Central Texas homebuyers are sharing their stories after their dream home contracts were canceled. KXAN investigated and found home builders can have a termination clause in their contracts that allows them to cancel for any reason. Brohn Homes said it is extremely rare to terminate a contract. The company explained to KXAN investigators its intent is always to continue to build and close the sale of a home.
LEANDER, Texas (KXAN) — Shally Kakkar couldn’t wait to show her parents their new home.
During a visit from India five months ago, Kakkar surprised her mom.
“They were so excited,” Kakkar said.
The home was going to be built in the growing Bar W Ranch subdivision. Kakkar loved the neighborhood tucked along Ronald Reagan Boulevard in Leander. She spent time planning and designing the four-bedroom, 1,933-square-foot home, which was going to be built by a local builder, Brohn Homes.
“This home for me meant being closer to my parents. So, I bought this home for them,” Kakkar explained. “One of them is a disabled parent… the (floor) plan was good for them. So, we wanted them to stay closer to us, and so that we can take care of them.”
But, she said her plan for her family was put on hold when Brohn Homes canceled her contract.
“We were, like, taken aback and shocked,” Kakkar said. “Like what happened?”
Tara Vaughn wondered the same thing. She and her husband couldn’t wait to move into their new neighborhood in Manor.
“I was like, ‘You’re gonna have your little office here. This is going to be our nursery,'” Vaughn said. “‘We’ll have parties here’ — like all that was chosen.”
It was going to be where the couple grew their family, but now it’s someone else’s home.
“We just sat there and kind of analyzed it like a bad breakup,” Vaughn said.
Meg Davis said she was caught off guard, too.
Three weeks from closing, Davis said Brohn Homes canceled the contract for her home in Cedar Creek. She said she had signed it in August 2020, and it was canceled in March 2021.
“I was there every single day,” Davis said. “I had bought furniture. I had everything ready — doggie doors were put in this house. This house was going to be the next chapter.”
Questioning why their contracts were canceled
The three families showed KXAN they were sent the same “Termination of Purchase Agreement,” which refers to a clause in the contract allowing Brohn Homes to back out.
The clause reads, “Seller may elect to terminate this agreement at any time prior to closing for any reason, with or without cause.”
She claims when she asked for a reason for the cancelation, she was told during a phone call, “I would never be happy with the house and that ‘they didn’t want to work with me.’”
Kakkar claims it was the same reason she was given.
“That was the spoken reason they gave us, but there was no reason in the contract cancelation,” Kakkar said.
Kakkar said her contract was canceled after she called Brohn Homes and requested another inspection on the home she was purchasing, after the initial inspection showed “damage” surrounding a “main drain,” and “recommended replacement.”
Vaughn signed their contract last summer. She said during the early phases, they emailed the builder they wanted to pay for an inspection before the foundation was poured, because they had drainage concerns. Less than two months later, in October Brohn Homes canceled their contract during a phone call.
“There’s no, like, thing they could point to that we did for why we should get our house canceled,” Vaughn said, adding they then had to look for another house.
Brohn Homes did not provide any specific details on these buyers’ claims and why their contracts were canceled, saying it’s important to respect their privacy.
‘Skyrocketing’ home prices
According to the Austin Board of Realtors, in just the first half of this year, the average home price jumped more than $100,000.
“It’s pending and it’s gone. It’s just fast-moving. Prices are skyrocketing,” explained Susan Horton, President of the Austin Board of Realtors. “…this time last year, we had inventory on the market that, you know, always had a steady, three-four months’ worth of inventory. On the market right now, we have right at two weeks’ worth of inventory.”
Kakkar signed her contract last summer and said she agreed to a price of $298,790. She explained she recently learned the home was later on the market for nearly $160,000 higher than her original purchase price. KXAN confirmed the home later listed on MLS at $458,031.
KXAN also researched the homes being built for Vaughn and Davis, and found those houses also listed on MLS for more than their original price.
“Brohn Homes does not cancel contracts for the purpose of financial gain. It is extremely rare that Brohn would exercise its right to terminate a contract for reasons outside of the pending buyer’s breach of contract or failure to secure proper and timely financing,” said Aaron Boenig, Co-President of Brohn Homes in an emailed statement to KXAN.
Every builder contract is different
In the Brohn Homes contract, the homebuyer can also cancel “with or without cause.”
“Those contracts are written with clauses in them that give both parties the ability to get out of a contract,” Horton said.
Horton added that every builder has its own specific contract. She said it’s critical for buyers to understand what they’re signing by reading every contract carefully, asking questions and even trying to negotiate the terms if there’s a termination clause. She also recommended working with a realtor or attorney.
The Home Builders Association of Greater Austin wouldn’t comment about contract terminations but explained that builders who have signed fixed-price contracts are absorbing crippling increases and could be at risk of being forced out of business.
“Locally, we are seeing approximately an average of $40,000 +/- increase in home cost, mainly due to the lumber pricing. Lumber prices have skyrocketed more than 180% since last spring. The unprecedented spikes have added more than $36,000 on average to the construction cost of a new single-family home on a national level,” said Chad Durham, President of the Home Builders Association of Greater Austin.
Durham explained that although the housing sector continues to lead the nation’s economic recovery, these sharp cost increases, which have led to enormous home price increases, have taken hundreds of thousands of homebuyers out of the market.
“The combination of building supply shortages and rising cost, substantial growth in Central Texas, an outdated Land Development Code, and delays on processing development and building permits are all causing demand to significantly outpace the supply of residential housing. It’s truly unfortunate how all of these circumstances are negatively impacting the housing industry and our community,” Durham said.
Reasons for canceling contracts
A spokesperson for the company provided KXAN a statement on behalf of Aaron Boenig, co-president of Brohn Homes.
The statement reads, “Brohn Homes does not cancel contracts for the purpose of financial gain. It is extremely rare that Brohn would exercise its right to terminate a contract for reasons outside of the pending buyer’s breach of contract or failure to secure proper and timely financing. Our intent is always to continue to build and close the sale of a home. In the last 12 months, we have sold over 1,000 homes and approximately 1% of all pending buyer contracts were canceled in this manner.
TIMELINE: KXAN Communication with Brohn Homes
- June 4: Connected with Brohn Homes Co-President regarding comment
- June 16: Brohn Homes provides initial statement
- June 23: Brohn Homes provides follow-up statements
- July 6: Brohn Homes declines multiple requests for an on-camera interview by this date
- July 12: KXAN Investigators go to Brohn Homes office for comment
- July 15: KXAN Investigators sent Brohn Homes list of claims being made by homebuyers
- July 23: Brohn Homes sends new statement responding to list of claims
Termination provisions in contracts that may be exercised prior to closing are commonplace in our industry and this equitable right is provided to both the buyer and the company. The decision of Brohn to terminate the contract of a pending buyer is taken very seriously and is only made after a panel of people, including the President of Brohn and the Director of Sales, review each specific case. If we cancel a pending contract, we give the pending buyer all their deposits back, plus an additional $500. If the pending buyer cancels, we typically only keep the earnest money deposit and deposit amounts required to cover options and upgrades that were uniquely selected for that particular build.
We will not identify by name any specific individuals speaking with KXAN for this story, however, we will share that this collective group of situations involved: buyers committing or attempting to commit improper and potentially illegal contract and mortgage fraud, verbal harassment toward our team members, disruption of construction/production of a home, and the threat of lawsuit and legal action. Each buyer received communications from Brohn explaining why their contracts were canceled.
While we respect the opinions of those who reached out to KXAN on this issue, we stand by our decisions to terminate the contracts of the buyers in question and wish them the very best in their home searches.“
The company provided additional background information in that statement, which said, “Brohn may exercise its right to cancel a pending contract for reasons including:
- Contract fraud or deception by Buyer
- Verbal harassment towards a Brohn Team Member or Trade Partner
- Physical assault towards a Brohn Team member or Trade Partner
- Prejudice, discrimination or slander against any Brohn Team Member or Trade Partner
- Direct contact of any Building Official causing disruption of construction
- Any disruption of production of home by Buyer
- Buyer performing work on house prior to close
- Threat of lawsuit or legal action”
KXAN had tried for weeks before that statement to schedule an on-camera interview by phone and by email but was told Brohn Homes was not interested.
Several weeks ago, KXAN investigators went to Brohn Homes’ headquarters to get additional answers. Before walking into the offices, a man approached KXAN in the lobby area. Brohn Homes would not confirm who he was or his title.
KXAN investigator Arezow Doost asked him if he was with the Brohn Homes leadership group. He replied, “All the communications would go through Bloom. No one here would have anything for you.”
The man referred KXAN to the public relations group which had been facilitating communication for Brohn Homes.
“I just want to make sure that every effort is made on our part,” Doost said. The man replied, “All the communications go through Bloom — that’s who would talk to you.”
Homebuyers turn to the Attorney General
The homebuyers KXAN investigators interviewed said there was never any discussion about price increases due to any kind of shortages.
They have filed complaints with the Texas Attorney General’s office which confirms it has received 10 complaints in the last year against Brohn Homes, 7 of those about contract concerns.
When KXAN investigators asked about the status of those complaints, the Attorney General’s office said “We don’t generally discuss pending investigations, including whether or not we are actively investigating, but we are aware of the Brohn complaints and are continuing to review the matter.”
Boenig additionally said in his statement, “We are unaware of any active investigations with the Texas Attorney General’s Office.”
Kakker, Davis and Vaughn shared their complaint letters to the Attorney General with KXAN investigators. The three are awaiting a response from the Attorney General.
“We are looking to be adequately compensated … plus aggravated and punitive damages for causing emotional and financial distress,” said their collective complaint.
The cost of losing their dream homes
All the families KXAN spoke with whose contracts were canceled said they got their money back plus an extra $500 for the cancelation of the contract.
Someone else now lives in the home Vaughn had hoped to buy, and it’s the same with Davis.
Vaughn and her husband are now working with another builder on a new home which cost them more.
“We’re always worried that it’s going to happen again, that they’re going to cancel on us. We feel, like, unsettled,” Vaughn said.
The delay has also meant holding off on starting their family.
“We’re gonna wait until we’re in a house to start trying to do that. So, it’s — that’s like probably a year and a half or so we’re looking at about a delay and when we were, like, going to start that, like, family journey,” Vaughn said, starting to get emotional.
Davis bought an older house which she’s now in the process of fixing up.
“I can never get back the time… to go and find a new house in the middle of a high housing crisis,” Davis said.
Kakkar is still looking for a home for her parents.
“If you have to go look for a similar plan in this kind of Austin market, it’s going to cost around $150 to $200K more,” Kakkar said. “That’s the reason I don’t have a house right now. I’m spending our time and energy to figure out what my next steps will be — how I’m going to pay for my parents to stay close to me.”
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Senior Investigative Producer & Digital Reporter David Barer, News Director Chad Cross, Graphic Artist Rachel Garza, Director of Investigations & Innovation Josh Hinkle, Investigative Producer & Digital Report Dalton Huey, Photojournalist Chris Nelson, Digital Special Projects Developer Robert Sims, Digital Director Kate Winkle and Graphic Artist Jeffrey Wright contributed to this report.