Buying a newly built home
can be a challenge. Labor and material
shortages demand for housing and
COVID-19 all play a role.
Several home buyers tell the KVUE
defenders they've dealt with.
Construction delays, price hikes,
even cancelled contracts.
They blamed the builders,
but builders say they're using contract
clauses to protect themselves.
Here's investigative reporter Jenny Lee.
More than 11,000 homes have been permitted
and are under construction so far this year.
Experts say the Austin metro area
is adding newly built homes to the
market at a faster pace than bigger
cities like Dallas and Houston,
but the new home construction boom
hasn't benefited all home buyers.
These two say the process has been painful,
putting them behind without protection.
This home was our dream home.
It was so right.
I cried the day we signed that contract.
Jasmine Giovanni became emotional.
When she bought her perfect home,
the home is beautiful that beautiful
home was set to be built on this lot
in the Seven Oaks community in West
Austin in November of last year,
Zavatti signed a contract with
trees custom home for $1.2 million.
We knew that this home. This design
was the home that we wanted,
but two months later Giovanni discovered
just how much that dream would cost
her emotionally and financially.
Between January of this year
until the end of March,
Giovanni says the builder hit her
with several price. Increases one
$40,000 additional two I wanna
say was like 90 to 100,000.
Three was an adjustment
140,000 for increase in lumber and
other building materials and slab and
the 4th increase was also an
adjustment from $140,000 to
$192,000. Their reason was
that the base price of the home
had gone up, which boggles my mind.
Javadi wanted to know how the base.
Price of her home shot up in 10 days.
She asked for an in person meeting
and after 40 minutes of that
meeting her contract cancelled.
I was crying like I'm gonna cry
now because this is something
that you work towards right?
In Leander wind chimes ring in the breeze
outside this new home, I'm going to
press that, you'll notice
that you won't hear anything.
A few feet away, no sounds coming
from Stephanie Hamilton's doorbell
after waiting 15 months to move in.
The mother of six is still
dealing with the host of issues
that's called water. Here's hot water.
Like no hot water in her bathtub,
her bedroom door doesn't
lock Hamilton's house.
Problem started even before moving in a
couple of weeks before closing in March.
She says milestone community
builders asked for an extra $33,500.
The new total more than $660,000.
If she didn't pay,
Hamilton would have lost her
earnest money with her home.
I remember breaking down that day.
I was like, you know what?
We're just going to be out 20 grand.
They're going to have it.
They're going to be able to sell
my home that I've invested in.
And they're going to be able
to send it for hundreds of
thousands of dollars more,
and it's all at my cost.
It was very frustrating.
On top of that, Hamilton says
milestone wouldn't provide an
itemized list of what costs went
up. Your buyers question
was a fair one, right?
We reached out to Drees custom homes and
milestone community builders for a response.
Both sent statements Drees and
Milestone pointed to an unprecedented
demand along with supply chain issues,
which has resulted in
unforeseen material shortages,
labor scarcity and cost volatility
milestone added rather than
outright cancelled the contract.
Like some of our competitors,
we wanted her to enjoy the equity
already accrued on her home.
Both turned down are requests for interviews,
so the KB defenders went to the Home Builders
Association of Greater Austin for answers.
Scott Turner is the president.
We've got a housing problem,
Turner says home buyers must realize
what's happening in the Austin area.
He says builders can't build
homes fast enough at the
same time, demand keeps skyrocketing it.
We asked Turner about getting itemized
list of when costs go up, he says,
while it's reasonable to ask.
Builders for them, and
that's also not in their contract, right?
For for those obvious reasons,
they can't provide that level
of detail to every buyer,
even if the builder was not
willing to provide, you know,
like here's the receipt,
at least the builder should
have a dialogue about where
those costs went right.
As for those price increases,
Turner says that's why it's
important to read and understand
the contract before you sign,
especially now when more builders
are using escalation clauses. So
if a cost that goes into the home goes up.
Then the escalation clause says, hey,
I have the right under my contract
to pass that cost on to the buyers.
This is a general example of an
escalation clause in a contract.
It states in the event that
there is a price increase in
these construction materials,
the excess charges will be
passed through the owner,
resulting in an increase in the total
contract price as we saw in Javadi's case,
builders are also turning
to termination clauses.
A termination or cancellation clause
allows one or both parties to terminate.
The contract before it expires,
as long as specific terms can be met.
Instead
of tying up this property that I
own and I'm building for you in a
in a lawsuit or or or a dispute of
any sort, we can just walk away.
The pandemic material and labor shortages,
increasing demand for housing,
low inventory of homes are some
of the factors behind issues like
extended delays and escalating prices.
Turner says builders don't have
control over those factors,
but he recognizes some in his industry.
May be taking advantage of
Austin's hot housing market.
Ohh it would not surprise me that
that's happening because like I said
the pressures are enormous and and
time is housing and time is money.
His advice. Talk to people in the
community where you want to live to
learn more about the builder and hire
an attorney to review your contract.
We were naive, we didn't
know any better. Hamilton
says she likely won't buy new
construction again after her experience.
It's just too much of a heartache
javadi's now selling that plot
of land and deciding what to do.
Next, for the Cav defenders
was an awful lesson to learn.
I'm Jenny Lee.
Jenny, thanks Turner also addressed
cost plus contracts where he
says there's not much incentive
for builders to control costs.
You can read more about
this story at cavium.com.