DR Horton and LGI MISLEAD Buyers???

Are Homebuilders Using Deceptive Tactics to Mislead Buyers?

Introduction

Are homebuilders using deceptive tactics to lure buyers into bad deals? Two major investigations are shining a light on practices that if true could cost homeowners thousands. Federal lawsuits and media reports are now alleging that major builders, including DR Horton/DHI Mortgage and LGI Homes, misled clients about the real costs of homeownership.

In this post, we break down what’s being claimed, how these tactics work, and most importantly, what you can do to protect yourself when buying a new build.

The DHI Mortgage Lawsuit: Hidden Costs Behind “Affordable” Payments

A federal class action lawsuit filed against DR Horton and its lending affiliate DHI Mortgage claims that the companies used misleading marketing by advertising monthly payments that left out key property tax amounts.

According to the complaint, buyers, often first-timers, budgeted around these “teaser” figures only to find their actual mortgage payments jump by hundreds of dollars after closing. One Florida buyer’s payment reportedly rose from $2,200 to $3,200 per month once escrow was recalculated.

The lawsuit alleges that the omission of taxes was a calculated scheme to understate true costs and qualify buyers for larger loans. If proven, this could mean significant damages for affected homeowners under RICO statutes. If your builder or lender can’t give you a complete monthly estimate that includes taxes, insurance, and HOA dues, you don’t have the full picture.

LGI Homes Investigation: The Renters’ Bait-and-Switch

An in-depth report by Hunterbrook Media found similar issues at LGI Homes, where ads and social media posts targeted renters with promises of “low monthly payments.”

Those numbers often looked appealing but excluded taxes, insurance, and other mandatory costs. In one community, an ad showing a $1,599 monthly payment turned out to be closer to $2,750 when all expenses were included.

LGI also discouraged buyers from working with realtors, claiming they didn’t pay agent fees. That left many buyers unrepresented and unaware of missing details.

If a deal seems too good to be true or if a builder discourages you from having your own agent, it’s a sign to slow down and ask more questions.

High-Pressure Sales and “Buy Now” Scripts

Hunterbrook also reports that LGI trained its reps, many from retail backgrounds, to use high-pressure tactics designed to close deals on the first visit.

Former employees described scripted approaches with limited transparency, while buyers said the experience felt rushed and confusing. During the pandemic boom, when demand was frenzied, these tactics likely pressured many into homes that stretched their budgets. No reputable agent or builder should ever pressure you to sign the same-day. If the deal can’t wait 24 hours, it’s not the right deal.

Overpriced Homes and Opaque Costs

Across multiple markets, LGI’s homes were reportedly priced 20% higher per square foot than similar new builds nearby. Investigations suggest this may have been justified by heavy marketing spend and a direct-to-consumer model that cut out agents, limiting buyer awareness and negotiation power.

These same communities often came with additional fees like PIDs and MUDs, which some builders failed to disclose clearly. Buyers only learned later that their “1.46% tax rate” actually came with thousands in extra annual costs.

Always verify your total tax rate, including PIDs, MUDs, and assessments. The lowest advertised rate rarely tells the full story.

The Real Cost: Higher Foreclosures and Buyer Risk

Hunterbrook found that LGI buyers were three to five times more likely to face foreclosure compared to typical FHA borrowers. In one Texas county, nearly 1 in 5 LGI buyers received at least one foreclosure notice since 2011.

While every buyer’s story is different, these numbers show the human cost of misleading payment estimates. When you stretch beyond your means, based on incomplete information, the results can be devastating.

Transparency isn’t optional. Builders that hide details about financing or costs are risking both your investment and their reputation.

5 Tactical Ways to Protect Yourself When Buying a New Build

1. Demand the Full PITI Breakdown
   Get principal, interest, taxes, insurance, HOA dues, and assessments in writing. Use your county’s current total tax rate, not a builder’s estimate.
   
   
2. Shop at Least Three Lenders
   Compare APRs using identical terms. If a builder’s lender offers incentives, check if they’re offset by higher interest rates or inflated home prices.
   
   
3. Hire Your Own Representation
   A seasoned buyer’s agent can catch red flags in contracts, verify numbers, and protect your best interests, something builder reps do not do.
   
   
4. Verify Taxes and Insurance Yourself
   Don’t rely on the builder’s figures. Check local appraiser sites and get your own insurance quotes to avoid payment shocks later.
   
   
5. Never Sign on the First Visit
   Take the numbers home, rebuild them in a spreadsheet, and test worst-case scenarios (higher taxes, rate changes, etc.). If the payment only works under ideal conditions, walk away.
   
   

Smart buyers don’t just fall in love with the model home, they study the math.

Final Thoughts

The recent lawsuits and investigations reveal a sobering reality: not all homebuilders play fair. While many operate ethically, some have exploited emotional buyers and opaque pricing to drive sales.

Our job as realtors isn’t just to sell you a home, it’s to protect you and your assets.

Buying new construction can still be a great move when done right. Just make sure you have the full picture before signing anything.

I’m Jeremy Knight, your favorite Austin Realtor. If you’re navigating a new build or want a second opinion before you buy, reach out anytime and don’t forget to subscribe on YouTube for more updates and tips on Austin real estate.