Central Texas homebuyers are sharing their stories after the leases on their dream home were terminated. KXAN did some research and found that builders can have a cancellation clause in their contracts that allows them to cancel for any reason. Brohn Homes said it's extremely rare to end a contract. The company told KXAN investigators that it always intends to continue building and closing a home for sale.
LEANDER, Texas (KXAN) - Shally Kakkar was thrilled to show her parents around her new home.
During a visit from India five months ago, Kakkar surprised his mother.
"They were so excited," Kakkar said.
The home would be built in the growing Bar W Ranch subdivision. Kakkar loved the tucked away neighborhood on Ronald Reagan Boulevard in Leander. He spent a lot of time planning and designing the 1,933-square-foot, four-bedroom home that would be built by a local home builder, Brohn Homes.
“For me, this house meant being closer to my parents. So I bought this house for her,” Kakkar explained. "One of them is a disabled parent... the (low) plant was good for her. So we wanted them to be closer to us and that we could take care of them.”
But he said his plan for his family was put on hold when Brohn Homes canceled his contract.
"We were kind of surprised and shocked," Kakkar said. "How did it happen?"
Tara Vaughn wondered the same thing. She and her husband were keen to move to the new Manor area.
"I thought, 'You're going to have your little office here. This will be our nursery,'" Vaughn said. "'Let's party here,' like all that was chosen."
It was supposed to be where the couple raised their family, but now it's someone else's home.
"We just sat there and saw it as a bad break," Vaughn said.
Meg Davis said she was surprised too.
Three weeks since closing, DavisBrohn Homes saidcancelledacontractto his home in Cedar Creek. He said he signed it in August 2020 and that it was canceled in March 2021.
"I was there every day," Davis said. "I bought furniture. He had prepared everything: In this house they installed doors for dogs. This house would be the next chapter.”
Ask why their contracts were terminated
The three families revealed to KXAN that they were sent the same "cancellation agreement," which refers to a clause in the contract that allows Brohn Homes to opt out.
The clause reads: "Seller may terminate this Agreement at any time prior to its conclusion for any reason, with or without cause."
- READ: A Brohn Homes contract that includes a termination clause in Section 16
- READ: Notice to Buyer of Terminated Contract
When asked about the reason for the cancellation, she said she was told in a phone call, "I would never be happy with the house and they didn't want to work with me."
Kakkar claims that this was the reason he was given.
"That was the verbal justification they gave us, but there was no reason to cancel the contract," Kakkar said.
Kakkar told himcontractI wascancelledafter calling Brohn Homes and requesting another inspection of the home he was buyinginitial checkIt showed "Damage" around a "Main Drain" and "Replacement Recommended".
Vaughnthey signed the contractthe last summer. She said that in the early stages they emailed the builder saying they wanted to pay for an inspection before they laid the foundation because they were having drainage issues. Less than two months later, in October, Brohn Homesthey canceled the contractduring a phone call.
"You can't fault us for giving notice to our home," Vaughn said, adding that they would have to find another home.
Brohn Homes did not provide specific details about the claims by these buyers or why their contracts were terminated, saying it's important to respect their privacy.
'House prices go up
CorrespondingAustin Board of RealtorsIn the first half of this year alone, average home prices rose by more than $100,000.
Average home prices have increased in the Austin-Round Rock area every year, with an initial increase to over $460,000 in 2020-2021. SOURCE: Austin Board of Realtors
"It's coming up and it's over. It's just fast. Prices are skyrocketing,” said Susan Horton, President of the Austin Board of Realtors. “…about this time last year we had stock in the market that, you know, always had a steady three or four month inventory. We only have two weeks left on the market."
Kakkar signed his contract last summer and said he agreed to a price of $298,790. She explained that she recently learned that the home is on the market for almost $160,000 more than the original purchase price. KXAN confirmed the house later listed in MLS for $458,031.
KXAN also examined homes built for Vaughn and Davis and found that those homes were also listed in the MLS for more than their original price.
“Brohn Homes does not terminate contracts for financial gain. It is extremely rare for Brohn to exercise his right to terminate a contract for reasons other than impending breach of contract by the buyer or lack of adequate and timely financing," said Aaron Boenig, co-president of Brohn Homes, in a Statement by Email Email to KXAN.
Every developer contract is different
The buyer can also terminate the Brohn Homes contract "with or without reason".
"These contracts are written with clauses that give either party the ability to opt out of a contract," Horton said.
Horton added that each builder has their own specific contract. He said it's important that buyers understand what they're signing by reading each contract carefully, asking questions and even trying to negotiate terms where there's a buyout clause. He also recommended working with a real estate agent or attorney.
LosAssociation of Builders in the Greater Austin AreaHe declined to comment on contract cancellations, but said builders who have fixed-price contracts could absorb crippling increases and risk being forced out of the market.
“Locally, we're seeing an average home cost increase of about $40,000.mainly because of the price of wood🇧🇷 Wood prices have skyrocketed by over 180% since last spring. The unprecedented increases have increased the cost of building a new single-family home by more than $36,000 on average nationwide,” said Chad Durham, president of the Greater Austin Home Builders Association.
Durham explained that while real estate continues to drive the country's economic recovery, these sharp increases in costs, which have led to a huge surge in home prices, have pushed hundreds of thousands of homebuyers out of the market.
“The combination of construction supply shortages and rising costs, significant growth in central Texas, an outdated land development law, and delays in the processing of development and building permits means that demand is significantly outstripping supply for residential real estate. . It is truly unfortunate how all of these circumstances are negatively impacting the real estate industry and our community," Durham said.
Reasons for terminating contracts
A company spokesman provided KXAN with a statement on behalf of Aaron Boenig, co-president of Brohn Homes.
The statement said: "Bron Homes does not terminate contracts for financial gain. It is extremely rare for Brohn to exercise his right to enforce a contract for reasons other than a lack of default by the buyer or a failure to secure adequate and timely financing. Our intention is always to keep building and completing the sale of a home. In the last 12 months we have sold over 1,000 homes and approximately 1% of all outstanding homebuyer contracts have been terminated this way.
SCHEDULE: KXAN communications with Brohn Homes
- 4. June:Connected to the Co-President of Brohn Homes for comment
- 16. June:Bronh Homes delivers an opening statement
- 23. June:Bronh Homes provides accompanying explanations
- July 6:Bronh Homes is turning down multiple requests for an on-camera interview for that date
- July 12:KXAN investigators are reaching out to the Brohn Homes office for comment
- 15th of July:KXAN investigators sent Brohn Homes a list of homebuyer complaints
- July 23:Bronh Homes is sending out a new statement responding to the list of complaints
Termination provisions in contracts that can be exercised prior to closing are common in our industry and the buyer and the Company are afforded the same right. Brohn's decision to terminate an outstanding Purchaser Agreement is taken very seriously and comes only after each individual case has been reviewed by a panel of people including Brohn's President and Chief Sales Officer. If we cancel a pending contract, we will refund the pending buyer all of their deposit plus an additional $500. Generally, if the pending buyer cancels, we only retain the deposit and any deposit amounts required to cover the options and upgrades selected solely for that particular build.
We will not name a specific individual speaking to KXAN for this story, but we will share that this collective group of situations is impacted: buyers who commit, or attempt to commit, inappropriate and potentially illegal contract and mortgage fraud, verbal harassment of members of our team, the disruption of construction/production of a home and the threat of lawsuits and lawsuits. Each buyer received communications from Brohn explaining why their contracts were being terminated.
While we respect the views of those who have contacted KXAN regarding this matter, we stand by our decision to terminate the relevant buyers' contracts and wish them well in their home hunting.„
The company provided additional information in that statement, which read: "Brohn may exercise its right to terminate a pending contract for reasons including but not limited to:
- Contract fraud or deception by the buyer
- Verbal harassment of a Brohn team member or business partner
- Physical assault on a Brohn team member or business associate
- Prejudicing, discriminating against, or defaming any Brohn team member or business partner
- Direct contact with a construction official causing a construction pause
- Any interruption in the production of the house by the buyer
- Buyer works on house before closing
- threat of legal proceedings or legal action”
For weeks prior to this statement, KXAN attempted to arrange an on-camera interview via phone and email, but was told Brohn Homes was not interested.
A few weeks ago, investigators from KXAN went to the Brohn Homes headquarters for more answers. Before entering the offices, a man approached KXAN in the lobby. Brohn Homes has not confirmed who he was or what his title was.
KXAN investigator Arezow Doost asked if he was part of the Brohn Homes leadership group. He replied: "All communications would go through Bloom. Nobody here would have anything for you.
The man referred KXAN to the PR group that facilitated communications from Brohn Homes.
"I just want to make sure everything is settled on our end," Doost said. The man replied: "All communications will go through Bloom, who would speak to you."
Real estate buyers contact the public prosecutor's office
Homebuyers surveyed by KXAN researchers said there have never been discussions about price increases due to shortages.
Complaints filed atTexas Attorney Generalconfirms it has received 10 complaints against Brohn Homes in the past year, 7 of them on contractual grounds.
When asked about the status of these allegations by KXAN investigators, the attorney general's office said, "We do not normally discuss pending investigations, whether or not we are actively investigating, but we are aware of Brohn's allegations and are continuing to investigate the matter." . . ”
Boenig also said in his statement, "We are not aware of any active investigations with the Texas Attorney General's Office."
Kakker, Davis and Vaughn shared their letters of complaint to the Attorney General with investigators at KXAN. The three are waiting for a response from the prosecutor.
"We are seeking appropriate compensation ... further aggravated and punishable damages for causing emotional and financial distress," the class action lawsuit reads.
The cost of losing your dream home
All of the families KXAN spoke to whose leases had been canceled said they got their money back and an additional $500 for terminating the lease.
Someone else now lives in the house that Vaughn wanted to buy, and so does Davis.
Vaughn and her husband are now working with another contractor on a new home that will cost them more.
“We are always afraid that this will happen again, that we will be cancelled. We felt a little uncomfortable," Vaughn said.
The delay also meant delaying the starting of his family.
"Let's wait until we're in a house to start with that. So it's probably a year and a half or so, we see a lag and when would we start this family journey," Vaughn said, beginning to get emotional.
Davis bought an old house that he is now renovating.
"I never find the time ... to look for a new home in the middle of a huge housing crisis," Davis said.
Kakkar is still looking for a home for his parents.
"If you have to look for a similar plan in a market like this in Austin, it costs about $150-$200,000 more," Kakkar said. "That's why I don't have a home now. I spend our time and energy figuring out what my next steps are: how I'm going to pay to have my parents around me."
- READ THIS RESEARCH BELOW: "Paid $10 for her death." A Cedar Park family's warning about fentanyl
Senior Investigative Producer and Digital Reporter David Barer,News director Chad Cross,graphic artist Raquel Garza, Director of Research and Innovation Josh Hinkle,Investigative producer and digital reporter Dalton Huey,Photojournalist Chris Nelson, Robert Sims, Digital Special Projects Developer,Digital Director Kate Winkle and Graphic Artist Jeffrey Wright contributed to this report.