Nervous Condo Buyers Want Out

[DC]

Posted on Thu, Mar. 22, 2007
Nervous condo buyers want out

BY MATTHEW HAGGMAN
In January, the developers of condo project 2 Midtown announced they would build 455 units instead of 459.
That's all it took for buyers Barry and Rachel Craemer to declare their contract void a week later and demand their $117,000 deposit back. The buyers for 47 units have sent such letters, and the builder is determined not to let any of them out.
In a cool housing market already overflowing with condos, what were once hot properties are now hot potatoes that many don't want in their hands. Buyers seeking to get out of contracts are pouncing on changes in developers' plans, including those related to higher insurance costs. Some are even combing through documents for blown deadlines, which developers blame on hurricane delays.
The tension is rising as closing day approaches for the roughly 25,000 new condos expected this year and next. And the spats between buyers and developers will help decide one of the biggest questions in the troubled housing market -- how many condo sales will actually close. If the spats continue, they would signal a rocky time to come, with unsold units and falling prices.
'This may be the beginning of the `interesting period,' '' said real-estate analyst Michael Cannon. ``We will see it evolve through 2008.''
So far, there have not been widespread defaults or much litigation, and by most accounts, buyers are going to the closing table, however reluctantly. Still, there is evidence of growing unease.
Attorney Gary Saul, who represents developers for 2 Midtown and other projects, said that six months ago he didn't receive any letters from buyers wanting out. Now they're coming from 10 percent of the buyers in buildings, sometimes as much as 20 percent.
Michael Schlesinger, a lawyer who has sued developers, said buyers started to call him in December, wanting out. He has signed 12 clients.
''Now I am getting three calls a week,'' he said.
And developer Gregg Covin, who plans to start closing next month for his 200-unit Ten Museum Park on Biscayne Boulevard, said 10 buyers in the past two months have approached him to get out. He has found vulture investors -- whom he allows to swoop in and buy at 2003 presale prices -- to purchase their contracts.
''The scary thing is, people who have flaked on me tell me they have like five other contracts in other buildings under construction,'' Covin said.
Florida's law allows condo contracts to be voided before closing if developers make ''material'' changes that are ''adverse'' to buyers. Buyers complain about changes they never signed up for, but developers accuse them of making excuses to flee because they no longer can flip the units for a fat profit. The estimates of how many buyers are speculators -- who bought so they could resell -- range from 30 percent to more than 70 percent.
`THESE ARE FLIPPERS'
''These are not people who have been wronged,'' Saul said. ``These are flippers who wouldn't be saying anything if the market was going well.''
To which Rachel Craemer replied: ``Who are they to decide? The person who makes the determination should be the buyer, not the seller.''
Both parties have plenty to lose. Condo buyers risk losing typical deposits of 20 percent, instead of 10 percent for new single-family homes, said real-estate analyst Lew Goodkin.
''That is prompting some folks to look at every possible technicality rather than walking away,'' he said.
Goodkin predicts that disputes will increase as closings approach for buildings sold in 2005 and 2006, because prices were higher and buyers have more at stake.
Developers in turn are worried that if they give one buyer a break, they will lose the building. With their support, legislation is pending in Tallahassee that would make it tougher for buyers to get out of condo contracts.
'If I am a developer and you come to me with your lawyer and I let you out, the first thing that lawyer does is tell everyone else in the building, `I can get you out, too,' '' said Miami attorney John Sumberg, who represents builders.
Insurance is a particularly sensitive area of dispute. Developers gave buyers projections for monthly maintenance costs when they signed contracts. But skyrocketing insurance premiums have pushed maintenance fees far beyond projections, prompting buyers to say their contracts are no longer valid and they shouldn't have to close.
CHANGES IN COST
Developers argue that they can't be held accountable for what is not in their control. State Sen. Mike Fasano, a New Port Richey Republican, has introduced an amendment saying that such changes in cost do not count as a breach of contract.
Back at 2 Midtown, buyer Susan Linnell of Burlington, Vt., is among those seeking to get out. She said the developer did not respond for months to her queries about when she could see her two-bedroom unit or the date to close.
''I couldn't get any information out of them,'' said Linnell, a real-estate agent. ``The whole thing started to have a really bad feeling.''
Calls to Midtown Group, the builder of 2 Midtown, were not immediately returned. The Craemers, who are from Florida but now live in Tucson, Ariz., said the four-unit reduction could raise their maintenance fees and assessments. ''We could easily close and use it as an investment,'' Rachel Craemer said. ``But I feel like I am being forced to close illegally, which is infuriating.''

[SHELLY]

Geez,......no one saw this coming


.

[Babyblue]

Geez,......no one saw this coming


.

Who did see this coming?

[Bobby J]

Who did see this coming?

Look above you...

[kathydwells]

Look above you...

I'm sorry...but that was so funny.

[Miss Kitty]

This condo buyer just wants in....get out renters, I am coming in two weeks!!!

[kathydwells]

This condo buyer just wants in....get out renters, I am coming in two weeks!!!

[Babyblue]

Look above you...

I should have known.

[30A Skunkape]

I heard an NPR story on this about 15 minutes ago. Not Miss Kitty coming to SOWAL, mind you, but regarding the condo investulators trying to wiggle free. An attorney said he fielded nearly 60 calls over the last 3 days from buyers "from Panama City to the Keys" looking for a legal method to get their deposits back. The lawyer said in about 90% of the cases, there is no way to do so. So, many people are eating 6 figure deposits

[destinsm]

I heard an NPR story on this about 15 minutes ago. Not Miss Kitty coming to SOWAL, mind you, but regarding the condo investulators trying to wiggle free. An attorney said he fielded nearly 60 calls over the last 3 days from buyers "from Panama City to the Keys" looking for a legal method to get their deposits back. The lawyer said in about 90% of the cases, there is no way to do so. So, many people are eating 6 figure deposits

Take a look at the current pendings (most likely all preconstruction contracts) at One Water Place (Kelly Plantation)...

Unit #505 (3008 sq ft.) - $1,299,000
Unit #1407 (3220 sq ft.) - $1,799,000
Unit #803 (3220 sq ft.) - $1,395,000
Unit #908 (3220 sq ft.) - $1,500,000
Unit #804 (3415 sq ft.) - $1,650,000
Unit #1404 (3415 sq ft.) - $1,295,000


Compare those prices to the current listing prices on the MLS taking into account unit size...

Unit #405 (3008 sq ft.) - $929,000
Unit #608 (3220 sq ft.) - $1,099,000
Unit #304 (3415 sq ft.) - $995,000

Note I pulled the three lowest listing prices for the three different floor plans to get a quick comparison of what the preconstruction price was compared to current listing prices...

Knowing there are currently 53 units for sale in this condo project I have my doubts that anyone will get a sale anywhere close to their listing price any time soon...

So if you bought preconstruction and you are closing this month... you are paying upwards of $300,000 or more than what the going price is today...

I would be walking away from that deposit too!

[Miss Kitty]

I just got nervous after seeing my HOA dues, so with much sadness we have decided to sell the Kitty Kondo at Water Color. Details to follow...

[Jdarg]

I just got nervous after seeing my HOA dues, so with much sadness we have decided to sell the Kitty Kondo at Water Color. Details to follow...

This BETTER be an April Fool's!

[30A Skunkape]

I just got nervous after seeing my HOA dues, so with much sadness we have decided to sell the Kitty Kondo at Water Color. Details to follow...

What?! I never even got a chance to drop the "F bomb" from the balcony

[Miss Kitty]

What?! I never even got a chance to drop the "F bomb" from the balcony

...you are an April fool. You can come drop the bomb starting on April 13. Mr. K will just have to put off retirement so we can all cuss on the balcony to our heart's content.

[Jdarg]

What?! I never even got a chance to drop the "F bomb" from the balcony

You can charge admission to this show.

[30A Skunkape]

You can charge admission to this show.

Actually, it is well documented that I try to avoid the F bomb...

[Mango]

Actually, it is well documented that I try to avoid the F bomb...

Let's try SJ's skeeter experiment with all our bug juice potions and see who can avoid the F bomb first.

[Miss Kitty]

Actually, it is well documented that I try to avoid the F bomb...

You can say frankfurter.

[Jdarg]

Actually, it is well documented that I try to avoid the F bomb...

Chickpea and Toots and I will stand in front of you and argue politics and the war with you until you collapse and start screaming it in agony.

[Smiling JOe]

Take a look at the current pendings (most likely all preconstruction contracts) at One Water Place (Kelly Plantation)...

Unit #505 (3008 sq ft.) - $1,299,000
Unit #1407 (3220 sq ft.) - $1,799,000
Unit #803 (3220 sq ft.) - $1,395,000
Unit #908 (3220 sq ft.) - $1,500,000
Unit #804 (3415 sq ft.) - $1,650,000
Unit #1404 (3415 sq ft.) - $1,295,000


Compare those prices to the current listing prices on the MLS taking into account unit size...

Unit #405 (3008 sq ft.) - $929,000
Unit #608 (3220 sq ft.) - $1,099,000
Unit #304 (3415 sq ft.) - $995,000

Note I pulled the three lowest listing prices for the three different floor plans to get a quick comparison of what the preconstruction price was compared to current listing prices...

Knowing there are currently 53 units for sale in this condo project I have my doubts that anyone will get a sale anywhere close to their listing price any time soon...

So if you bought preconstruction and you are closing this month... you are paying upwards of $300,000 or more than what the going price is today...

I would be walking away from that deposit too!

On a $1,000,000 interest only loan at today's rate of let's say 6.5%, you interest for the first two years will be $130,000, so in many cases, walking away from $200,000 isn't as bad as it might seem. In reality, you are walking away from $70,000 if you spread it over time. Plus, you are not in possession of a huge loan, condo fees, and a condo which will not sell at the purchase price for a while. All of the shake out will be interesting to witness.

[Indigo Jill]

On a $1,000,000 interest only loan at today's rate of let's say 6.5%, you interest for the first two years will be $130,000, so in many cases, walking away from $200,000 isn't as bad as it might seem. In reality, you are walking away from $70,000 if you spread it over time. Plus, you are not in possession of a huge loan, condo fees, and a condo which will not sell at the purchase price for a while. All of the shake out will be interesting to witness.

I just can't imagine the level of anxiety that would go along with having to contemplate walking away from a $200K deposit or, conversely, having to come up with that kind of interest on an exotic loan knowing your preconstruction investment, at the time of closing, has lost that much in value (from the current CMA data). Realtors, have any real life stories of sellers who are in this position on the Emerald Coast? What are the majority of sellers here doing (walking or staying?)?

[Smiling JOe]

Yes, there are real life stories right here in SoWal, on a wide range of price points.

[Indigo Jill]

Yes, there are real life stories right here in SoWal, on a wide range of price points.

Are sellers trying to scapegoat and blame others for their bad decision or are they just panicking and kicking themselves in the arse?? Any lawsuits yet out of this? It will be interesting to see how this shakes out.

[Camp Creek Kid]

Are sellers trying to scapegoat and blame others for their bad decision or are they just panicking and kicking themselves in the arse?? Any lawsuits yet out of this? It will be interesting to see how this shakes out.

Why would the down market be the seller's fault? Most of the condos that are closing now have been under construction/in the planning and permitting process for several years. When presales were offered, at the height of the real estate boom, many projects sold out it days or hours. Buyers were all too happy to plunk down their reservation fees, many intending to flip. Most of the flippers couldn't afford to hold on to the property if something went wrong, and most probably never even considered the fact that they may have to hold it. It is the buyers, who bought to flip, who made bad decisions. The fact is that they signed a contract to buy a property. Sellers offered no guarantees that their condos would be worth "X" amount at closing. There is a lot of discussion about buyers walking away. While this may be possible with a RESERVATION, once a hard contract is signed, a seller doesn't necessarily have to let the buyer out.

The "sellers" or developers were providing a product that the market demanded. Nobody (but Shelly) could see this coming four or five years ago when most of these projects began. Real estate is an investment with risks just like any other investment. When the stock market takes a dive and someone loses hundreds of thousands of $$ because their stocks aren't worth what they were when they bought them, there is nobody to sue or blame (assuming there is no Enron-type scandal). Real estate is the same.

[Indigo Jill]

Why would the down market be the seller's fault? Most of the condos that are closing now have been under construction/in the planning and permitting process for several years. When presales were offered, at the height of the real estate boom, many projects sold out it days or hours. Buyers were all too happy to plunk down their reservation fees, many intending to flip. Most of the flippers couldn't afford to hold on to the property if something went wrong, and most probably never even considered the fact that they may have to hold it. It is the buyers, who bought to flip, who made bad decisions. The fact is that they signed a contract to buy a property. Sellers offered no guarantees that their condos would be worth "X" amount at closing. There is a lot of discussion about buyers walking away. While this may be possible with a RESERVATION, once a hard contract is signed, a seller doesn't necessarily have to let the buyer out.

The "sellers" or developers were providing a product that the market demanded. Nobody (but Shelly) could see this coming four or five years ago when most of these projects began. Real estate is an investment with risks just like any other investment. When the stock market takes a dive and someone loses hundreds of thousands of $$ because their stocks aren't worth what they were when they bought them, there is nobody to sue or blame (assuming there is no Enron-type scandal). Real estate is the same.

Ooops...meant to say "buyers" (preconstruction buyers) CCK ... coffee still hasn't fully kicked in this morning. Sorry for the confusion. And I totally agree 100% of what you are saying.

[Camp Creek Kid]

Ooops...meant to say "buyers" (preconstruction buyers) CCK ... coffee still hasn't fully kicked in this morning. Sorry for the confusion. And I totally agree 100% of what you are saying.

Thats A-O.K.

[30A Skunkape]

Chickpea and Toots and I will stand in front of you and argue politics and the war with you until you collapse and start screaming it in agony.

Or until the three of you pitch me over the rail!

[30A Skunkape]

Shelly, I didn't realize you dabbled in cartooning

http://www.workingforchange.com/prin...m?itemid=22163

[Rita]

Why would the down market be the seller's fault? Most of the condos that are closing now have been under construction/in the planning and permitting process for several years. When presales were offered, at the height of the real estate boom, many projects sold out it days or hours. Buyers were all too happy to plunk down their reservation fees, many intending to flip. Most of the flippers couldn't afford to hold on to the property if something went wrong, and most probably never even considered the fact that they may have to hold it. It is the buyers, who bought to flip, who made bad decisions. The fact is that they signed a contract to buy a property. Sellers offered no guarantees that their condos would be worth "X" amount at closing. There is a lot of discussion about buyers walking away. While this may be possible with a RESERVATION, once a hard contract is signed, a seller doesn't necessarily have to let the buyer out.

The "sellers" or developers were providing a product that the market demanded. Nobody (but Shelly) could see this coming four or five years ago when most of these projects began. Real estate is an investment with risks just like any other investment. When the stock market takes a dive and someone loses hundreds of thousands of $$ because their stocks aren't worth what they were when they bought them, there is nobody to sue or blame (assuming there is no Enron-type scandal). Real estate is the same.

Right on CCK! When you play the game, you enjoy your wins or accept your losses and move on! Kick yourself if needed, but don't blame others.