Would the Builder Honor Incentives?
If you are persuaded to close a home sale by incentives offered by the builder, including the Punctual Payment Program, take a look at what has happened for buyers from PFP Holdings and their subsidiaries.
A recent motion filed in the case for PFP Holdings/Trend Homes/Classic Communities stated that the builders had been unable to honor incentive commitments to customers who closed on their homes prior to the Jan’08 bankruptcy.
What happened was that the builders’ bank had dishonored a number of checks and declined to make funds available, notwithstanding that many of the closings induced by these incentives had converted the bank’s real estate collateral to cash.
Anyway, there are 2 types of incentives:
- HOA Subsidies: The builders agreed to subsidize the buyers’ HOA dues.
- Punctual Payment Program: The builders, buyers and Rainy Day Holdings entered into an arrangement under which Rainy Day would reimburse the buyer for timely mortgage payments made during the 1st year.
Under the Punctual Payment Program, the purchase price of a home would be negotiated to reflect an increased amount which approximated the first year’s anticipated mortgage payments. Under the Punctual Payment Program the negotiated amount would be returned to the homeowner in specified monthly payments over the first year of home ownership by Rainy Day. All that was required to be presented was a copy of the check to the buyer’s lender evidencing the punctual payment of the home mortgage. The spin on this program was that the first year mortgage payments would be covered (albeit by the buyer’s own funds), but, hence, no risk in closing on a new home.
At each closing, the funds under the Punctual Payment Program were deducted from the buyer’s funds by Chicago Title and provided to the builders, as agent for Rainy Day. Unfortunately, the funds never made it to the hands of Rainy Day. The Punctual Payment Program funds were, and continue to be held by the builders.
At the time this motion was filed, these issues were never resolved and still in a state of limbo.
