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When should you release a buyer from a new-home contract?

On Behalf of | Jul 11, 2022 | Contract Disputes

Your buyers came to you because they loved the blueprints in a home design that you were offering. You agreed to the terms of your contract along with some of the changes that your buyers wanted to see in the property.

The purchase contract is done, and you’ve been working hard on the property. That being said, with slowdowns caused by a weaker workforce, delays from people not showing up to work and the rising costs associated with building, you’re finding it hard to get the work done on schedule.

The buyers are frustrated, you’re frustrated, and everyone wants to figure out a good solution. Is now the right time to release them from your contract?

There are times when a builder can back out legally

In your contract with the buyer, there will be terms that both parties are expected to follow. You may include sections that state that you’re not liable for delays that are no fault of your own or that the contract may be cancelled if certain permits aren’t approved.

It’s generally unacceptable to cancel a contract just because costs have increased. If your contract allows you to charge more to the client because of raised prices, then you may be able to ask them to make up the difference and cancel the sale if they cannot, but if your contract doesn’t include this terminology, you may not be able to ask for more. You may still be required to complete the project at the stated price.

If you’re running into high costs and other problems, you can still talk to your buyer and express that the build will take longer than expected. You can ask if they would exit the contract and offer to refund their earnest money. In many cases, buyers will refuse to do so, because it’s not always a good deal for them if they walk away. On the other hand, some people may be tired of waiting for the build to get done, especially if it has taken longer than the time period agreed upon in the contract, and be willing to walk away with a refund in hand.

This is a complex situation and one you may want to have legal support for. Contract violations, breaches of contract and conflicts could lead to legal trouble if they are not handled correctly.