Casualty Loss- $40K New house down pmt

[Taxman VA]

Client put a $40K deposit on a new home to be built for them. Delay after delay caused them to lose a good offer on the home they wanted to sell and because of excess water a drainage problem occurred on the new lot. The property was supposed to be flat (They have 3 young boys) instead it was re-graded and wound up being the drainage point for the street. A week before move-in clients discovered on their final walk-thru that our flat lot was deeply graded with 3 concrete storm drains in the yard and a 6ft unfenced drop-off to the neighborhood below. basically, for a family with three active boys, it was a disaster. So they walked away before settlement and lost their substantial deposit, but they couldn't be happy there and didn't see a point in putting more money into a home that they wouldn't be able to really be happy or functional in.

Do they have a case for a casualty loss?

Thanks in advance!

[Gary2]

I don't see one. Was there any fraud on the part of the developer? Otherwise, it sounds like buying a Corvette, driving it off the lot, discovering that the kids don't fit in the back, and not being able to get the full value back for the used Corvette.

[Taxman VA]

40K Casualty House Dnpmt Lost

Gary:

What if the developer had in his contract with them that the land was to be level graded?
I understand how water drainage problem can ensue but isn't there any relief for these people?

What do you think?

Thanks,

Taxman VA

[BP.]

had in his contract with them

Is there not a remedy through the court system?

[Taxman VA]

Loss- $40K New house down payment

Unfortunately, developer's contract totally protected them and it was written in their favor as to the possibility of changing the land grading. Clients pursued legal action only to find this out. Double slam- No casualty loss (they never owned the property so you can't claim a loss on something you didn't have title too) and no legal recovery b/c of contract terms. Very good client of mine so I tried to go the extra mile to no avail. Oh well!

[JohnH]

Nice of you to try, but it appears they're out of luck.

You said they walked away because they couldn't be happy there - sometimes happiness has a steep price tag.

[Burke]

Unfortunately, developer's contract totally protected them and it was written in their favor as to the possibility of changing the land grading. Clients pursued legal action only to find this out. Double slam- No casualty loss (they never owned the property so you can't claim a loss on something you didn't have title too) and no legal recovery b/c of contract terms. Very good client of mine so I tried to go the extra mile to no avail. Oh well!

Wow. This still does not prevent them from filing a complaint with the Attorney General's office and a little pressure and publicity just might make the builder think again about refunding some or all of that deposit. After all, he can sell that lot to someone else and recoup his costs as well as make a profit. (The earnest money they paid him is ordinary income to him.) As well as with the BBB. And if you have a local columnist in the newspaper that would love to get into this sort of thing, well......