Don't Lie to Your Builder

Roxanne relocated to Florida through her employer. She put earnest money down to build a home, but she believes she may lose her job next January. What are her building contract options at this point?

QUESTION: Roxanne in Sarasota recently relocated to Florida through her employer. She put earnest money down to build a home, but she believes she may lose her job next January. What are her options concerning her contract with the builder at this point?

ANSWER: There are two aspects of this. I don’t know that they’re in competition with each other, but they’re two things worth talking through.

Don’t sign off on the P.O. yet, because I think if you were to tell your mortgage company that there’s a high likelihood you’re going to lose your job, you’re probably going to be turned down for the loan, and I would assume that this deal is contingent upon financing. If you tell your mortgage company you’re about to lose your job, then they would turn you down for a mortgage—unless they’re stupid. Then when you’re turned down for the mortgage, you were unable to get the financing and the deal falls apart. For that reason, your earnest money would be refunded. That would be legal and moral and truthful. You haven’t lied to anyone. When you signed up for this thing, you thought it was all okay; then you found out later it wasn’t.

Let’s pretend you got laid off today. It’s the same thing. You haven’t done anything wrong. You haven’t misled the builder. You didn’t know this was coming. So far, the good news is the builder isn’t out anything. We’re not costing him any money. He doesn’t want to do a deal that the whole time he’s building, you don’t think this is going to work. I think I would sit down with everyone in person and call a little meeting and just have a truth time. Tell them the truth and say, “I’m about to get turned down for this mortgage because I didn’t see this coming. I’m very sorry, but I didn’t know this was happening. We can do this the hard way, or we can do this the easy way. The easy way is you can all just accept my word on this, and we’ll cancel the deal, and you can cut my earnest money check back out of your escrow account, Mr. Real Estate Agent. The hard way is that I’ll get the turn-down letter from the mortgage company, and then I will force you to do that.”

I think it’s unwise for you to enter into owning a home. If your mortgage company were to do regular underwriting and contact your employer, one of the old-time questions was, “What is the probability of continued employment?” The truthful answer is maximum of 50/50. That should get you turned down for a mortgage.

Morally, have you kept your word? Yes. Legally, do you have an out with this contingency on the financing? Yes. Your downside is if you get approved for this stupid mortgage anyway, you bought a house or you lost your $13,700 if they want to hold your feet to the fire. You need to arrange it in such a way that this causes you to be turned down for the mortgage. I’m not trying to cause you to lie, because that’s the truth. I’m not going to participate in misleading somebody just to get you out of a deal you don’t want to be in because you’re not comfortable. That’s not the discussion you and I are having. If the discussion is legitimately we’re not sure you’re going to be able to pay the stinking bill, your lender ought to know that. Based on that, if your lender has two brain cells, they’re going to turn you down. If you’re going to buy anything, you need to go through with this deal because you’re getting approved for a mortgage to buy something else. They don’t make duplex loans based on proven history. They make duplex loans based on your employment being stable. You don’t have stable employment. If you get out of this deal, you are a renter until your employment stabilizes—or you’ve done an immoral thing by lying to your builder.