The purchase agreements that the builders have you sign are MUCH more restrictive (is there such a word?) then the standard residential purchase agreement used in a standard resale home.
Indeed the contingency period is VERY short and varies from builder to builder. Also as purchases are filled with emotion many people do not think out numbers very well when they sign the docs. Furthermore they seem to listen but not fully comprehend the loan programs explained to them by the loan officer while the sales lady bobs her head in a hypnotic like fashion telling them that prices will only go up.
BSR floating the rate means the buyers sign the purchase agreement and they have not locked a loan rate for the loan yet. Thus they “float” the rate in escrow until they get within 30 days of closing and then they lock it. Again the overwhelming percentage of buyers of new homes float the rate.
Also when they sign they may indeed have the reserves… everything is fine when you are looking at the models and eating cookies in the sales office. Then as escrow close comes near and people really sit down and look at the budget with the monthly payment, the mello roos, the property taxes… reality hits….thus cancellation…
Remember, these people lining up are not dumb people…They are degreed, they have high paying jobs, they just… well they all have their own reasons for buying. That is okay…If they just all would run the numbers out from the beginning, and then lock a loan, and realize, fully realize what they are getting into, I think most of them would hold off… and those that did will at least buy knowing the real situation. Thus they would have a lower probability of losing the home or deposit down the road.
but many of them dont.
ps – many float the loans also because the lender will charge a little bit more to lock a loan for a long period of time.
SD Realtor
