New home builders in some are requiring that you sell your current residence or they’ll cancel your contract. Tell me more.
I heard about this from one particular builder, OK, but I wanted to bring it up because I don’t know if this is something with our. You know, supply and demand issue that we’re having in our market, that we’re going to start seeing this. So this particular builder was Dear Horton and D.R. Horton does have an express division. They also have you know, they do a lot of building throughout our metroplex.
So I have heard it was from D.R. Horton. So I don’t know the price range if that matters or anything like that, but. Someone who had this was the the situation, so a buyer put a contract to build a D.R. Horton home contingent upon the sale of their primary residence, and they received a letter from D.R. Horton stating that, you know, because of the demand that we’re seeing in the area, we are now requiring that the home be sold. And you supply us with the closing statement prior to us being able to close. And if you don’t do that within a period of time, then we have the right to terminate your contract.
And No. So this had nothing to do with the individual’s qualification for the initial loan? No, and that’s interesting. So what they’re trying to do. Right, because sometimes it comes down to ratios and you can’t afford two homes. And I definitely understand that how a person in most cases can qualify for one home simultaneously.
So that that makes sense. But requiring the person to sell it when it’s already disclosed and known in advance is surely a sign of a super hot market or a fact that they get more of a premium from the loan when they have certain things that are done or they have a higher fall out rate and they’re just looking for the best possible ones with the highest close rates for them right now.
D.r. Horton, you know, it’s pretty well-known that they don’t allow investors to come in and purchase homes in their communities. They just don’t do that. And I’m sure it’s tied into their lending that they can’t have a certain percentage of rentals, that it probably comes down to something lending related. But in this particular case, the buyer came back in and had a way to close without selling their home. OK, so they said, no worries, I don’t have to sell my home. I’m qualified to purchase without it. And D.R. Horton still said, no, you must sell the home and supply us with that closing statement or you can’t close.
So I was thinking, you know, I understand about the investment part that they don’t want a lot of investors in. And anybody can just say, oh, no, I’m not going to do that and keep their primary residence and say that they’re going to keep their investments going to do nails to me, kind of like that, what it is. Well, it did to me, too. And but it’s in their contract. So when you’re doing not just a D.R. Horton home, but this is just another thing to check if you have a client purchasing a new construction.
Ask those questions, especially if it’s contingent, say, does it matter if they have to sell it and show you anything or confirm anything or you know, I heard another story yesterday that someone wanted to keep their home as a rental and they were going to truly move into the new home that they were building, but they were going to use their what is now their primary residence as a rental. And that was declined.
They were like, no. And it just seems, wow, how can they do that? But you know what? If you sign a legally binding contract and you don’t read that fine print, you’re bound to it. I mean, it is what it is now.
To me, that seems like something that the salesperson should bring up. Right.
That’s like very responsible, the salesperson or if they have representation from a realtor. You need to bring them up as their represent as their representative. To check, right, you always want to ask these questions and check, because that could fall on us as well, right? The thing we don’t want to do is start practicing law here. So there’s a fine line to where you should say, you know, if your clients are. Is this legal? Can they do that? You know what? I don’t know that for sure.
But you need to probably just get the advice of an attorney, right. So please don’t be practicing law out there. You guys know enough to guide them to ask the right questions. But, you know, if it gets a little hairy there and you don’t know the answer, you need to seek legal legal help.
Ok, so on on this here it there’s a lot that goes into this. Hmm. And, you know, one thing that’s extremely important to everybody and you talk about it all the time is read the contract. Right. Especially the new competition that they throw in things all the time. Let’s have a little bit of a conversation here. Right. You’re an agent. That’s your job. So read the builder contract and understand what it says and highlight things.
Don’t just go with the blanks that are filled in like that. Super easy. What you take, I don’t know. I have no idea how long these contracts are. Take 15 minutes and actually read it for you again. So because I’m leaning in because I’m like, what the heck? How about we just read it? That was for emphasis, you know?
You know, we know one thing with the new builder contracts is the appraisal. Right. No matter what, at a price for you, sign here and you’re on the hook regardless of what it appraisals for. So a lot of times the builders, especially now, are sending the contracts out to your client, DocuSign. So what I always do is ask them to copy me and send it to me first. And once I review it, then it can go to them. But you never want them signing something prior to everybody putting their eyes on it and looking at it and just double checking it, because, gosh, there’s a lot there’s a lot to it.
There sure is. Read the contract at the bill and that’s it.
Ladies and gentlemen, that’ll be a wrap, we have covered three topics, we left one open for manyana. It’s a good one and we’ll have it tomorrow. And that was a little bit of a tease. So we did cover fire suppression systems, all of those things and how it relates to residential construction. We saw some of them breaking, especially because they were in the ceiling, in the attic, and it wasn’t insulated. So the ones that did very well had foam insulation, spray foam insulation above them.
And they didn’t freeze and then they didn’t burst. So maybe think about that. And especially if they’re in areas where they are not conditioned space, meaning an attic. Right. So that was topic one. Then we covered topic number two lender requirements with inspection before closing.
My personal suggestion is anyone that is a listing agent that currently has any listings, especially if their contract today, anybody that has one, please get an inspection to inspect 150 bucks. That’s my recommendation to everybody and make sure that it’s completed. Yeah, absolutely right. Yeah. And then topic number three, new home builders requiring to sell your home the builder contract. Please do it. We’ll leave that other topic open.
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