New construction home buyer gets buyer’s remorse and wants to buy a different home.

Q: I signed a contract two months ago for a newly-built house with a leading builder. The home will take about four months to build. The builder has not applied for the permit and has not done any of the ground work on the home.

The builder told me that until I pay him about $9,000 in earnest money and all the money for the upgrades I ordered, he will not apply for a building permit and will not start building the home.

But when we negotiated the terms of our deal, he agreed that I would pay him for the upgrades in four installments over a period of two months. So far I have paid him most of the earnest money and most of the money for the options.

We found another house which we like more. Can we cancel the contract and get my money back? In the contract (obviously it has tons of papers), I believe it states that if we default, the builder will not refund any money. What should we do?

A: It seems that you have new home buyer’s remorse and are now looking for a way to get out of the deal you entered into with the builder.

Frequently, builder contracts contain provisions that deal with the payment of funds from the buyer to the builder over time. In some situations, a buyer will pay a builder a small sum of money when the contract is entered into, then more money when the building permit is obtained, more money when the foundation is poured, then another installment when the house is framed with a final payment at closing when the home is finished and an occupancy permit has been issued.

There are many variations of the method that builders use to get money from their buyers. Builders will generally not want to proceed to the next step of the building process in building a new home unless their buyer has complete steps that are outlined in the purchase and sale agreement.

While you didn’t say so, it may be that your purchase agreement states that the builder will give you time to make payments on the contract, but the builder won’t have to commence construction on the home until those payments are made. If that’s the case, the builder has done nothing wrong under the contract and any delay in the closing date may come from the timing of your payments.

You’ll probably see a provision in the contract that states that the builder is allowed to delay the closing date to accommodate those payments and other delays caused by weather.

Some purchase agreements go so far as indicating a target date for closing but setting a firmer closing date when the builder actually obtains the building permit and commences construction on the home.

If you decide to not buy this home, you’ll have to negotiate a termination of the contract with the builder. You may need to be prepared for the reality that you will lose all the money you gave the builder unless the contract provides otherwise or the real estate laws in your state give you other protections. If you walk away from the deal, the builder will claim that you are in breach of contract or in default and try to keep all the earnest money you have deposited on the contract.

It would be at this point that you would be wise to talk to a real estate attorney and discuss your options. After listening to your attorney, you may decide to continue with this purchase, move in and ultimately enjoy living in your new home.

One last word of advice, when you buy a new construction home, you need to make sure who you are dealing with. Once you give money to the builder, that money may be at risk of loss if the builder goes out of business or files for bankruptcy. In the ideal world, you’d want your money held by an escrow company or other entity that would hold your money until closing in a segregated account that could not be touched by third parties.

Please speak to a real estate attorney immediately to understand your legal options.