In a heated market developers are only too happy to let buyers out of their contract so that they can raise the price. Now a couple of developers (John Ross and Civic) have decided that they are going to enforce the contracts that buyers entered into. It’s an interesting situation for a couple of reasons. First it is a case contract enforcement versus goodwill. Second there is probably an agency question to be addressed. ***Note that we backed out of a new construction condo/hotel project in Seaside in the spring and got our earnest money back***
In the heat of the moment, buyers lined up (literally) to get a condo reservation. Those contracts became binding and then, in some cases, more earnest money was due and it was reiterated customization additions became nonrefundable (on paper). I heard more than once, “earnest money is nonrefundable but I have never seen this builder go after it” from sales offices. Neither had we. If Buyer wanted out, buyer got out based on Developer’s goodwill. That is no longer the case.
The other issue becomes my long standing debate over dual agency. We firmly believe that dual agency on resale property should be against the law even though we are in the minority of Realtors on the matter. I’ve made the exception for new construction but this and another recent event make me wonder (We had a builder offer the buyer a $10,000 price reduction if they chose not to be represented by us. We have to assume they took it since we never heard from them again).
Builders and developers, more often than not, use their own paperwork for the contract. It is written by their attorneys for their projects. Realtors, including us, are trained on OREF contracts; the standard contract used in real estate. When we come across nonstandard forms, we have to disclose, in writing, that these are not the forms we are familiar with and therefore advise legal advice before entering into a binding contract. We read the contracts but cannot offer legal advice on them.
There is no way of knowing what percentage of the sales in question were buyer agent represented versus sales office represented but I am willing to bet that most did not involve a second agent. Would it have made a difference? Would the buyer’s agent have been any more aware of the potential reality of contract enforcement? More questions to a changing market.