Buyers rarely win lawsuits over developer price cuts
Several buyers in new housing tracts have sued the builder because the developer cut prices. So far, none of the lawsuits have been successful.
Q. I purchased a home in a new housing tract in January of last year for $224,950. In the summer, when sales got bad, the developer cut the price of its identical homes to $199,950 - which basically took away $25,000 of my equity because no one would want to buy my house now when they could get a brand-new home that looks just like mine for a lot less money. Can I sue the builder for the loss in my property's value?
A. You can sue, but you probably will not win. A handful of such cases have been filed before in states across the U.S., and the outcome has always been the same: Judges have ruled that builders are free to raise or lower their prices and are not financially liable if their decisions impact the values of the entire neighborhood.
Such court decisions may seem unfair, but they really are not. If the courts were willing to make developers give back some of their money to buyers who purchased a house and the value of their property subsequently dropped, then builders also could sue for a slice of the profit if the buyers later resold the home for more than they paid for it.
Investing in real estate - whether it's to purchase a home of your own or to buy a rental property - does not guarantee a surefire profit, especially in these difficult financial times.
Q. Have you ever heard of a place called Pigtown in New York?
A. Sure. It's part of the old Flatbush area of Brooklyn, named for the pigs that were once raised there and the stench that came from a long-closed dump.
About 100 years ago, a man named Charles Hercules Ebbets secretly started buying up adjacent parcels in Pigtown to build a new stadium for his fledgling (and my personally beloved) baseball team, the Dodgers. Construction of Ebbets Field began in 1912, and the team played there until moving to Los Angeles in 1957.
The old stadium was torn down in 1960 and is now the site of several high-rise apartment buildings.
Q. I am 62 years old and recently married a man who is 60. Both of us have grown children from previous marriages. I read your booklet about living trusts and found it very helpful, so I called my estate planner and he said that we should consider a "qualified terminable interest property trust." Is this the same thing as the basic living trust that you wrote about before?
A. Close, but not quite.
A basic living trust typically involves spouses who want their own children or other heirs to inherit their property quickly rather than suffering through the long and costly probate process that could take months or years for a judge to solve.
A qualified terminable interest property trust - commonly called a Q Tip - is often used by remarried spouses who want to take financial care of each other while they're both alive but ensure that their property goes to their respective children after one of them dies.
To illustrate, say that you purchased a rental property in the time between the divorce of your first husband and the marriage to your second. If you pass away before your new spouse does, the law in most states would automatically award the property to him - and then to his own grown children (not yours) after he dies, too.
If you instead form a Q Tip, you could specify that your spouse would receive all the income from the rental after you die but that the property would go to your children from the previous marriage when your current husband passes away later.
In addition to remarried homeowners, Q Tips are also commonly used by those with a family-owned business who want to ensure that their firm or company will pass directly to their grown children rather than forcing a court battle between one side of the remarried couple's offspring and the other's.
• For a copy of the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City CA, 90231-2960.
© 2009, Cowles Syndicate Inc.