Contract Signing Locks In Purchase

Sometimes consumers report signing a purchase contract at the same time they leave a deposit, and sometimes they return to sign the purchase contract. Dealers sometimes argue that once a purchase contract is signed, the consumer is contractually bound to accept the home-even though they may not have seen it or agreed to financing terms.

James E. of Tyler signed contracts and left $500 but changed his mind within hours. The salesperson refused his written cancelation notice and said he would have to come up with $1,500 more, according to Mr. E's wife. He got his money back a few days later. Under the deposit law, consumers can still cancel after signing purchase contracts. As currently interpreted by TDHCA staff, dealers are required to fully refund a consumer's investment unless the consumer has signed a loan agreement and the funds on deposit have been transferred to the down payment.(16)

Victor S. of Canutillo and his wife went out to shop for a mobile home. In an initial visit to a Nationwide dealership, they picked a home, signed a purchase contract, and asked for copies. They also signed over their own home title as earnest money. Told they could have copies of their paperwork at "closing," they went home empty handed and unsure about the deal. That same day, they decided to shop around some more and called the dealer to cancel. When another dealer offered a better price and interest rate, they called to get their title back.

"We told him we just want to pick up our title, and he said that he was going to keep our title if we didn't purchase a home from him. He also said that he could keep our mobile home if he wanted to because my husband had signed papers and that if we wanted our title we had to send him our attorney." The new dealer contacted Nationwide's national office, which ordered the title released, but the first dealer filed a report with the credit bureau saying the consumer owed $60,000. The dealer refused to remove the chargeoff from the credit report even after contact by the AG unless "he comes in, honors the contract signed and takes his home."(17) According to the dealer, this home was a special order home (see story, p. 24). Although the family cancelled the same day, refund rights for special order homes are much more limited. Further, the law does not prohibit dealers from placing the full cost of the home on a consumer's credit report as an unpaid debt.

Ms. F. of Hidalgo left $500 at a dealership in Weslaco, thinking that she would have no additional out of pocket costs for her manufactured home purchase. She signed some documents but didn't really know what they were because they were all in English. At closing she discovered they wanted her to pay $6,000 more-money she didn't have. She walked out of closing and asked for her $500 dollars back. After waiting three weeks she turned to the Attorney General for help. The AG ultimately got her deposit back from the dealer, and she eventually purchased a different mobile home on terms she understood (no surprises at closing). She is very happy now in her new home, according to her interview with Consumers Union.(18)

Many consumers put down money and sign a purchase contract based on a dealer promise to get them credit approval. Before 1999, Texas law specifically required dealers to return all but $100 (or 10% of the deposit, whichever was less) if they were unable to corral a lender. Today, the law requires a refund in full.(19) But some consumers turned down for credit still reported considerable difficulty getting their money back.

A Spanish speaking couple from Austin left $1,000 on a home in 2000, contingent on credit approval. Their credit was not approved. Four weeks later they hired a lawyer to help them get their money back.(20) After a dealer said her credit had already been approved, a disabled Caldwell, Texas woman put $1,500 down on a home-money she borrowed from a sister's credit card account. But soon after, the salesman told her that her credit was not approved after all. More than nine weeks later she sought help from the Attorney General to get her sister's money back.(21)

Rather than give back a consumer's deposit, dealers sometimes try to force consumers who have been turned down for credit into alternative financing or another home. Another Spanish speaking couple in San Juan left their deposit with a promise of credit approval. When the dealer couldn't get a loan approved, he suggested the couple find someone else to buy the house for them (called a "buy for" deal). They refused and filed a complaint when the dealer didn't return their money.(22) Ms. W. of New Waverly left $1,200 on a 1999 home. Weeks later the salesperson told her she had not qualified for credit on the 1999 trailer, but they would sell her a 1980 model instead. She didn't want the older model, and asked for her money back. The dealer refused because "he had gotten me approved for a home," she told the Attorney General, even though it was not a home she wanted to buy. "I told him that I was coming to bring the high Sheriff with me. He told me that I could bring God, that I wouldn't be able to get it [her deposit] back."(23)

While some consumers report a single "closing" with purchase and all loan contracts, others report more than one trip to the dealership: once for the purchase contract (with the deposit) and again for the loan closing. Once the purchase contract is signed, but before the loan closing, construction on the lot may begin (clearing, foundation, electric hookups, septic, etc.), and those contractors will need to be paid. By the loan "closing," the consumer is essentially locked into the deal.

A retired military man from Kemp, Texas selected a home for $67,000. By the time he went to the loan closing at the dealership, his slab had already been poured, although the home itself had not yet been delivered. As he reviewed the loan documents, he noticed that his home price had risen to a remarkable $80,900. Although he was shocked, he continued with the closing because the workers had to be paid. Ms. R. of Kingsland had the dealer completely redo the loan documents at closing. "My mother told me to walk out," she said. "I was stuck in a hard place, because Palm Harbor had K--- installing my septic and paying for it $2,400, and B--- Construction putting my pad down for the double wide, $1,500. If I did not go through with it, someone had to pay them."(24)

The image of old, dilapidated trailers abandoned by their
owners continues to haunt the industry.

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