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Home builders cancel buyers' contracts right before closing — then sell on open market for more

Hanna James contracted a year ago for a new house, but in January a week before closing the builder tore up her contract and has since increased the price 25%.

FAIRBURN, Ga. — A public school teacher in metro Atlanta said Wednesday that she learned a tough lesson and has a word of warning to people, like her, who are trying to buy a house in this sellers’ market.

Her house builder bailed on her a week before closing and tore up her contract in order to put the house on the open market for tens of thousands of dollars more.

And, she found out, it was perfectly legal.

Hanna James signed the contract with the contractor in February 2021, for $295,000, to build a brand new house, in a brand new south Fulton County subdivision, just off of South Fulton Parkway and Highway 92.

The home was supposed to be ready for her to move in by September 2021.

She visited the construction site often, watched her new home take shape, took photos of every stage of the build and paid nearly $5,000 for various additional optional upgrades.

Completion of the home was delayed repeatedly. But she was scheduled to close in January 2022.

One week before the closing, her agent told her the buyer, Heatherland Homes of Atlanta, was suddenly backing out of the contract and raising the price by tens of thousands of dollars.

“The message from my agent at that particular time was that the builder had decided to terminate all existing contracts,” James said Wednesday, “and he was increasing the price of the home, and if we wanted to move forward we had to enter into a new contract with the new price of the home.”

The new asking price then, she said, was $355,000, which she could not afford. And now, online, the price is posted at $370,000, 25% higher than James’ original contracted price of $295,000 from a year ago.

“I was hurt, a little bit of disbelief,” she said, and she understands that the builder was within his legal rights to do what he did.

She added, “But I think ethically, no, he’s dead wrong.”

James did receive a refund of her earnest money, $3,500.

But two months after the builder canceled her contract, she still has not received a refund for the nearly $5,000 she paid last year for the upgrades.

“To wait a week before closing to tell someone that you’re going to increase the price of the home I think is ethically not--that’s just not right.”

And, she said, until she gets her total reimbursement, she can’t begin to look for another house to buy. James is living with relatives after having moved out of her apartment last year, anticipating that her new home would be ready by the fall.

The person who answered the phone listed on Heatherland Homes' webpage on Wednesday told 11Alive she did not work for Heatherland and did not know how to reach anyone with the company.

Hanna James saw, online, other people posting similar complaints about Heatherland canceling their customers' contracts at the last minute in order to find new customers willing and able to pay much more.

A response online, from someone claiming to speak for the company, wrote that the company has no choice but to cancel contracts that, over the course of the construction period, end up too low in price to cover the rising costs of building materials.

“Prices are just going crazy” in every facet of the housing industry, said Atlanta Realtor Kevin Maxberry of Maxberry and Associates.

Small to medium-sized house-building firms, Maxberry said, are more likely than larger companies to have difficulties paying for expensive materials and holding down cost-overruns; he said they don't have the extra cushion to absorb the spikes in costs. 

“And there’s very little that a buyer can do,” Maxberry said, “because all builder contracts are what are called 'unilateral contracts.' They’re written to protect the builder, that they have many ways out of the contract. It’s unethical and unfortunate for the buyer to have to experience something like that.”

James said that since January she has been unable to reach anyone with the company. She was able to get the Better Business Bureau to intervene, and the latest she heard is that the builder is now promising BBB to FedEx her refund to her.

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