Pulte buyers in escrow must sign addendum for reduced prices

Jennifer Shubinski

Wednesday, Nov. 3, 2004 | 11:18 a.m.

When Pulte Homes offered its customers pending the close of their houses the opportunity to buy them at lower prices, there was a catch.

That catch was an agreement that buyers sign an occupancy addendum that restricts the ability of buyers from reselling the home within a 12-month time period.

Blaming a slowdown in demand and an over-aggressive pricing strategy, Pulte Homes at the end of September reduced prices at its Las Vegas Del Webb and Pulte Homes communities from $25,000 to $170,000.

The homebuilder offered all buyers still in escrow -- those who had not yet completed the purchase of their home -- the reduced prices if they signed the addendum.

Sheryl Palmer, Nevada area president of Pulte Homes, said the company is asking all customers, not just some, to sign the addendum.

She said the vast majority of buyers agreed to sign the contract.

"It's been very well received," Palmer said. "If you're a homeowner that intends to occupy the home, it protects the integrity of your neighborhood."

Pulte Homes is not the first to add occupancy addendums to home contracts. A handful of homebuilders throughout the Las Vegas Valley have added the forms in an attempt to curb investor purchases and in what many said was a move to protect true homeowners.

But attempting to restrict investor sales has another purpose -- it reduces the competition within that builder's own communities.

Southern Californian Anita Jain, along with her sister and brother-in-law, entered into a contract in May to purchase a 2,700-square-foot home from Pulte in the Summerlin neighborhood of Escala for $674,000.

Jain said she was always upfront that the home would be used as a second home or as a rental property.

Jain said they settled on a Pulte Home because it was the only builder she could find at the time that did not require buyers to sign an occupancy addendum.

"I did make it clear to them from the beginning that we were not going with anybody else," she said. "I talked to the Pulte person today (Tuesday) and he said if we want the lower price we have to sign the addendum. They were very inflexible about it."

Jain said the price if she signed the addendum would be $480,000 to $500,000. If they break the contract, they will lose their $20,378 deposit, she said.

Jain said Pulte Homes should give people the price break without changing important portions of the contract.

Palmer, however, said not everybody is honest about their intentions for the home purchase, which is why the company has started using the occupancy addendum. Palmer was not commenting on Jain.

If someone does sell a home before the 12-month waiting period has expired, Pulte Homes has the right of first refusal, meaning the contract allows it to buy the house for the original purchase price, or it could collect any profit from the sale. Other builders' have reported that their addendums have similar language.

There are exceptions for extreme circumstances, such as death and job transfer, Palmer said.