Canberra homebuyers left in lurch after developer backflips on sales three years after deal - ABC News Did not know that Developers can do this? Bit unfortunate for the buyers. Hope WA have the rules to prevent this happening.
This has happened in past for VIC & NSW when the builders realise the land value has soared during the build time. Their contracts only benefits themselves in case they were to do a backflip & even in case the buyer is unable to finance.
It's pretty low when if land prices go down the buyer has to wear it. Need some changes to laws to protect the buyers
Happening all the time now with builders. They realise when the land/house prices have soared since their commencement and realise they can pocket another few million.
These contracts effectively mean the developer gets a put option (strike at contract price) and gets paid for the privilege (buyer's deposit). Great deal. I wonder what the value of such an option would be (eg if you run it through a Black Scholes model) - effectively the developer gets a free option, and a cash deposit. Very lopsided contract.
The deposit stays in the REA or solicitor's trust fund - it isn't released to the developer but the contracts may be used as proof of pre-sales for finance.
