Builder filed wrong amount for custom home

I closed on a home earlier this year in Chicago. The builder submitted incorrect total cost due to an error they made in their calculations. The amount is over $50,000. A month later the builder is asking to settle the amount. While I acknowledge that this is an error, the problem is that the interest rates have now gone up and I would have to refinance and also incur closing costs to pay them the 50K. I have told the builder that I cannot be penalized for their mistake. I have told them that they would have to bear the costs of the refinance and points required to lower the rate. The builder insists on being paid in full and not agreeing to the above offer. What are my options and legally am I at risk?

Asked on October 6, 2017 under Real Estate Law, Illinois

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

What do you mean by "submitted the incorrect total cost"? At the end of the day, you are responsible for paying the amount on the contract you signed--no more and no less--unless and only if you clearly knew that amount was wrong and was simply a "typo" (i.e. at the time you signed the contract, you were aware, or had all the information necessary to be aware, that the amount listed on the contract was an error). Leaving aside that situation where the contract contained an obvious mistake (e.g. you bought a house with a base price of $600k, but asked for a $50k upgrade package--you knew then that the price should have been $650k, but they accidentally wrote $600k on the contract), you are, as stated, responsible for the contract amount.
 
So if the contract said a certain amount and you had no reason to know it was incorrect, that is the amount you have to pay. Even if the builder "should" have charged you more, if they low-balled themselves, that is their responsibility, not yours: they have to absorb the difference
 
On the other hand, if the contract price was for $X but for some reason, the data that got to the bank/lender was for $X - $50k, then since you are still liable for the remaining $50k of the purchase price, you have to see to paying it. In theory, if you could show that the reason the financing was low was 100% the builder's cost (i.e. you did not have a chance to review and catch the mistake, but failed to do so), they should pay the closing, etc. costs for you, and you could sue them for that money if they do not. In practice, the cost of suing, if they refuse to pay, could--in terms of money and your lost time--equal or exceed the additional costs; it may not be worthwhile to take legal action.
 


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