urbnlivn, a seattle condo blog

29 responses so far ↓

• 1 CG // Jul 19, 2007 at 2:33 pm

  Buying condo units in advance of completion always involves risk, including:

  (1) Final product doesn’t live up to quality promises (e.g., Vulcan’s 2200 development)

  (2) Too many investors get involved, creating a community of speculators rather than homeowners (e.g., Cosmopolitan)

  (3) Promised completion and move-in dates keep getting pushed back, wreaking havoc on plans to sell existing homes or knowing how long to extend existing rental leases (e.g., Parc)

  (4) Job relocation means no dice on moving into the complex (e.g., the instant letter writer’s predicament).

  I think too many new-construction condo purchasers are unduly influenced by developer marketing campaigns, as cheesy as those marketing campaigns usually are, and they buy way in advance of completion under the starry-eyed notion that, if they get in on the ground floor, they’ll only reap the benefits.

  Alas, as the hapless letter writer indicates, she’s bound to lose money one way or the other: She can’t afford to carry a rental, she can’t afford to absorb the RE commissions (and county transfer taxes) if she flips the unit, and she can’t afford to lose her evidently considerable earnest-money deposit. Maybe someone will come up with a savvy way for her to wiggle out of her contractual obligation, but I can’t think of one.

  In hindsight, of course, she never should have purchased pre-construction. But her dilemma can help serve as a wake up call for more of us to be skeptical of pre-construction purchases, as markets do tighten, personal plans do change, and financial risks abound. These days, it’s probably much safer to see the finished product, kick the tires, and have a clearer understanding of move-in dates.

• 2 EconE // Jul 19, 2007 at 3:50 pm

  http://www.youtube.com/watch?v=MxFx0NzSjWw

• 3 Chris // Jul 19, 2007 at 3:53 pm

  “we would probably lose a lot of money paying RE commisions and taxes if we sold it immediately after closing”

  I take it you think that the unit is not worth (market value) 6% more than you bought is for? How in the hole do you think you’d be? Depends if the loss on sale is greater than the earnest money. Could you do sell someone an option to purchase the unit upon completion at a specified price (that may or may not be below what you paid)?

• 4 newbie // Jul 19, 2007 at 4:38 pm

  Thanks for the replies. I am actually not sure what the market value is. I’m going to show it to a few different agents to get an idea. I’m looking into selling the option to buy the unit at the price we paid rather than buy and then re-sell the unit. That would minimize commissions and taxes. Not sure how I would market it since it can’t be listed on the MLS. Does anyone have experience selling pre-sales? That info would be hugely valuable to me.

  Also, I haven’t yet talked to the builder. I do think they could resell it for more than what we paid. Maybe substantially more…

• 5 Brett // Jul 19, 2007 at 4:43 pm

  The contracts are pretty tight but there are a lot of pages and details and legal issues surrounding a new construction purchase. In all that paperwork, there may be a loophole, a document someone forgot to sign, a acknoledgement of POS that was missed, a material addendum that triggers an additional seven day review of the POS. A survey that wasn’t included, a legal description that wasn’t included. I’m not an attorney and in no way am qualified to or will give legal advise. But, I can say it may be worth your time to take all 300 pages of your purchase packet to a real estate attorney to see if the contract is voidable. Make sure it is a real estate attorney.

  If you fall short there, talk with the sales team to see if the developer would be willing to put your unit back on the market at a higher price, and if he finds a buyer, release you from the contract.

• 6 jdp // Jul 19, 2007 at 7:44 pm

  EconE- that is some priceless advice!!

• 7 Chessnoid // Jul 19, 2007 at 7:50 pm

  I had a relative actually put an earnest money deposit on a Las Vegas high-rise condo 2 years ago before the values started to sink. The builder didn’t have enough buyers or interest to firm up their own construction financing, so the project was cancelled and they refunded her all the money. I know it is a long shot, but in today’s market that could change overnight, even in Seattle. Good luck.

• 8 Matt // Jul 19, 2007 at 9:54 pm

  EconE- Your link isn’t very helpful considering that it doesn’t apply in this situation.

• 9 EconE // Jul 20, 2007 at 12:03 am

  Matt…I can understand where you are coming from but it was stated that they purchased what they couldn’t afford as an “investment” and that walking away from the ernest money would “wipe out most” of their “hard earned” savings.

  6 months ago people assumed that they would be able to cover a mortgage on these higher end condos. I saw it by what they were trying to get on CL and saw rents for places like the cosmo drop to…well…let’s just say much lower than expected levels..all the way from the studios to the 2BR’s.

  If the “ernest money” wipes out their savings then it seems like it is a situation where someone bought more than they could afford. I understand that it’s a hard lesson to learn but if they are confident that the builder can sell it for more than they paid…and maybe even “substantially” more then why wouldn’t they just sell it themselves and reap the profit?

  I have a feeling that because the market is “softening” that we will hear more about people trying to get out of their contracts while receiving a refund on their deposit. Who knows…maybe in the future people will walk away just because they may feel that *just* losing their deposit is the easiest way out. We’ll see…I don’t have a crystal ball myself.

• 10 jo // Jul 20, 2007 at 7:42 am

  What are you guys babbling about?

  These people are trying to get out of their contract because they are moving. Plain and simple. It’s not as if they can’t afford it or they bought more than they could afford…they simply have to relocate which means to keep their unit in Seattle they would have to pay two mortgages. I don’t know about you guys, but the majority of the country can’t afford two mortgages.

  When I bought my first place, I used up most of my savings. Unless you’re getting mommmy and daddy money you almost always will. Wanting to get your earnest money back is a no brainer.

  I also missed where they said they purchased the unit as an “investment” - they distinctly stated they were planning on moving into the unit when it was ready.

  My advice: goto the developer. If the unit is worth more than you paid for it, they will gladly let you out of your contract. It’s free money to them.

  My advice: Ignore most of the idiots on here. They’re a bunch of bitter, miserable people who get off by wishing ill will upon others.

• 11 Dan C. // Jul 20, 2007 at 8:02 am

  jo,

  I don’t think that is the case at all and you are being counterproductive by insulting others on this board. If you don’t agree with what people post, don’t read it.

  I would always advocate using an RE attorney in any sales transaction, I hope that this person had one review the contract before they purchased this pre-sale. There is always a way to snake out of a P & S, but it will just cost *more* money, which this person is trying to avoid.

  Some issues here:

  1. They probably can’t re-sell the option to another buyer, I guarantee that is covered in the contract.
  2. If they give the option back to the developer (I guarantee the unit is worth less than they paid anyway) there is probably a penalty involved, most likely the earnest money.
  3. There is probably a covenant outlining how many units can be rented and I bet that many other pre-buyers will be trying to rent as well.

  My advice would be to wait until the building is completed, then sell the unit in the traditional way. Money may be lost in the downtime between now and then, but they are much more likely to recoup the money once the building is done.

  Which project is this anyway? (Please don’t say Domaine or Trio! :))

• 12 Matt // Jul 20, 2007 at 9:24 am

  jo - “My advice: Ignore most of the idiots on here. They’re a bunch of bitter, miserable people who get off by wishing ill will upon others.”

  Can’t agree more. The comments at this place used to be fun to read and informative. Now it’s just a bunch of negative people putting down anyone that is buying or has bought a home.

• 13 DMG // Jul 20, 2007 at 9:55 am

  Jealousy is an evil emotion Matt…keep up the great work with the site. I have found it to be very informative and enjoy the work you put into it!

• 14 newbie // Jul 20, 2007 at 10:40 am

  Thanks Jo for clearing up our situation! We are a young couple buying our first home together. We certainly don’t spend more than we earn, we have good incomes but also have student loans, a car loan and some, but not a lot, of savings. We could afford the mortgage payments, we just can’t afford two mortgage payments. I’m sure in 10 years, the earnest money will not seem like a lot of money but right now it is a big deal to us.

  Our plan is

  1) Talk to the developer. I’m still optimist that there is a win-win possible. Or at least a win-breakeven.

  2) Have a RE lawyer review the contract if (1) doesn’t work out. It will cost some money but seems like it is worth it to potentially recoup our earnest money.

  3) Sell the property as soon as we take possesion if (1) and (2) don’t work. Since we can’t list it on the MLS until we actually own it, we will probably try to market it FSBO first. Anyone have any experience selling FSBO condos in Seattle? Tips would be appreciated. Between Craiglist, Zillow and the Microsoft classifieds, it seems like there should be good reach. Does Google have an internal classifieds?

  I appreciate all the advice and will update this topic as events happen. I don’t want to disclose the developer until we’ve made a good faith effort to explain our situation to them. They probably read this and may not appreciate public debate until they get a chance to respond to us personally. I’ll keep you updated!! I’m sure there are others in our situation and I didn’t find any other resources on this topic on the web. Thanks Matt for providing this forum.

• 15 Phil // Jul 20, 2007 at 2:01 pm

  newbie:

  I would talk to a RE lawyer first. He/she might be able to give you some leverage in your discussions with the developer. Otherwise once the developer knows you want out, it puts you in a weaker negotiating position.

• 16 Matt Goyer // Jul 20, 2007 at 2:32 pm

  FYI, the Matt commenting on this post isn’t the Matt who runs this site.

  As for the comments here not having the same level of quality that they used to, I refer you to this very timely post from one of my favorite bloggers, Joel: http://www.joelonsoftware.com/items/2007/07/20.html

• 17 EconE // Jul 20, 2007 at 2:44 pm

  Sorry Matt…I believe that you have things backwards.

  I don’t wish ill will on others as Jo stated and you should know that by the emails I have sent you and the discussions that we have had on the phone.

  I do find it interesting how nothing was said (by yourself) when all of us “bitter renters” that “missed the boat” etc. etc. etc. were constantly being belittled and called idiots and morons (well…I wasn’t called a moron, however, Jo referred to his friends as “morons” in a previous post) yet now when the market isn’t heading in the direction that all the bulls predicted, the bears are now the “bad guys”.

  I am also not one of the people that “won’t be happy until you sell your place for less than you paid for it” as you stated in your posting. In fact…I even emailed you stating that I had some suggestions that would possibly help in the marketing/sale of your unit yet did not want to post them online. You however chose not to respond.

  How should people have really responded to this particular thread? Issues such as the one presented here have been discussed over and over and over and presented as “food for thought” as to what could happen if someone had to move, change jobs, etc etc etc and were only met with the standard “they will be able to sell it for more than they paid for it” argument. If that is the case, then why even try to back out of a contract if appreciation is such a sure thing as has been stated over and over and over again on your blog?

  Your reader seemingly has a contractual obligation…offer + acceptance + consideration = CONTRACT. Correct me if I am wrong as I am not an attorney.

  This reader should not have even posted the question here as it is a question that regards contract law so who are we to give advice? They should have asked a RE attorney instead.

  Bottom line is that when the RE market is “booming”…nobody wants to listen to the “bears”,”bubbleheads”…whatever you want to call us and would rather view us as a group to be laughed at or told that we are just “bitter renters” that missed the proverbial bus. So…of course our posts could have been viewed as entertainment for the bulls.

  Now that the market is appearing to turn…and July 22 seems to be a date that many are looking at with the tighter lending standards…not only do people not want to “listen” to the “bears”…they don’t even want to “hear” us.

  With that…I’ll retire from commenting on your blog and relegate myself to the sidelines as an impartial observer.

• 18 Matt Gaines // Jul 20, 2007 at 3:00 pm

  As Matt Goyer pointed out above, I’m not him. Sorry for the confusion. Too many Matt’s around here.

• 19 Matt Gaines // Jul 20, 2007 at 3:18 pm

  When I said the comments were more fun and interesting in the past, it was before the “bear”/”bubbleheads” even were commenting on this site. It was back when it was just the people who were interested in buying a place or had already bought a place. There was an air of excitement and camaraderie on this site.

  There’s just too much negativity and bickering going on now. I have no problem with people that have a different point of view. It’s just that the points of view have gotten too combative lately.

  Can’t we all just get along?

• 20 Matt Gaines // Jul 20, 2007 at 3:21 pm

  Btw…off topic

  Matt, are you ever going to finish your Meritage reports? I think you only posted one so far.

• 21 Matthew // Jul 20, 2007 at 3:47 pm

  “My advice: Ignore most of the idiots on here. They’re a bunch of bitter, miserable people who get off by wishing ill will upon others.”

  That’s funny coming from one of the most bitter and smack talking people on this blog.

• 22 CG // Jul 20, 2007 at 4:04 pm

  Time for a group hug.

  Newbie: Hang in there! As you acknowledge, you now have some great ammunition to try to unwind from a prickly situation. Good luck!

  EconE: Your fan base won’t stand for you to be relegated to the sidelines. Keep those Goyer-Voyeur insights coming! (And, see the confusion as to the two Matt Gs.)

  Jo: Take a deep breath before posting. It’s too easy to make a flaming comment. We’re here to build community. That involves entertaining divergent viewpoints.

  Matt Goyer: Maybe only you should have the power to incorporate a blue background onto a posting. The other Matt sure did a good job at impersonating you!

  All: Our periodic Urbnlivn Meetups are great ways to cut through the anonymity of blog postings and reinforce, through face-to-face interaction, the substantial consumer-empowerment tips that this site dispenses. You know, we really DO like each other. Keep your ears open for news of our next Meetup!

• 23 Matt Gaines // Jul 20, 2007 at 4:39 pm

  Looks like an overactive spam filter whacked all my posts and is blocking new posts from my gmail email. Anyways…

  I didn’t do anything to get a blue background nor was I trying to impersonate Matt Goyer. I think I got the blue background since I just used my first name. I usually just use my first name out of habit when posting to blogs and didn’t think about the confusion it would cause here.

  Hopefully, my other posts will get restored soon. Since I’ve added some that were never posted.

• 24 Matt // Jul 20, 2007 at 5:00 pm

  EconE, I’m awful at replying to personal mail ask Carl, Foster, KH, etc. I will reply to yours as soon as I’m done this comment though.

  Matt Gaines, no worries. I think I recovered most of your comments. I also switched spam filters. As for the Meritage reports, I thought it best to wait until I sold it :).

• 25 Matt Gaines // Jul 20, 2007 at 5:08 pm

  Thanks Matt Goyer.

  I think I understand why you’re waiting to post the other reports. Hope you get as much as possible from your sale. I’m curious to see what you have to say. Also, curious what you have to say about Trace once you move in there.

• 26 manamongbabies // Jul 23, 2007 at 9:26 pm

  You may want to consider trying to find a buyer before you close on it. Many people have been able to write a contract “subject to a successful closing” for a purchaser to buy it from you as soon as you close, aka a dual closing. Another option that’s tried & proven is to find someone who wants to buy the unit, add them to your P&SA so you close with them on your title. Have them get the loan in their name, & have them give you a refund for your earnest money before you close. Then as soon as you close QUITCLAIM it to them- a simple form & $10 charge at any title company. Only one closing happens & they will already be on title & loan. Have them pay the closing costs & loan origination fees, since they will end up owning the home. By this method you at least end up not losing anything or ending up stuck with having to list & sell a home!! Simple!!

• 27 Foster // Jul 23, 2007 at 11:01 pm

  Okay, now I will say something.

  Jo advised on July 20th: “My advice: goto the developer. If the unit is worth more than you paid for it, they will gladly let you out of your contract. It’s free money to them.”

  This is certainly not always the case. I know of a builder here in town who sold a unit to someone on opening day of presales, and then when the person found out they were unable to stay in Seattle and would be moving, the builder offered to MAYBE let the person out of the contract, but only if they got to keep his earnest money.

  Bear in mind that this unit will surely sell for more, and its not like the builder has been damaged in this case. The building is still about 20 months away from completion.

  So in effect, this is an example where the builder would NOT choose to do the right thing, and would simply try to shaft you. They wish to keep the earnest money, and then sell the unit to another buyer for likely more money.. and get their earnest money as well! True, the builder has a contract and presumably has the right to keep the earnest money, but its obvious the buyer isn’t backing out to run to another project or something.

  This particular case is ongoing, and it will be interesting to see whether the builder makes the right choice. My understanding is that this person is growing quite weary of the builder’s antics. I don’t quite understand why a builder would choose this path, because as most urbnlivn readers know, word spreads fast in the Seattle condo community.

• 28 Shawna // Jul 24, 2007 at 3:29 am

  I don’t get it. If you put down earnest money for a purchase and then back out of the contract… you lose your earnest money. Pretty simple. I understand that you want the developer to have a soft heart for your extenuating circumstances, but that’s not how the business world works. You signed a contract, broke the contract and now want the developer to give you a big hug and say it’s ok? I don’t think so! We have all had to learn a lesson in life. Some are harder to learn than others. Consider this yours.

  As for this particular developer, Wysong has been more than accommodating to me. I bought the condo back in August contingent on the sale of my home. My first offer fell through leaving me to make a decision on whether or not I wanted to keep my earnest money on this particular condo. After looking at other condos in the area it was clear that none of them compared to the Press. The developer extended my contract until the home finally sold. It seemed like forever, but I was finally able to move in sometime in March.

  This was one of the best purchases I have ever made. We are truly a community here at the Press. I can’t say that for many of the other developments in Seattle. After looking at many other condos in the same price range I was thrilled to finally find the Press.

• 29 Joel // Jul 30, 2007 at 11:54 am

  Maybe “Don’t buy stuff you cannot afford” should be “Don’t buy things that don’t exist yet”.

  Jo:
  “…they simply have to relocate which means to keep their unit in Seattle they would have to pay two mortgages.”

  Who ever said anything about two mortgages?

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