On September 27 we closed on our K Hovnanian home located in the Silverwood community at block 6, lot 5,7563 63rd St Circle, Cottage Grove, MN 55016.
When we signed our purchase contract on March 10th we requested a price protection guarantee (see attached) to protect our financial investment in the current unstable housing market. Even though K Hovnanian was no longer offering the price protection guarantee we were granted one in order to secure our business. At the time of our purchase we were given a total of $50,000 in incentives which were as follows: $25,000 for using K Hovnanian's preferred lender, $15,000 for selecting more than $100,000 in options and an additional $10,000 for writing our contract non contingent on the sale of our current home. The base price of the home we purchased was $409,995, we were charged a $15,385.85 lot premium for the location of our lot and then we selected a total of $174,630.00 in options for a total purchase price of $548,170.85 (we chose to use $5,000 of our incentive money towards closing costs, therefore the final purchase price showed as $553,170.85).
On September 14th, K Hovnanian launched their highly touted nationwide sale named the "Deal of the Century" (see attached). When we approached the Silverwood sales staff in regards to the increased incentives and our price protection guarantee we were told that our home site would not have been included in the Deal of the Century offerings as they were now referring to our home site as a premium lot. Since we initially had to pay a lot premium of $15,000 and now were being excluded from the extra $50,000 in incentives due to the location of our lot, essentially we were now paying a $65,000 lot premium as another buyer was able to build a larger home for $100,000 less than us, on a lot located 4 lots away from ours. It was my understanding that this is what the price protection addendum was suppose to protect us from. Our home site is by no means a premium lot, the lot is so narrow that we had to forfeit the original option we chose of extending the width of the garage because it would have extended our home beyond the city codes and even purchased a home with a small footprint, there were many other floor plans including the Silverwood's model home that would have been excluded from being built on our home site due to their larger footprint. This definitely would have limited the number of potential buyers for our home site since most of the homes built in the community are what is modeled, the Gershwin, the home with the largest footprint. The price protection addendum states that "if at the time of closing the purchase price (excluding any home site premium paid for the location of the lot) for the property as listed in the purchase agreement is greater than what the purchase price would be due to incentives that seller is offering at the time of closing, then at closing, seller shall give purchaser a credit against the purchase price equal to the difference" the addendum defines that incentives shall include those offered within the community for similar architectural homes.
The fine print on the Deal of the Century states the offer is only valid if a purchase contract is signed no later than 9/21/07 however the buyers of the home site located at block 3, lot 14 (which was a home site that per the Deal of the Century specifications was suppose to be classified in the $80,000 incentive bracket not the $100,000) did not sign their purchase contract until 9/29/07 and were still given $80,000 in incentives. Then at a later date they were given almost an additional $20,000 in incentives that included no charge upgrades of oil rubbed bronze plumbing fixtures, a movie theater room and an additional $5,000 for changing their purchase contract to non contingent, giving the them close to $100,000 in total incentives. The buyers of this home site are friends of ours that we referred to the community.
Prior to closing on our home, the base price of the model we purchased was lowered to $384,995, $25,000 less than we were charged. When we approached the sales staff again with our price protection guarantee we were told that the preferred lender incentive was now only $10,000 instead of $25,000 and the options incentive was $10,000, so $40,000 total in incentives, the sales staff said there would not be any additional incentives given for writing non contingent which we found out after closing not to be a truthful statement. Once again referring to the buyers, our friends, of block 3, lot 14 who were given additional incentives totaling almost $20,000 for changing their purchase contract to non contingent.
If we did not close on the property as schedule we would have lost our earnest deposit plus we would have lost our deposit given to K Hovnanian's preferred lender to qualify for a builder cap rate. Also, per the purchase price protection addendum, in order to qualify for the protection we had to comply with closing on the purchase property as required by the purchase agreement. Either way we were set up for huge financial loss.
For the new year K Hovnanian has re introduced their supposed guarantee, advertising on their website to potential fearful buyers stating that they guarantee low prices, giving the buyer "peace of mind" and standing behind every home they build by offering an exclusive price protection guarantee. K Hovnanian gave us a guarantee and then used deception to avoid having to follow through with their guarantee. Our real estate agent is our witness of what was stated to us by the Siverwood sales staff, we have access to the purchase agreement signed by another buyer within the community, we have a copy of the Deal of the Century promotion and the reduced base price of the model we purchased and most importantly we have our price protection addendum. Not being given the additional incentives that we should have has cost us a lot of money. With even just another $25,000 in incentives we could have had a conforming mortgage with a lower interest rate rather than a jumbo loan than, we've lost money due to interest we could have earned by keeping more money in savings as a lower purchase price would have required less money to meet the 20% down criteria. Not to mention higher homeowner insurance premiums and higher property taxes.
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