Builder demanding to increase price after contract signing

[nag007]

Hi,

I have booked a property in FL state and contract was signed in Nov 2021 with a closing date of June-Aug 2022. The construction has been delayed for a long time. In last 3-4 months, the builder contacted for sharing color choices and readiness about financing. Last update was the closing to be done in Feb 2023. I now receive an email to increase the prices by 13% citing economic conditions.

I would like to seek some guidance on what can I do here? Looks like builder is taking advantage as the property prices are still higher than when I booked and there was a considerable delay at his end.

[simplextableau]

No one can possibly answer this question without knowing what your contract says. It's a legal question anyway, prohibited by forum policy, so you should see a lawyer.

[nag007]

Here is the clause in the contract that the builder is referrring to as part of asking to sign increased price. By this contract, it seems that he can increase the price and notify " no later than the date of the Pre-Drywall Orientation".
1. Can someone help me understand what does " no later than the date of the Pre-Drywall Orientation" mean?
2. The delay was far beyond the committed date and the price would increase over the period of time. Can this clause be used because of the price increase after the delay?

(B) Materials and Labor. Buyer hereby acknowledges that the Purchase Price contained in this Agreement is based upon the price for materials and labor being paid by or on behalf of Seller on the Effective Date. Due to market or environmental conditions some of the materials and or labor may increase rapidly in costs. Buyer agrees if material or labor costs increase, the Purchase Price shall increase in an amount sufficient to cover increases in the price of materials and/or labor incurred in connection with the construction of the Property. Copies of invoices for similar materials and/or labor as of the Effective Date, and copies of invoices for materials and/labor for construction will be sufficient to establish the increases. Seller shall notify Buyer of the total increase to the Purchase Price no later than the date of the Pre-Drywall Orientation. If the increase is more than five percent (5%) of the original Purchase Price, either party may terminate this Agreement by delivery of a written termination notice to Seller on or before fifteen (15) days after such notification. If either party timely terminates this Agreement, all Deposits (less third-party costs) paid shall be refunded to Buyer and all rights and obligations of the parties under this Agreement shall expire, except for those that survive the termination

[EdNorton]

You can agree to the increases or walk away since price increase is more than the stated 5%. Sounds fair.

[SevenBridgesRoad]

Found this in a quick google search:
"What is a pre drywall orientation?
Your pre-drywall meeting is just what you think—the meeting before all of your drywall goes in. You'll be walking through the house at its framed stage—complete with wall studs, roof, electrical, and plumbing. You'll have plenty to do and look during this stage, so here's what you can do to prepare!"

[PotashDoggerd]

Hi,

I have booked a property in FL state and contract was signed in Nov 2021 with a closing date of June-Aug 2022. The construction has been delayed for a long time. In last 3-4 months, the builder contacted for sharing color choices and readiness about financing. Last update was the closing to be done in Feb 2023. I now receive an email to increase the prices by 13% citing economic conditions.

I would like to seek some guidance on what can I do here? Looks like builder is taking advantage as the property prices are still higher than when I booked and there was a considerable delay at his end.

How much in actual dollars is the increase? How badly do you still want the house? I second the suggestion to speak with an experienced real estate law/construction law attorney who is licensed in Florida before taking any actions or making any further decisions, and to do it quickly given the timeframe.

[nag007]

Sorry, I should have mentioned. The increase is in the range of 13%. I am willing to take this house as per the contract signed and not at the increased price. Backing off also mean that I am losing the appreciation value by waiting for over a year.

[Tamarind]

Looks like a fair clause to me. Folks have posted others here that did not promise a return of deposit.

If the house is not worth 13% more to you, you can walk away clear and contract with someone else, without losing your deposit. The question is, can you find someone else to build you a home who willing to contract today for a lower price?

Supply chain issues and labor shortages persist, and I just spent 2 years on a waiting list for an architect. The builder also needs protection against building at a loss.

You should, however, ask for copies of the invoices being used to support the increase.

[eagleeyes]

Many things have changed over the last year. Many vendors and subs have been blaming the pandemic and supply chain issues for increased costs and are likely passing these on to the builder. (This may or may not be true. It’s more likely that they see an opportunity for greater profits and are cashing in). There is so much building going that subs will walk off a job if it’s too small, there is a delay in getting materials, or if the owner is being overly fastidious

I would pay the extra 13% and be ecstatic.

[Steelersfan]

The contract seems clear to me. Ether you pay the higher price or you walk away.
You may not like the contract language, but that's what you signed and agreed to.

[smitcat]

Sorry, I should have mentioned. The increase is in the range of 13%. I am willing to take this house as per the contract signed and not at the increased price. Backing off also mean that I am losing the appreciation value by waiting for over a year.

I would suggest you start shopping for a different home right now, you are not going to get this one at the contract signing date price.

[billaster]

Backing off also mean that I am losing the appreciation value by waiting for over a year.

Presumably some portion of that appreciation in value is the increase in materials and labor that you don't want to pay for.

It's sounds like you would be getting what you paid for. The question is whether that price is now beyond your budget.

[RubyTuesday]

Were you notified before drywall installation?

If not, seems like you should discuss with your lawyer to enforce the contract.

If so, seems like you can: accept, walk, or try to negotiate a smaller increase.

In any event it’s likely prudent to consult an attorney.

[thedaybeforetoday]

Backing off also mean that I am losing the appreciation value by waiting for over a year.

What is the percentage of appreciation you are referencing?

[TheRealBadger]

Just make sure it will still appraise.

[galawdawg]

Were you notified before drywall installation?

If not, seems like you should discuss with your lawyer to enforce the contract.

If so, seems like you can: accept, walk, or try to negotiate a smaller increase.

In any event it’s likely prudent to consult an attorney.

Agree. That recommendation reflects my (cursory) reading of the provision of the contract provided by the OP.

[urban]

OP, you could try to negotiate with the builder the % increase (unless he already has another potential buyer).

[momvesting]

In my area, prices have dropped in this time frame. If it was me, I would walk. See if the builder chases you. If he does, then you can negotiate down. If not, go find a more fairly priced house.

[safari]

The key question to answer is whether you were notified about the price increase before the drywall orientation. If the closing is scheduled for next month, it sounds like the house is almost ready.

[thedaybeforetoday]

Question on this topic:
If the price of the home depreciated, would it be expected the builder drop the price just before closing?
Or is it standard practice if the new home depreciated, the owner would send the builder a note stating that the new closing price is lower?

[EdNorton]

Question on this topic:
If the price of the home depreciated, would it be expected the builder drop the price just before closing?
Or is it standard practice if the new home depreciated, the owner would send the builder a note stating that the new closing price is lower?

If the contract addresses that issue, then yes. Did the OP have attorney look over contact before signing? OP seems to think he/she is getting screwed, I say he/she should have expected this, not unusual at all.