Condo buyers abandon contracts
By PAUL SWIDER, Times Staff Writer
Published January 10, 2008
With the implosion of the real estate market, would-be condominium buyers are bailing out of binding contracts, leaving developers in a lurch.
"Builders are hurting now, and it wasn't their fault," said Ann Guiberson, president and chief executive of the Pinellas Realtors Organization. "There's this thing called buyer's remorse."
In some cases, condo units' drop in value makes banks less willing to loan buyers money for purchase. In other cases, buyers who were looking to flip a property now want out because there's no downstream buyer. Inevitably, lawyers get involved.
"There are a lot of legitimate reasons" to want out of a contract, said attorney Lenny Englander, "and there are a lot of illegitimate reasons."
Englander said developers are reluctant to talk about such issues lest they teach crafty buyers how to game the system.
But working, at times, for both buyers and sellers, he said there are certainly examples of creative thinking. He's currently defending a developer who's facing four law firms working to test a theory on applying 40-year-old federal antifraud rules to get one buyer out of a contract.
Other cases are more mundane, if still unusual.
Developer Frank Maggio said he's had buyers of docks at his Nautico marina claim they wanted out of a contract because they didn't know there would be mosquitoes in the area. He said rather than fight, he just gives back deposits.
"They all want to say it's the greedy developer," he said, "but the whole concept has been tipped on its ear."
Maggio said some lawyers see contract deposits as a "slush fund." If the lawyers can get a buyer out of a deal, they get a piece of the money. Some buyers offer similar ideas.
Attorney Richard Zacur said he's defending a downtown developer against a buyer with a $165,000 deposit and no desire to close.
After unsuccessful challenges on several different areas of the contract, the buyer is offering to take only $65,000 of his deposit and let the developer have the rest. Another buyer on a different project is out $500,000 on two units but is willing to settle for $100,000.
"There's no gain for anybody if you can't work something out," Zacur said. "But the buyers don't understand that their deposit went into the construction. It's in sticks and stones now."
Buyers have a right to bail if something is wrong with the property or the plan has changed significantly from when they bought.
Zacur said he settled one case where a buyer thinking their condo was next to a fitness center showed up at closing to see their unit next to a bathroom instead. "That's a material change," he said. "We gave them their money back."
Often lately, people simply can't afford a deal that no longer makes financial sense. Miles Development Partners has seen some of that on its 1010 Central project and on the Sage.
"We've had everything from people with too many investments to those where their family status has changed to others who just can't sell their old homes," said Leslie Smart, director of sales and marketing for Miles.
"These people walked into the situation believing they could make it happen, but later their life changes."
The 1010 Central building was sold out before Miles broke ground, but by the time it was done last year, some 30 buyers failed to close and left deposits, Smart said. Miles has resold half those units but still has a few left now, as it does at Sage.
Developers of upscale properties say they don't see this problem because their buyers are more serious and the deposits too large to risk. But even Opus South Corp. has seen it in Parkshore Plaza and is waiting to see what happens as closings begin on 400 Beach.
"They signed a binding contract and we expect them to honor it," senior vice president Jerry Shaw said. "We honor our end. Construction costs went up, but we didn't go back and ask for more money."
Developers say buyer bailouts happen more in Tampa. Or South Florida. Or on the beaches, anywhere but on their projects. But the attorneys says it's all over, for everything from a delay in construction to a dislike for the shape of a dock.
"It's a strange world out there," Zacur said. "But for these economic times, we wouldn't be seeing this. These are all great places to live."
Paul Swider can be reached at firstname.lastname@example.org or 892-2271.
[Last modified January 9, 2008, 21:10:17]
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