Are deposits non-refundable?

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1sttimebuyer_IHB

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I think I remember a post a while back about builders not being able to double sell a home - so the buyer would get deposit back when the house is sold.

Others have told me that you get deposit back after builders' costs to remarket the property - could be $0 at the end of the day.

And still others have answered with the ubiquitous, "It depends."

Any lawyers or experts out there with a definitive answer?

Thanks in advance for your replies.
 
What did your contract say? Was your purchase contingent upon (e.g. the sale of your own home)? How many days were passing from the tender of your deposit to your decision to back out of the purchase? How and when was the seller notified of this decision to "back out?"
 
The builder can keep up to 3% of the purchase price for damages. Drop in property value fits the definition of damages. I have not seen a builder keeping any deposit money in the past (based on 5 known cancellations) because builders were able to resell at same price. Now, the landscape has changed where the builders are dropping prices, it is possible that some of the deposit can be kept.
 
Who is the builder? If they are big they will give it back because it costs them more in attorney fees if they get sued. Make sure you talk to the sales director for that division of the builder and not the sales agent. Just think of all the deposits they have kept because of people who didn't ask or didn't ask the right person.
 
HBs are required to mitigage their damages, not by assumption of a drop in property value, but by actual realized loss. They are required by best efforts to remarket the property and if similar models are reselling at the same or higher price, they could be held for further liability if the subject property is somehow sold for less. Are they transacting on bad faith? The courts loathe windfalls to the seller, especially if it is a corporate entity (big guys versus little guys).

Also, a lis pendens can tie up a property, so HBs might just go ahead and release the deposit. Sometimes, the HBs would be willing to sit down and renegotiate the price with the buyer to avoid the cancellation and any lawsuit. If you are contemplating the proposed new terms, you should consult a lawyer, not a realtor, to determine how your rights.
 
I do not feel bad for the builder when it comes to the real buyer cancellation and return of the whole deposit.

I do feel unfairness for the builders when flippers tie up properties and close only when there are sizeable profits. Investors walk and demand all deposit back when there are no profits to flip. So unfair.

I think this is the reason why builders hold on to the deposit to discourage flippers.
 
We have built many new homes since the early 90's and our stats report that, on average, each home needs to be sold twice before a deal closes. That's at least one cancellation per lot and we have always returned a deposit back to the buyer. The exception is when strategy was changed and we began charging buyers for options (cash & non-refundable contract).

No HB wants to be faced with a lawsuit (even big public ones) so use it as your leverage.
 
raymond,

Buyer remorse is just a fact of life. I would like to know how much do sales agent for new home do to keep the buyer comitted in a down or flat market?. I thought having the buyers pay 25% upfront for upgrades is a great tool.
 
ramond,

I could not help but LOL about the car. Unbelievable!

I know someone who is in escrow for a unit at the hi-rise Irvine Plaza. This buyer just does not want to to move in the home at all. This buyer felt that she has to close escrow because there is no other choice. The buyer had to put down 15% and the contract said the 15% deposit is non-refundable if cancel for any reason. Do you know how this builder treat cancellations? Escrow is to be closed sometime in June. Thank you.
 
Wow now they are requiring a 15% deposit and I thought it was ridiculous when they required 10%. This was mentioned by someone here before and I don't think they ever came back to follow up with what they ended up doing. I wish I could offer some advice but my knowledge on this is with a public company builder and Opus is private. I would think about getting an attorney if they are serious because that deposit is excessive in my opinion. When I heard that they required a 10% deposit it made me think that they might be having a cash flow problem and now that it is 15% they must be having a cash flow problem. I don't think this company would go bk but if they do the buyers who had deposits with them are last on the list of creditors and will most likely never see that money again.

NIR - I wish you luck on this one and please let us know what the buyer decides to do and what happens to the deposit. I personally think this company shot themselves in their own foot when they allowed over 60% of the buyers at Marquee as investors. Those are the people who told the truth and said they were not going to live there so the number is probably a lot higher. Thinking that this was real demand they went ahead with the Plaza and other companies followed with 40 other projects in the Irvine business district. Lenders do not like condo projects that are 60% non-owner occupied.

Here is a quote from the BIA conference:

About 40 high-rise condo projects in the Irvine Business District have "ground to a halt," said Mac O'Donnell, CEO of the Irvine brokerage O'Donnell/Atkins.

Not a good sign and it raises the red flag for a cash flow problem.
 
graphrix - I am surprised that 8000 and 5000 Plaza are just about amost sold out. I had been in the Penthouse and that felt like I am in some kind of industrial building- It did not feel "luxurious", perhaps super duper interior design work would do. I do not know of anyone else who bought there.

Do people really like to live in Hi-rise?

I just sent out in inquiry to this real estate lawyer in Irvine and see if he has handled such case for the Plaza. I will keep you posted.
 
Am I missing something here? Liquidated damages provide for 3% in most sales contracts so how are HBs able to ask for and keep all 15% deposit as non-refundable? It's legally unsupported. Anything more than 3% is construed as a penalty and not enforceable.
 
Thank you all for sharing your insight and experiences.

This is definitely one of the hardest decisions we have ever had to made and are trying our best to evaluate the circumstances absent of emotion.

We appreciate all that you've given us to consider.
 
IIIrvine - This is why I have always been skeptical of this high deposit requirement. This is a major red flag for a cash flow problem especially with a private builder. A high-rise condo builder in Miami went bk during the building process. They collected the same large deposits and the buyers got screwed.

NIR - Do people like the idea of living in a high-rise? Yes many do because you get all kinds of perks for the $1000 a month HOA and awesome views in the right location. I do not know what the Plaza is like but Marquee is really cool. It didn't have that industrial feel you speak of but it was decorated very nicely. It felt like a luxury living in NYC but with views of something other than buildings. I was talking to a friend of mine this weekend married three kids SFR homeowner somewhat optimistic on RE and he thinks they are cool too. Until I told him the price is and what square footage that would get and he said WTF the prices will have to come down. The thing that creeped me out was how empty it was. I mean it was dead and the floor I was on if I knocked on all the doors maybe one or two would be there. This was just this week too. I think it is a good idea but we do not need 40 of them.
 
graphrix,

I showed homes at Marquee and my clients were not impressed. The interior reminded them of low-income housing. The exterior was very industrial with bare views of rock planters! The resale rate was 65%, DOM was over hundred of day. Not a good indicator of desireablility.

I am hoping the Plaza is better. But I will have to see.

We are meeting the attorney in 2 weeks to look at the cancellation option.
 
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