LIBERTY TOWNSHIP, Ohio — Home buyers by now are well aware of therising prices and brutal competition in the existing home market.
As a result, some home buyers are considering hiring a builder and having a home built instead. Due to soaring costs, though, that may not be a more affordable option.
Jason Reeves looked out over a lot of dirt and weeds that is supposed to become his family's dream home in Liberty Township, Ohio.
"The contract was finalized on March 25th," Reeves said
But just as the first bulldozer arrived to start work a month later, his builder, Frazier Homes, had some bad news.
"They asked us for $75,000 more to build our house," Reeves said.
He had thought their price was locked in. But the surprise meant that Reeves and his wife would have to come up with another $75,000 in this neighborhood of $600,000 homes.
Lumber prices void earlier price agreements
The builder said that the primary reason for the price increase was soaring lumber prices, which have nearly doubled this year. But Reeves said his bank won't extend his loan that much.
"We would have to start all over again," he said.
This is happening to more and more families this year who are having a home built, with the price of lumber adding another $36,000 to the price of the average new home, according to the National Association of Home Builders. You agree upon a price, sign a contract, work begins, but then the builder says he is going to need a lot more money.
For the Reeves family, though, since they can't meet the builder's price, they are now canceling the deal. And to make matters worse, the builder wants to keep $17,000 of their $40,000 deposit.
Edward Aiken, an attorney for Frazier Homes, said, "$12,000 is for architectural plans -- which the Reeves get to keep and shop around -- and $5,000 is for non-refundable administrative costs as outlined in the contract."
The Reeves have now hired a lawyer of their own to plan their next steps.
Caution for home buyers
But this is a caution to anyone building a home right now: be prepared for price increases, possibly significant price increases.
"My wife is heartbroken," Reeves said. "I am taking it a little better than she is, but for her it is just a nightmare."
They worry they may have to start the home-building process all over again.
Unfortunately, for buyers, most contracts now allow builders to raise the price if supply costs keep increasing. So if you're signing a contract with a builder, make sure you know if it is a locked-in price, or if it can escalate with the price of materials.
That way you don't waste your money.
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