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The Rebound Indiana: Zionsville man loses job, then dream home and $30K deposit

Building industry explains why builders keep deposits
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Posted at 6:00 AM, May 22, 2020
and last updated 2020-05-22 07:57:40-04

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ZIONSVILLE — A Zionsville father lost his dream home and his $32,400 deposit after also losing his job during the COVID-19 pandemic.

Timothy Staten contacted Call 6 Investigates after seeing RTV6’s Rebound Indiana Virtual Town Hall with the Neighborhood Christian Legal Clinic and discussed topics ranging from stimulus checks to evictions and foreclosures, as well as unemployment.

Staten is a financial analyst who is used to dealing with numbers.

“I’m out of $32,400 in deposit,” Staten said.

In fall 2019, Staten signed a contract with Fischer Homes to build his family’s dream home in Zionsville.

"I've been working for years to build up that money," Staten said. “It’s a large part of our savings.”

But then, in February, Staten lost his job after 20 years in the industry.

"I'm not sure if it was related to COVID-19,” Staten said. “The company said it was a restructuring. I’ve never had anything like this happen so it came as quite a shock to me.”

Staten said because of COVID-19 and the economic downturn, he was unemployed for awhile.

He did find a job in Georgia, but Staten said it’s half the pay he was making, which means the Staten's can’t afford their new Zionsville home and they have to move out of state.

"We are just devastated that we can't move into our dream home that we thought we were going to be living in for a long time," Staten said.

Fischer Homes will not refund the $32,400 deposit.

"We don't know where to turn, we don't know what to do," Staten said.

The Builders Association of Greater Indianapolis CEO Steve Lains explained there’s a reason builders keep the deposits.

"That deposit goes toward that builder working with that customer on the selections of the colors, materials in that house, securing the permits, paying the impact fees, and engineering fees to get that project started," Lains said.

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Lains said the market is up 18 percent for the year, and permits are up 5 percent comparing April 2019 to April 2020.

“We think the impact will be felt later on the year,” Lains said. “There’s a lot of things in the pipeline being worked on so we think the demand is going to start to dwindle off as some impact of COVID will impact us later in the year.”

Lains said it’s not simple for a builder to sell a custom home.

"Now they're trying to sell somebody else's house as opposed to selling a house that they think the market wants," Lains said.

Fischer Homes points out the Staten’s home includes custom tile, flooring and cabinetry.

The builder provided the following statement to RTV6:

“This customer signed a contract to build a new home in October of 2019. The home was completed in March of 2020 and is now valued close to $700,000. This amount includes over $185,000 in custom design options – such as tile, flooring, and cabinetry, which were specifically selected by the customer last fall. We are, of course, sympathetic to the customer's situation, which is why we have suggested a resolution of retaining only the deposit, which is well below what the customer contractually agreed to pay. We are not pursuing other obligations from the contract like the actual loss we may suffer on the sale of the home, per diem fees for delaying the home purchase (already over $2,500), and payment of 10% of the final sales price (almost $70,000). The total amount Fischer Homes is retaining is less than 5% of the value of the home. The customer has been given the option to use this amount as a credit in the next six months on a future home purchase either in Indianapolis or in another market in which we build."

Timothy Staten said Fischer Homes did give him a six-month credit to use toward the purchase of another home in any of their markets including Indianapolis and Atlanta, Georgia.

However, Staten said it would be tough to afford after losing income.

What you can do if you find yourself stuck with a purchase you can no longer afford

  • Ask for the project to be delayed, if possible
  • Request a grace period or credit
  • Before you buy, evaluate your job stability and economy
  • Read the fine print on any contract

Consumer law attorney Duran Keller of Keller Law said home building contracts have few, if any, outs for consumers.

"I think it's important for all consumers to read their contracts and understand exactly what it is that they're entering into because situations may pop up you didn't account for,” Keller said. “These things are always one sided in favor of the people who write them up. And that's never consumers."

Keller is the chair of the National Association of Consumer Advocates, Indiana Chapter.

“The culprit here appears to be the pandemic,” Keller said. “In contract law, we have something called mitigation of damages. If this builder can sell this home to somebody else for the exact same amount, it would appear the consumer could get their money back and everyone could walk away unscathed—but I don’t know that is a reasonable situation with a custom home.”

Staten said he did read the contract.

“I was in good faith planning to buy the home exactly as we contracted to do," Staten said

But he feels builders should make exceptions in light of COVID-19 and the economic downturn.

"I just think they really ought to consider the environment that we're in today," Staten said

Full statement from Fischer Homes
"This customer signed a contract to build a new home in October of 2019. The home was completed in March of 2020 and is now valued close to $700,000. This amount includes over $185,000 in custom design options – such as tile, flooring, and cabinetry, which were specifically selected by the customer last fall. We are, of course, sympathetic to the customer's situation, which is why we have suggested a resolution of retaining only the deposit, which is well below what the customer contractually agreed to pay. We are not pursuing other obligations from the contract like the actual loss we may suffer on the sale of the home, per diem fees for delaying the home purchase (already over $2,500), and payment of 10% of the final sales price (almost $70,000). The total amount Fischer Homes is retaining is less than 5% of the value of the home. The customer has been given the option to use this amount as a credit in the next six months on a future home purchase either in Indianapolis or in another market in which we build."

Additional information from Fischer Homes
Since the customer has not closed on the home as originally scheduled, Fischer Homes has been paying for costs and fees on the property which include:

  • Cost of purchasing and developing the home-site
  • Cost of lending to finance the construction of the home
  • Cost of labor and materials to construct the home
  • Property taxes
  • HOA fees
  • Utilities, including heating and cooling
  • Lawn and cleaning services

Selling the home may also require Fischer Homes to pay a 3% Realtor fee, which is how the majority of our sales occur. This would consume most of the deposit mentioned above, in addition to additional efforts from the sales team.

Fischer Homes may also incur losses from new buyers who may have different taste preferences from the custom selections made from this customer. So there is a risk for us in addition to the real costs we are facing and already absorbing above.

Tips from the Attorney General's Office

Retain an attorney before signing any documents

Check for certificate of occupancy

  • Has your local municipality signed-off on your house?
  • The City Inspector's office can help you find records

Hire your own inspector

  • While the builder will schedule a final “walk-throughs” with you, it is important to invest the money in hiring your own home inspector
  • Find an inspector that has a good reputation and who will conduct a thorough inspection
  • Any offer or contract should be contingent upon (or subject to) a whole-house inspection with a satisfactory report. Get a right-to-inspect in your initial purchase agreement

Building codes

  • Research your area’s building codes and certificate of occupancy requirements (remember, some municipalities do not require an inspection prior to move in)
  • Most new homes must also receive a certificate of occupancy. Request to see your certificate. You can also find the certificate at the city inspector’s office

Pre-settlement walk-through

  • Consider having your inspector accompany you on twice-monthly walk-through of the home during the construction phase
  • Be wary of any construction agreement that does not allow you on the premises prior to completion
  • The walk-through is usually conducted just prior to finalizing your home purchase with the builder. This is a time when you have the opportunity to closely scrutinize the home. You should be observant, carefully examining all surfaces, fixtures, floors and walls for possible damage.
  • During this walk-through, you should write down a checklist of all the items that need repair before you move in
  • Do not agree to close until all items on the checklist have been corrected unless you are willing to do them yourself. Keep a copy of the checklist for yourself.

Warranties and Repairs

  • Many builders schedule two visits during the first year you occupy your home. One is near the beginning and the other near the end to make necessary adjustments and to perform work of a non-emergency nature
  • This process is designed to let the newly constructed home settle into its new environment, allowing flaws to appear which can be fixed at one time, such as cracked tiles, grout or nail-pops in the drywall
  • Most builders will also have warranty service procedures to follow. Request these procedures so that you know how you should interact with the company
  • Familiarize yourself with your warranty. Builders are not required to fix problems if the warranty has expired; however, some items, such as appliances, may be covered under manufacturers' warranties and relief may be found through the manufacturer

What to do if a defect occurs

  • Contact the company and follow-up your conversation with a written letter outlining what needs addressed
  • Include your name, address, home and work telephone numbers
  • Type your letter if possible
  • Keep it brief and point out all relevant details

State exactly what you want done and how soon you expect the problem to be resolved. Be reasonable and pleasant.

  • Include all documents relevant to the problem. Send copies and keep originals

If an impasse occurs, you have some options:

  • Pursue legal proceedings
  • Contact the local homebuilder’s association
  • Contact the Better Business Bureau
  • Contact the Indiana Attorney General’s Office