubt we could screw him as much, if not more, than he could screw us.

Imagine 1 year from now I posted and said I went through with a deal even though the house had dropped in value. The same people on this board would say they we're brilliant deal makers and would have backed out, yada, yada, yada. Man, you people are so full of yourselves.

You don't even need to reply to this thread. I'm not going to waste my valuable time on a forum with people who can not enter meaningful dialogue.

I know, you'll reply anyways to get the last word. Have fun. Ta-ta.

Good luck.

There's no doubt we could screw him as much, if not more, than he could screw us.

Arrogance. Not pretty.

Two suggestions - see your religious adviser for some help with your integrity issues, and talk to a real attorney about the legal issues involved in breaking a contract and causing damages to another party.

You'll quickly find that when you walk on a contract, there are more legal remedies for the contractor than just keeping your deposit. In good times, they are rarely pursued since the deposit becomes extra profit for the builder. With the current economic situation, I'm sure he'll exercise them.

To answer your original question; I would have a face to face conversation with your builder. Mention your fear that it might not appraise. My guess is it won't get you anywhere because his cost to build, while maybe a hair less due to slightly lessening costs of petroleum products, has not caught up with the depreciation you cite.
Another angle--can you renegotiate the terms of your mortgage since rates are lower? You could save at least what you are trying to save now.

Jo

The responses to the OP's question have been so ridiculous. Telling him to see his religious advisor? Seriously??!!

Anyway, it's a business deal with clearly defined terms through your contract. Only you know exactly what your contract allows regarding walking away from your earnest money, so it may be a simple process (although a pricey one) to walk if the numbers aren't where you need/want them to be at closing. I agree with the other posters about one point though...in a "turnkey" contract, both the owner and the builder need to be fully aware of the risks that they are taking on financially. Right now, you are the one getting pinched because of decreasing home values...it could just as easily have been the builder who would start to lose money if we have another oil spike, etc. That is the risk inherent with this type of contract. However, contracts are renegotiated EVERYDAY. It is not unethical, immoral, or somehow dishonest to request a chance to discuss the terms of your contract to see if there is a way to have it amended to be more reflective of today's environment.

nc

We should do some math. Try this.

If you agreed to pay the builder 200K for the house, and the bank required a 20% equity stake, then you would be required to put down 40K and the bank would finance 160K.

But if the house appraisal comes in 20K lower at 180K, the bank might only finanace 80% of that 180K or 144K. The house price is still 200K - so where does the delta come from? You might have to come up with the 16K difference if the bank takes the position that they will only finance to 80% of the appraised value. I would be concerned about that especially if you do not have the 16K in cash.

I can tell by your responses that you are a fool. The contract is binding - and legally you cannot just walk away from it. In a good market, builders would just find another buyer and take your money - its a good deal for them. But in this market?

There might be mitigating circumstances such as loss of job or injury where a court might see it your way. But if you pull chocks on this only because you no longer like the price you agreed to pay, you will be in breach of contract and you will lose the 15K deposit and possibly a a whole lot more - that depends on what legal actions the builder decides to take.

And yes - your mortgage is contingent on the appraisal but that is not an out for you! That is an out for the bank!

nc,

All math and contract language aside, you posted a question here and asked for opinions but then take offense and tell people not to "take the high road with you" when you don't like what you hear. But maybe you were not asking for opinions or advice but more were looking for a cheering section.

You agreed to a contract and signed it. Absent a failure to perform or breach in contract terms, even if you exercise your right to walk, that doesn't say much for your signature. Sorry, I may be taking the high road but I place a VERY HIGH value on my signature and word.

I think you summed it up best by your comment about who could screw whom the most. It is sad but true that there are those who will always measure the value of their business skills by the degree and magnitude they screw over another.

"But maybe you were not asking for opinions or advice but more were looking for a cheering section."

Bravo, great response. If you ask a question,expect to get answers even if they are not what you want to hear.

I am in the middle of a build started back in July. I wouldnt even think about going back to my builder to ask for a "do-over" nor would I expect him to change mid stream on me. I did however ask for control over my "allowables" ( appliance,flooring,cabinet packages) so I could negotiate better deals there.

I agree though you should sit down and express your concerns honestly and openly

I think there is a HUGE difference between a cheering section and some of
the responses here . I am amazed at just how rude some people on this forum can be . Those of you that question his ethics and suggest he see a spiritual
advisor should maybe take a look at yourselves . Why do you insist on driving
people AWAY from this community ? Does it make you feel smarter or superior
in some way ? He asked a simple question and got some unnecessarily rude
negative responses . I was taught if you can't be nice - keep your mouth shut .
Too bad some of you never learned that .

I think the rudeness begins when NC started defensively picking away at genuine honest answers he received from other members. Ask a question,get answers. Ive read the post a few times and other than the spiratual advisor thing,which may have been over the top,I dont see where people have been rude. Just honest.

sometimes a little rudeness is a good thing. when somebody conspires to screw his builder out of what he was promised i dont see why that person deserves respect.
when he started saying things like this he showed his true colors and what he was really up to:
"There's no doubt we could screw him as much, if not more, than he could screw us."

The problem NC is having is real and has been discussed at length over on Buying and Selling. Buyers and builders - good people - are getting caught in a tumbling market where the appraisals are coming in lower than the agreed to price. Some people have had to borrow from family to make up the delta at closing, some have been forced into paying PMI, some deals went bust. It is a travesty.

A lot of people tried to help the OP. Perhaps he was just venting his frustrations out and testing his arguments before approaching the builder. Sound advice was given, I hope he heeds it.

I suggest we let this thing fade out.

Look to your contract for options:
it says you have 3.
1) Buy house at agreed upon price.(nothing wrong with that)
2) Not buy house and lose deposit.(nothing wrong with that)
3) Adjust due to apraisial if it comes in low.(nothing wrong with that)

renegotiate b/c you feel like it? umm nope, not in the contract.

I would fee differently if the house is coming in at an appraised value 20% less than contract and you still had to buy, but the appraisal contingency has you covered from paying too much.

if you want an additonal 10K cause you feel like it, great, go try and why not do it now while he's finishing the house. you could start off by saying we have a contract, I know it sets a price, i know it protects me from the house being worth less than cost, but frankly I feel like screwing you out of another 20K. You feel like not paying it, so lets meet in the middle?

nc lawn nut: If the market were increasing and the house appraised for more than originally anticipated, would you expect to pay the builder more than the agreed price? This doesn't mean that you shouldn't try to negotiate a lower price if possible since values have generally come down but maybe it's something to consider.

"2) Not buy house and lose deposit.(nothing wrong with that)"

Depending on the exact wording of the contract the builder may be able to come after you for additional damages.

Yikes....I've been in the Kitchens forum for awhile now where you don't need a flak jacket! nc lawn nut: You entered a contract with a builder at a time when the housing crisis was already under way. Sounds like you're having remorse and realizing you should have just bought something that was already on the market. That is where your "deals" are to be found on existing builder inventory. Why do you think a Builder would build something for you with your choices and specifications and then renegotiate the price at or just before closing? Get real. I hope your next experience is a lawsuit, those are fun and not getting any cheaper either. Good luck trying to renegotiate that bill when it comes in. My husband is a Custom Builder and I'm very glad we have yet to contract with someone who would like to "screw" him.

Out of all the horror stories you hear of "builders" screwing the client, it's refreshing to see the other side of the coin, idiots that are out to screw the builder. Life's a two way street! Respect on the part of both parties typically ends in a smooth build able to take care of problems in a professional, respectful manner when both are concerned.

Look at it this way. If you and the builder negotiated a contract and then property values went up, would you appreciate him coming to you asking for more money? It's no different than you asking him for a better price. A contact is a contact.

In the business I am in, we quote jobs based on the price of stainless steel, which has very fluid pricing. We quote based on current pricing and hope the market holds out long enough for us to get the order and purchase material at that price. Sometimes the price of stainless drops and we make a little extra, sometimes the price goes up and we lose some money.

The builder is in this same position. When he quotes a job, the price of materials may go up or down, either giving him a little extra profit or cause him to dig deeper in his pocket. Either way, you pay the same price. You agreed on a price and you are legally and morally bound to pay what you agreed on.....like it or not. You did come here for opinions and that's what you got. Sorry if you don't like the answers you got.