Question: One year ago we signed a homebuilder’s contract to build a $1.2 million Peoria home for us. This home is now built, but the homebuilder’s sales representative refuses to talk to us about a close of escrow date. This home has appreciated in value to $1.6 million, and we think that this homebuilder is trying to sell our home to another buyer for a profit of $400,000. How can we prevent the sale of our home by the homebuilder to another buyer for $1.6 million?
Answer: Most new home contracts used by homebuilders prohibit any lawsuit and require arbitration before an arbitrator, not a judge, of any disputes between the homebuilder and the buyer. Therefore, you should consult an attorney to see if you can nevertheless file a lawsuit for specific performance of the new home contract. This lawsuit for specific performance would then allow you to simultaneously record with the County Recorder’s office a Lis Pendens (Latin for “pending litigation”) to prevent the sale of your new Peoria home to another buyer. At the very least, however, you should be able to immediately record a simple one-page memorandum of agreement between you and the homebuilder. The reason is that at the time that you signed the homebuilder’s contract, you became the equitable owner of both the lot and the new home that was subsequently built on the lot. The recording of this memorandum of agreement should prevent the sale of the new home to another buyer.
Note: Under the AAR Purchase Contract for resale homes, however, a buyer is allowed to file a lawsuit against the seller for specific performance of the AAR Purchase Contract and to record a Lis Pendens. The seller and the buyer must then go to mediation before proceeding with the lawsuit.