over charged for construction what can I do?

[Dan F.]

I will give you the history so you understand whats going on. I signed a contract with a Dealer and my contract states cash price includes delivery and installation to buyers lot. Then below that my construction budget is itemized and setup or installation is not in that bid. From the beginning I was told the home price includes set + delivery.

My finance company authorized an additional 10,000 for the deal after the appraisal came back. At this point I told the dealer add 10,000 to the home so I can get this exta money. We signed a new contract withe same language in it. He added 7,000 to the home in options, such interior door upgrade, stretch the home, 4ton A/C, and French patio doors and 4/12 roof. Then I explained put the rest in construction because a couple down the street had some problems with PG&E and had to spend $4000 on a transformer, and the sewer and water may be further than we thought, in other words some just in case money. Now that we are in the construction Phase PG&E and the sewer water situation are fine and the additional money is not needed. I should add that the contractor showed me his bid so I know for a fact the money is not needed. I also, have the bill from PGE. (I also have the wholsale price list for options I used this for negotiating the price on the home Anyway back to the subject).

I phone the Dealer and ask for a credit either now or at closing since the power was so cheap. We will only draw exactly what we need. I said what does that mean? They explain just send us the bill and we will use the extra money for other things ( Yeah the setup that was suposedly incuded in the price of the home!). Then they say the bid from the contractor is actually a couple thousand more than you are paying, (Keep in mind we padded the construction $3000 from their original quote.) I then said no this is surplus so you need to give me a credit. . I then said well the contractors bid should be more because he bid setup and I am not paying for that, it is in the price of the home. They then repeated the draw line. I repeated myself and then was told a manager would call me. Well its the end of the day and no call.

I hope this isn't written i n a confusing way, let me know if you need more info. the bottom line is the dealer is trying to recoup the cost of setup by over charging me for construction. what do I do?

[rmurray]

I think I follow...Most dealers DO add profit on all items sold (just like any business)..including site prep if they aquire the contractor...They know..if that fellow (who showed you his bill) does bad work..the dealer is going to be held responsible..and will have to pay for corrections....I do not think that a small mark up is unusual...Just look at the posts here about set up problems..a good dealer will cover this in his pricing so he can afford future issues

Often folks bring their own contractors...when this happens, we insist there be a couple of thousand in cushion in the deal..since we will not get funded until the work is done...if the customer supplied contractor fails..the work still has to be done...if all goes well we credit the deal and sometimes the consumer gets a refund...other times lenders do not allow cash refunds..so we offer priciple reductions or other goods beyond the contract...but this is all detailed in the contract...

I wish you the best of luck...Maybe your conversation with the management will go fine..

[Dan F.]

thanks for the info Murray,
A small mark up would be expected but were talking $6000.00. when you divide that into what I am paying it comes to 18% of what I am paying. I spoke with the manager this afternoon and they said the sales person used the wrong terms. The manger said could be used other things and the install is in the price of the home., For ex. If wanted the garage larger or decking. I guess I will wait and see what really happens. If do not ask for any upgrades then I should expect some money back at the close correct? Wouldn't the contractor have to come back and fix a mistake himself? I thought thats why they are lisenced and bonded so you have some recourse if they scew up? Its just hard to trust people when you have this kind of money involved.

[rmurray]

18% is not a large mark up....Most retail store you deal with mark up items about 50%....

Seems like he is saying that cash refund is not possible...Many lenders only allow small consumer refunds at the close...Often these refunds are limited to $ 1500 or less..an other over payment is paid back to the lender in the form of a priciple reduction on your loan...This does not change you payment...but does lower you payoff and the amount of interest you pay each month...thus..there will be less total payments over time..

You asked "Wouldn't the contractor have to come back and fix a mistake himself? "...Well yes...IN A PERFECT WORLD...We all know this does not happen...plus..with mechanic liens in most states...he gets paid..even if the work is started and then refused by you...Then another contractor must be paid to do the job...This just happened to us...a consumer suppied block underpinning contractor did a horrible job...The only fix was to remove and replace...The original contactor placed a lien on the property...To close the loan..we had to pay the original contractor and the replacement contractor...We were out $4000..Now the home owner did have recourse to go after him in court...but they got their home and loan...why would they pay court fees to do so????..They will not...we lose and go on to the next deal..Happens much more often that you might think..We had another recent example of this...a homeowner contracted well driller estimated the job at $3500....When he completed the job..after the construction loan was closed..he demanded $6500..placed a lien and got his money..out of ours..Dealers face this risk every time they deliver a home..They usually price them selves with these possible thought in mind...

By the way...you should understand mechanics liens...Most states allow contractors to attach your property up to 6 months after the work is done if they were not paid...EVEN if you paid the dealer for the service..(if the dealer did not pay the contractor..you get to pay for the service again)...Smart landowners will get a lien release from EVERY contractor that does work on you home..prior to the final close..or as they get money...Protect yourself..

Anyway...Good Luck