Can a Builder Cancel Your Home Purchase for Not Using Their Lender?
Buying a home is already a complicated, and often emotional, journey. But imagine that you find your dream spot in a planned senior community, lock in a purchase agreement, and prepare for the next chapter. Then, just two days after opting to use your own lender, the builder cancels the deal. Something about a possible “misalignment” in loan preferences?
That’s actually exactly what happened to one Georgia homebuyer. We’ll explain what went down, and how you can protect yourself from the same situation.
The Real Issue: Builder vs. Buyer Lending Preferences
Here’s the deal: builders often have “preferred lenders”. These lenders are basically just the financial institutions builders partner with to make the process smoother (and, sometimes, more profitable). But legally, they cannot require buyers to use these lenders. According to federal Real Estate Settlement Procedures Act (RESPA) guidelines, steering consumers toward a particular lender and then penalizing them for choosing their own is a big violation.
Builders can offer incentives for using their lender (think closing cost reductions or design upgrades), but they can't retaliate when you opt out. So if your purchase agreement is suddenly voided after choosing your own lender, especially an FHA-approved one, it’s fair to ask whether the builder is crossing a line.
Is It Legal for a Builder to Cancel the Sale?
There’s actually a bit of a gray area here. The thing is, most new home contracts include broad cancellation clauses. The language used in these clauses does allow the builder to back out of the deal for a range of reasons, including rising construction costs, limited inventory, or even vague things like an “inability to perform.”
In today’s market, where materials like lumber have skyrocketed in price, builders are operating on thinner margins. Some may try to offload less profitable lots or renegotiate contracts when market conditions shift, even after a buyer is under contract.
So while canceling a contract in response to your choice of lender feels retaliatory, it’s often not framed that way on paper. Legally, the builder might point to a clause you agreed to (even if you didn’t realize it at the time) that gives them the right to cancel.
What Can Buyers Do About It?
Unfortunately, if the builder has a legal “out” in your contract, there may be limited recourse. That said, you’re not completely powerless. Here are a few steps to take:
- Review your contract carefully. Look for cancellation clauses and any references to lender requirements or preferred partners.
- Contact your real estate agent immediately. A seasoned realtor can help identify possible violations or red flags.
- Consult a real estate attorney. If you suspect the cancellation was unjustified or retaliatory, legal counsel can determine whether you have a valid claim.
- Report questionable practices. If you believe a builder is violating lending laws, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) or Georgia’s Department of Banking and Finance.
Buyers in Georgia, especially those targeting new developments or planned communities, should be aware that builders are running businesses first. Their decision making may hinge more on profit projections than personal relationships. And with construction costs fluctuating weekly, some may cancel a deal simply because it's no longer financially appealing.
Don’t Let the Fine Print Surprise You
It’s easy to get swept up in the excitement of buying a new home, especially in niche communities like senior housing developments. Contracts matter though, and if the fine print gives builders an easy exit, even your best intentions won’t protect you from a last minute cancellation.
Wondering if this could happen to you? Ask yourself whether you carefully reviewed every clause in your new home contract, and if your realtor is experienced in new construction deals and local builder practices.
Buying a home should be about building a future, not battling bureaucracy. Take the time to understand your rights, question unusual requests, and never feel pressured into a lender you don’t trust.