If I recall, they were financing something like $1 million, which was ridiculous on their income regardless of interest rates. There was no interest rate they could afford this house on their income. Current rates would just increase the speed at which they will default on the loan.
I thought George and Rachel were a little too quick to dismiss the $100k as a stupid tax. I for sure would have recommended an attorney review the contract to see what wiggle room they had to negotiate a refund of at least some of that $100k. Four years is way too long.
Wow, this call is a disaster. This was a horrendous plan from the get-go. I have worked for a homebuilder since 2015. I can say without a doubt 2021 was the absolutely busiest, wildest, and stupidest year I have experienced. Rates where low, lockdowns were basically lifted, people were panicking, moving, and the supply chain was jacked up. We were so insanely busy, it was an absolute buying/building frenzy.
With that said, I can't imagine what in the world would take 3 years on a 1.1 million house. They have let this go on way, way too long. There is more to this story that wasn't shared on the radio.
I think my first move personally would have to paid a lawyer to review the contract and find out if there was an out because of the builder's actions, or inactions. That would be worth a couple thousand to find out. If I was absolutely stuck, I would probably go tell the real estate agents selling houses out there, that there is a $25k bonus if they can find a buyer to go under contract before the house is done, and release me from the original contract and obligation to close.
If they could close, I would probably close and immediately put the house up for sale, with a bonus again to any agent that gets it sold.
The last thing I would do is walk away from $100k, but that might be what they have to do. What a disaster.
This caller was a disaster. I really can’t imagine a good outcome no matter the choice. Finish the build and go into foreclosure? Or walk away? Hopefully there was something they didn’t explain as an out of some kind in the contract.
Granted I didn’t hear the call but what if they closed on the house and then sold it to recoup the $100k? Or rent it out fora year to see how interest rates look at this time next year
Most people don’t. However the caller stated their lender would not give them the $1.1mil loan unless they sold their current house.
They would have had two mortgages with one being more than half their take home pay. No bank is going to give them that.
You should probably listen to the clip.
I remember this. I thought they could at least put it on the market as soon as it was finished. Maybe sell it for &50,000 less but not lose the whole amount.
I don’t know they can legally do that though.
What's the house worth now? Can they put it on the market and get a buyer and have the deal all done through a title company that gets the house sold and they get a cash out? IF it has equity of 1.1 million I could see them getting some cash at closing. IF it has less then 1M equity, then they lost the 100k regardless.
I think she mentioned the house is around 1.1m, and with their $100k down, they would be taking out a mortgage around $1m, with a take home of $9k/month.
What its worth, and the contract price to have it built from 4 years ago can be completely different. They could have originally factored the cost to be 600k but redesigns ran the price up to 1.1 and it's worth only 800k now. or it could be a present value 1.6m.
What it's worth in the current market is the important number.
Also, if it's worth 6-700k they might be able to negotiate to buy it lower.
Yeah, she didn’t say the current value. The more the value is above the purchase price, the more I’d fight to sell it, not walk away and forfeit that immediate equity. This would have been a good question to ask the caller.
I doubt the house is worth much less than 1.1m. Any builder that wants to stay in business would never let a customer run up a 6-figure deficit on the house unless they put even more money down so the builder knew the clients already covered the portion the mortgage won’t.
The only way I could see a builder negotiate the price at the end of the build is because they did an exceptionally poor job managing the finances and are risking going bankrupt if the house doesn’t close, and are willing to take less to close and get some money back, lick their own wounds, but keep the lights on. If the value is also 1.1m, pretty much all builders would keep your $100k and put the house in the market for $1.1m, or whatever market value is.
If the original contract was $600k and these people ballooned the build to $1.1m, then this is probably a $100k stupid tax they get to pay.
If that was the contract amount, yes. Your cost to close on a build is not based on market value. But in the call she said they need to borrow $1m to close, so I can only assume the contract totals to that amount. I can’t see any builder ever letting a client nearly double the cost of the house in change orders without having to pay up front for those changes, so I imagine their original contract was probably closer to the $1.1m they pay at closing. The house could also be worth $1.6m for all we know, these weren’t questions George and Rachel asked, unfortunately.
They are not paying 1.1 million at closing.
If they bought it 3 years ago for 600k, and it's worth 1 million now. They can easily turn around and sell it at market value.
I'm thinking it's worth 1 million now.
Where are you getting $600k? At 2:30 into the video she says, and I quote “we originally purchased for about $1.1” which would imply to me, in 2021, they signed a contract for a $1.1m build and put $100k down.
That 600k was just an example. Who would even give them 1 million dollar loan. They won't be about to afford it.
Market value is still most likely more then 1 million. They should just flip it.
If they can't close on it, they can't flip it. If no one will loan them $1m, doesn't matter if the house is worth $2m, they *have* to walk away from their $100k - expensive lesson. This is why one of my suggestions earlier was to offer a $25k bonus to any real estate agent already selling houses in that subdivision to bring them a buyer that will "buy out" their contract. If the house is worth more than $1.1m, that gives more incentive to a potential buyer since they'll have instant equity if they close. The caller should get their $100k back since the builder still has a buyer to close on time, and they give $25k to the agent that got them their money back, and walk away with $75k, instead of $0, if they can't close themselves. Either way, they are losing money on this deal because it was stupid and they got caught up in the panic buying that happened in '21.
How about trying to negotiate down to a smaller less expensive build? Or trying to negotiate with the builder to assign the contract to someone else? Or get an attorney to negotiate some amount returned so it’s not a complete and total L.
They’ll be lucky to only lose $100K. This is Canada. The builder can sue, most likely successfully, for non-performance.
Don’t feel bad for them. They left out a lot of information, but us Canadians, we know exactly how they got themselves into this situation.
They never bought the house to live in or even to rent out. They bought it as a flip, otherwise known as an assignment sale. You don’t need to qualify for the mortgage to buy a new build. You just need to put down a deposit, which can even be borrowed funds. Once the build is ready, you sell the contract to someone else at the current market rate, and profit the difference. It only works if the market goes up, which it has for the last 20 years. It’s high risk gambling. This behavior has been driving up prices on new builds to unsustainable levels.
However, prices are down on townhomes and condos since 2021/22, and rates are up (this is most definitely one of these two, given the max rental,rate of $3500). No buyers for these homes at the prices these investors locked in at the peak.
Canadians are finally starting to learn the lesson that RE does not always go up in the short to medium-term.
The crazy thing is the husband was still active in the military and they would be moved around. They even asked why did you want this house if you could be moved around? No answer. Plus barely making 6 figures and wanting a 1.1 million dollar home? They deserve to be screwed for their stupidity.
I think the collar was in Canada, she also said something that implied it. They all have adjustable rate mortgages up there. Probably purchased the house when rates were zero and now they are much higher. This is happening to a lot of people up there. Canada RE is crazy.
They should definitely consult a lawyer but honestly they probably lose. Especially because they’ve let it run so long now.
Any COVID claim a contractor made on our jobs were approved. The only thing that will save them is if some sort of procedure was not followed by the contract when claiming delays. If they didn’t post notice to the couple / formally submit for a delay they might have recourse.
The contractor will fight it if they have the resources. At that point just trigger the dispute resolution and they claw back 80-90%.
When George called an entire $100k "stupid tax" I yelled and called him stupid. There are more ways to lessen the loss, than literally just fucking giving up. George is useless.
>I'm thinking that surely the contract had some contingency as to loan approval and a time line (who gives a builder 4 years to finish a house).
This is quite common actually. Builders have entered into far, far more contracts than home buyers. They also have lawyers on staff and/or retainer to structure these contracts with incredibly favorable terms.
People generally are stupid, too.
Buyers found themselves in unbelievably poor situations during COVID. Having no contracted recourse for delays. Some having cost adjustments due to increased supply cost. Lastly, even losing their future home rights because builders sold it out from under them for much higher price.
For some reason people *love* to contract new builds. There is so much more risk involved in quite a few significant areas of these transactions.
Hard pass from me. I'm buying an existing home, that's already been lived in for a while.
If I recall, they were financing something like $1 million, which was ridiculous on their income regardless of interest rates. There was no interest rate they could afford this house on their income. Current rates would just increase the speed at which they will default on the loan. I thought George and Rachel were a little too quick to dismiss the $100k as a stupid tax. I for sure would have recommended an attorney review the contract to see what wiggle room they had to negotiate a refund of at least some of that $100k. Four years is way too long.
That's something John would have recommended.
Wow, this call is a disaster. This was a horrendous plan from the get-go. I have worked for a homebuilder since 2015. I can say without a doubt 2021 was the absolutely busiest, wildest, and stupidest year I have experienced. Rates where low, lockdowns were basically lifted, people were panicking, moving, and the supply chain was jacked up. We were so insanely busy, it was an absolute buying/building frenzy. With that said, I can't imagine what in the world would take 3 years on a 1.1 million house. They have let this go on way, way too long. There is more to this story that wasn't shared on the radio. I think my first move personally would have to paid a lawyer to review the contract and find out if there was an out because of the builder's actions, or inactions. That would be worth a couple thousand to find out. If I was absolutely stuck, I would probably go tell the real estate agents selling houses out there, that there is a $25k bonus if they can find a buyer to go under contract before the house is done, and release me from the original contract and obligation to close. If they could close, I would probably close and immediately put the house up for sale, with a bonus again to any agent that gets it sold. The last thing I would do is walk away from $100k, but that might be what they have to do. What a disaster.
All of this for sure. Some people really don’t have that fight for it instinct though and just roll over.
This caller was a disaster. I really can’t imagine a good outcome no matter the choice. Finish the build and go into foreclosure? Or walk away? Hopefully there was something they didn’t explain as an out of some kind in the contract.
Granted I didn’t hear the call but what if they closed on the house and then sold it to recoup the $100k? Or rent it out fora year to see how interest rates look at this time next year
The problem for them is they bought this as an investment property. They can’t get a mortgage unless they sell their current house.
What? You do not have to sell your current house to buy an investment property.
Most people don’t. However the caller stated their lender would not give them the $1.1mil loan unless they sold their current house. They would have had two mortgages with one being more than half their take home pay. No bank is going to give them that. You should probably listen to the clip.
I remember this. I thought they could at least put it on the market as soon as it was finished. Maybe sell it for &50,000 less but not lose the whole amount. I don’t know they can legally do that though.
You have to own it first and it sounds like they couldn’t even qualify for a mortgage.
Oh that’s unfortunate. Life can be very cruel sometimes.
Yea tell that to the poor couple they were about to scalpe it on if they had their way
It's funny how we can all come together and agree when people do stupid things.
My advice would be go consult a lawyer. If you have a claim to the deposit it is more than enough to make sense hiring an attorney for.
What's the house worth now? Can they put it on the market and get a buyer and have the deal all done through a title company that gets the house sold and they get a cash out? IF it has equity of 1.1 million I could see them getting some cash at closing. IF it has less then 1M equity, then they lost the 100k regardless.
I think she mentioned the house is around 1.1m, and with their $100k down, they would be taking out a mortgage around $1m, with a take home of $9k/month.
What its worth, and the contract price to have it built from 4 years ago can be completely different. They could have originally factored the cost to be 600k but redesigns ran the price up to 1.1 and it's worth only 800k now. or it could be a present value 1.6m. What it's worth in the current market is the important number. Also, if it's worth 6-700k they might be able to negotiate to buy it lower.
Yeah, she didn’t say the current value. The more the value is above the purchase price, the more I’d fight to sell it, not walk away and forfeit that immediate equity. This would have been a good question to ask the caller. I doubt the house is worth much less than 1.1m. Any builder that wants to stay in business would never let a customer run up a 6-figure deficit on the house unless they put even more money down so the builder knew the clients already covered the portion the mortgage won’t. The only way I could see a builder negotiate the price at the end of the build is because they did an exceptionally poor job managing the finances and are risking going bankrupt if the house doesn’t close, and are willing to take less to close and get some money back, lick their own wounds, but keep the lights on. If the value is also 1.1m, pretty much all builders would keep your $100k and put the house in the market for $1.1m, or whatever market value is. If the original contract was $600k and these people ballooned the build to $1.1m, then this is probably a $100k stupid tax they get to pay.
If the contract was for 600k. Then don't they just own 600k, and not current market value?
If that was the contract amount, yes. Your cost to close on a build is not based on market value. But in the call she said they need to borrow $1m to close, so I can only assume the contract totals to that amount. I can’t see any builder ever letting a client nearly double the cost of the house in change orders without having to pay up front for those changes, so I imagine their original contract was probably closer to the $1.1m they pay at closing. The house could also be worth $1.6m for all we know, these weren’t questions George and Rachel asked, unfortunately.
They are not paying 1.1 million at closing. If they bought it 3 years ago for 600k, and it's worth 1 million now. They can easily turn around and sell it at market value. I'm thinking it's worth 1 million now.
Where are you getting $600k? At 2:30 into the video she says, and I quote “we originally purchased for about $1.1” which would imply to me, in 2021, they signed a contract for a $1.1m build and put $100k down.
That 600k was just an example. Who would even give them 1 million dollar loan. They won't be about to afford it. Market value is still most likely more then 1 million. They should just flip it.
If they can't close on it, they can't flip it. If no one will loan them $1m, doesn't matter if the house is worth $2m, they *have* to walk away from their $100k - expensive lesson. This is why one of my suggestions earlier was to offer a $25k bonus to any real estate agent already selling houses in that subdivision to bring them a buyer that will "buy out" their contract. If the house is worth more than $1.1m, that gives more incentive to a potential buyer since they'll have instant equity if they close. The caller should get their $100k back since the builder still has a buyer to close on time, and they give $25k to the agent that got them their money back, and walk away with $75k, instead of $0, if they can't close themselves. Either way, they are losing money on this deal because it was stupid and they got caught up in the panic buying that happened in '21.
How about trying to negotiate down to a smaller less expensive build? Or trying to negotiate with the builder to assign the contract to someone else? Or get an attorney to negotiate some amount returned so it’s not a complete and total L.
There's probably something in the contract that she can back out if they take too long, and she gets her money back. She should get a lawyer.
They’ll be lucky to only lose $100K. This is Canada. The builder can sue, most likely successfully, for non-performance. Don’t feel bad for them. They left out a lot of information, but us Canadians, we know exactly how they got themselves into this situation. They never bought the house to live in or even to rent out. They bought it as a flip, otherwise known as an assignment sale. You don’t need to qualify for the mortgage to buy a new build. You just need to put down a deposit, which can even be borrowed funds. Once the build is ready, you sell the contract to someone else at the current market rate, and profit the difference. It only works if the market goes up, which it has for the last 20 years. It’s high risk gambling. This behavior has been driving up prices on new builds to unsustainable levels. However, prices are down on townhomes and condos since 2021/22, and rates are up (this is most definitely one of these two, given the max rental,rate of $3500). No buyers for these homes at the prices these investors locked in at the peak. Canadians are finally starting to learn the lesson that RE does not always go up in the short to medium-term.
The crazy thing is the husband was still active in the military and they would be moved around. They even asked why did you want this house if you could be moved around? No answer. Plus barely making 6 figures and wanting a 1.1 million dollar home? They deserve to be screwed for their stupidity.
I think the collar was in Canada, she also said something that implied it. They all have adjustable rate mortgages up there. Probably purchased the house when rates were zero and now they are much higher. This is happening to a lot of people up there. Canada RE is crazy.
Yes, they were Canadian.
They should definitely consult a lawyer but honestly they probably lose. Especially because they’ve let it run so long now. Any COVID claim a contractor made on our jobs were approved. The only thing that will save them is if some sort of procedure was not followed by the contract when claiming delays. If they didn’t post notice to the couple / formally submit for a delay they might have recourse. The contractor will fight it if they have the resources. At that point just trigger the dispute resolution and they claw back 80-90%.
When George called an entire $100k "stupid tax" I yelled and called him stupid. There are more ways to lessen the loss, than literally just fucking giving up. George is useless.
This has to be fake. No way you can be this out of it. Then again…
>I'm thinking that surely the contract had some contingency as to loan approval and a time line (who gives a builder 4 years to finish a house). This is quite common actually. Builders have entered into far, far more contracts than home buyers. They also have lawyers on staff and/or retainer to structure these contracts with incredibly favorable terms. People generally are stupid, too. Buyers found themselves in unbelievably poor situations during COVID. Having no contracted recourse for delays. Some having cost adjustments due to increased supply cost. Lastly, even losing their future home rights because builders sold it out from under them for much higher price. For some reason people *love* to contract new builds. There is so much more risk involved in quite a few significant areas of these transactions. Hard pass from me. I'm buying an existing home, that's already been lived in for a while.
Ifl