"He pulled the carpet out from under our feet," Mau said, referring to the developer.

The repricing of Mau's unit is clearly allowed in the sales contract but prospective buyers in Hawai'i's volatile real-estate market who purchase a residence before it is built may not realize that can happen.

A planned house-lot subdivision on Kaua'i recently informed buyers their prices would rise, while a high-rise condo planned in Kaka'ako is trying to find ways to avoid making a similar move.

The problem has arisen, developers and real-estate consultants said, because stiff increases in construction costs created trouble for a few developers who obtained construction bids long after offering units for sale based on significantly lower cost estimates.

Local real estate consultant Ricky Cassiday said most developers have been able to balance construction costs, which have generally risen 20 percent to 30 percent over the past 18 months, with home prices that also have been rising, though a few have been caught by poor timing.

Many new-home buyers may not read or clearly understand their sales contracts and disclosure statements. Such documents can be dozens of pages filled with legal terms that define at what point a buyer cannot cancel a purchase and when a developer cannot cancel or modify a project, including unit prices.

"The average person will not read (disclosure statements)," said Calvin Kimura, executive officer of the state Real Estate Commission. "It is usually the biggest investment and liability somebody will face. Some people pay more attention to buying a car than buying a house."

Higher construction costs often force developers to delay construction or modify plans by changing materials or design. Typically only as a last resort will a developer raise prices for buyers who have made deposits and executed a reservation, presale or another form of nonbinding sales agreement.

"No developer ever likes to do something that would cause their buyers to fall out of their purchases," Cassiday said, adding that doing so creates risk that new buyers won't pay the higher prices or a risk of tarnishing a developer's reputation.

For a homebuyer, an unexpected price increase can mean the difference between affording and not affording a new home.

Permitting delays

Kaua'i resident Karl DeTreaux reserved two lots two years ago in a Kapa'a project called Kulana from developer Kapaa 383 LLC headed by Bill Hancock. In April, the developer said in a letter that prices for DeTreaux and other buyers would be raised to reflect "current fair market value" because of higher costs stemming from permitting and approval delays as well as added infrastructure requirements.

DeTreaux said the price for one 2-acre lot he reserved rose from $318,000 to $479,000 and the lot was slightly reduced in size. A second lot for his in-laws went from $376,000 to $589,000 and also was made smaller.

The radio show host said he isn't sure he can get loans at the higher prices. "I just want to be able to build a home for my family to live in, and I'm concerned I missed the opportunity because I didn't pursue other opportunities two years ago," DeTreaux said.

Kulana developer Kapaa 383 has since been working on a compromise to maintain original prices, said Jim Bickerton, an attorney representing buyers. The developer and it's attorney could not be reached for comment.

Reasonable increase

Another developer with similar issues is Posec Hawaii Inc., a unit of a South Korean steel company that is considering increasing prices for presold units in its Honolulu high-rise 909 Kapiolani at the corner of Ward Avenue and Kapiolani Boulevard.

"We're right in the middle of that struggle," said project manager Larry Fukunaga. "We may have to ask for some kind of reasonable increase because of some things we have no control over. We're trying to avoid it."

Posec is working with its general contractor to keep costs down, especially from subcontractors, and will be able to raise the price on the 20 percent of unsold units to help offset higher costs. Still, repricing units that have already been reserved is something the company continues to assess.

For the Loft@Waikiki developer, Urban Loft Development LLC, raising prices was not an easy decision, according to Urban Loft principal Don Huang.

Urban Loft announced plans for its project in late 2003 assuming conservative construction costs, upscale unit prices and a modest profit, Huang said.

But competition for condo contractors soared in the last 18 months, and Huang said several $100 million-plus condo projects got the best contractors at the best prices, while his roughly $15 million project received more inflated and less competitive construction bids.

"It's a dire situation," he said. "We're not trying to be greedy."

Huang said lenders don't want to risk financing a project that doesn't make money, while he didn't want to reduce the quality of units designed with art-deco doors, jet-spa bathtubs and high-end appliances.

So he cut costs with revised structural engineering designs and tried to forgo hiring a general contractor, but concluded that prices had to be raised on at least some of the 30 units that had been presold in the 36-unit project.

Instead of a smaller increase for all 30 buyers, Huang said he tried to determine who would be better able to absorb a larger increase, and raised prices on five units generally being bought by investors or Mainland buyers.

"It was not an easy process," he said, adding that he lost two buyers who are entitled to their deposits back.

Legal recourse

One buyer selected to pay more was Mau, who indicated he was an investor on his contract but said in an interview that he intended to live there.

"That's prejudiced," Mau said of Urban Loft raising prices for 5 of 30 buyers.

Mau said he's considering legal recourse, especially because he originally planned to buy a unit at the Kaka'ako condo high-rise Ko'olani but changed his mind because the Loft@Waikiki was scheduled for completion sooner.

Ko'olani, which broke ground last year, is scheduled to be completed next spring. Project developer Crescent Heights said it has not raised, and does not need to raise, prices after Ko'olani buyers make deposits and sign nonbinding contracts.

Christine Camp Friedman, managing director of local development consulting firm Avalon Development Co., said larger and more experienced developers usually have contingency plans other than raising prices on pending sales if costs unexpectedly escalate.

Still, real-estate development is a risky business. "It is a risk on both sides," she said.