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If you've been considering a purchasing a new construction home in Plainfield or Naperville it probably never even crossed your mind to use a Realtor, but using a Plainfield or Naperville Realtor to represent you will not only save you thousands of dollars, they will protect your best interest and work on your behalf.

When you buy a house from a builder and work with the sales agents in the office to write your contract, it's important to keep in mind that they are not representing you in the transaction.  They are working for the builder and their obligation is to the builder.

This Spring I had the privilege of representing Wendy and Darrell Pratt on their new home purchase in the Regency Oaks subdivision by Kimball Hill Homes in Bartlett.  They had considered several areas and types of homes before their search finally brought them to Regency Oaks.  As they finalized their decision to build their new home in the subdivision, I contacted the builder for their requirements for beginning construction.  One of the requirements was 5% earnest money to be held by the builder until the house was completed. I had also noticed there were extreme incentives being offered by the builder to have buyers close by March 14th for all newly constructed inventory homes... hmmm.  The 14th of the month seemed like such a strange day of the month to close by.  I started to feel like something wasn't quite right, so I decided to do a little cyber-sluething.

With the news of so many local builders filing for bankruptcy over the last few months I had my reasons to be concerned about having my clients lay down such a large amount of cash to be held in earnest by the builder.

A quick Google search confirmed my suspicions about an impending bankruptcy. 

My concern for my clients was that if they began the process of building with Kimball Hill Homes and the builder then filed for a Chapter 13 or Chapter 7 debt elimination, that my clients earnest money would be at lost and their home would never be completed. 

My point is that if Wendy and Darrell had walked into the sales office with the intent to purchase and build a home and write the contract with out buyers representation, they would never have been informed by the sales team of the very real possibility of a bankruptcy or that their earnest money could potentially be at stake. 

I questioned the sales office about the implications of a potential bankruptcy and they assured me that any bankruptcy would most likely be a Chapter 11 debt repayment plan, but I need more definitive answer than "most likely".  They needed to close these transactions prior the March 15th deadline for securing their debts to their investors in an attempt to avoid that situation. I even tried to amend the contract so that my office could hold the earnest money in escrow as a means to protect it, but Kimball Hill Homes would not allow for any modifications to any of their contracts.

Kimball Hill Homes was able to meet the March 15th deadline, but the extension expired on April 10th and the builder ultimately ended up filing for a Chapter 11 repayment plan on April 23rd. 

Well, all is well that ends well.  Wendy and Darrell still really loved the location and the neighborhood so they decided to take the builder up on their extreme incentives and purchase a beautiful brand new inventory home.  We closed on their new house on March 14th, 2008.

Going into it, no one knew how it was going to play out.  It was my job as their Realtor to inform them of the risk involved in the transaction, and it was then up to them to decide whether or not the risk fell within their comfort zone. 

Ultimately because the model that they wanted was available as an inventory home the Pratt's were still able to get the house that they wanted without suffering any of the risk! 

You need to work with a Realtor that is always one step ahead of the game in a market like this.  We didn't have to worry about things like this when the real estate market was booming 5 years ago, but unfortunately these issues are still part of the aftermath of the housing bubble. 

If you have questions about new home builders in the area or about using a Realtor for a new construction purchases, I'd be happy to answer them for you.  If you are one of the many buyers that has been affected by a recent builder bankruptcy, please leave a comment and tell us about it.