Moda Goes Apartments – What Happened To The Buyer?

Seattle PI reports Project’s developers make switch from condos to rental apartments.

How does Moda go from 15% of units falling through to so many falling through that they need to go rental? Was the building way more investors than actual home buyers? Or was it mainly first time home buyers who were putting 0% down?

Are there any readers who purchased there? What’s the inside scoop?

Alright, who’s going apartments next?

About Matt

Matt , Urbnlivn's publisher, has a love for lofts, floating homes and mid-century moderns.

For years Matt resisted becoming a real estate agent preferring to be an executive in the startup world but he recently caved in the spring of 2014 and became an agent.

You can also find Matt on Twitter or skiing.

  • Jon Hunter

    Belltown project shows how condo market has changed
    By LYNN PORTER
    Journal Real Estate Editor

    Moda, a Belltown condo project that created a buzz with pint-size units at below-market prices, will become an apartment complex because most of the potential buyers backed out, according to the developer.

    The 251-unit moda Apartments on Third Avenue between Battery and Bell streets is slated to open in October, said David Hoy of HMI Real Estate of Mercer Island.

    The moda developer is 2312 LLC, an affiliate of HMI.

    Demand was so strong that in September 2006 when the developer started presales that within a week potential buyers had dibs on all the units, most with reservations, some with purchase-and-sale agreements.

    But this year when the developer approached those holding reservations to sign purchase-and-sale agreements and put down earnest money, only a handful agreed, he said.

    The vast majority of them backed out, leaving us high and dry, said Hoy.

    The market had changed, he said. Tighter lending standards due to the subprime crisis, including the requirement for larger down payments, a poor national economy and the fear of buying into a soft condo market left potential buyers skittish, Hoy said. Some also were concerned that the already small units would end up even smaller due to design changes that, for instance, meant some 296-square-foot units would be 251 square feet.

    The developer sent a notice on Aug. 5 to the few people with signed purchase-and-sale agreements that it wasn’t moving forward with the condos, Hoy said.

    The Seattle Condo Blog on Aug. 8 reported that the moda would be apartments.

    In the fall of 2006, hundreds of potential buyers were drawn to the lower than average prices for the units, which started at $149,000 for 296 square feet.

    By the time 2312 LLC approached buyers to sign on the dotted line this year, they said oh the square footage is too low’ or the financing market had changed where they had to put more money down or there was just a change in the economy, Hoy said.

    Construction on moda two stories of concrete and steel, with five stories of wood-frame above began in October of 2006. It is being built to condo standards with high-end finishes, which gives the developer the ability to convert it back to condos down the road, Hoy said.

    A number of other apartment complexes are planned for Belltown, including Harbor Properties’ 17-story, 185-unit project at Third Avenue and Cedar Street; Pine Street Group’s two-tower, 650-unit development on the west side of Sixth Avenue between Lenora and Blanchard streets; and Laconia’s 32-story, 283-unit project at Sixth Avenue and Wall Street.

    Hoy said rents in moda will be more competitive than in those projects because moda isn’t high-rise and many of its units will be smaller. Rents haven’t been set yet, he said.

    In September of 2006, a crowd showed up at the presale offering of the moda condos, and reservations were quickly put down on the units. Some people intended to use them as second homes. Others jumped at the chance to buy a lower-than-market condo after being priced out of other projects.

    Demand was so strong that the developer cancelled a broker’s open house.

    It is unfortunate, said Hoy, that from the time that we sold out in less than a week and today it’s like day and night.

  • Jon Hunter

    Belltown project shows how condo market has changed
    By LYNN PORTER
    Journal Real Estate Editor

    Moda, a Belltown condo project that created a buzz with pint-size units at below-market prices, will become an apartment complex because most of the potential buyers backed out, according to the developer.

    The 251-unit moda Apartments on Third Avenue between Battery and Bell streets is slated to open in October, said David Hoy of HMI Real Estate of Mercer Island.

    The moda developer is 2312 LLC, an affiliate of HMI.

    Demand was so strong that in September 2006 when the developer started presales that within a week potential buyers had dibs on all the units, most with reservations, some with purchase-and-sale agreements.

    But this year when the developer approached those holding reservations to sign purchase-and-sale agreements and put down earnest money, only a “handful” agreed, he said.

    “The vast majority of them backed out, leaving us high and dry,” said Hoy.

    The market had changed, he said. Tighter lending standards due to the subprime crisis, including the requirement for larger down payments, a poor national economy and the fear of buying into a soft condo market left potential buyers skittish, Hoy said. Some also were concerned that the already small units would end up even smaller due to design changes that, for instance, meant some 296-square-foot units would be 251 square feet.

    The developer sent a notice on Aug. 5 to the few people with signed purchase-and-sale agreements that it wasn’t moving forward with the condos, Hoy said.

    The Seattle Condo Blog on Aug. 8 reported that the moda would be apartments.

    In the fall of 2006, hundreds of potential buyers were drawn to the lower than average prices for the units, which started at $149,000 for 296 square feet.

    By the time 2312 LLC approached buyers to sign on the dotted line this year, “they said ‘oh the square footage is too low’ or the financing market had changed where they had to put more money down or there was just a change in the economy,” Hoy said.

    Construction on moda — two stories of concrete and steel, with five stories of wood-frame above — began in October of 2006. It is being built to condo standards with high-end finishes, which gives the developer the ability to convert it back to condos “down the road,” Hoy said.

    A number of other apartment complexes are planned for Belltown, including Harbor Properties’ 17-story, 185-unit project at Third Avenue and Cedar Street; Pine Street Group’s two-tower, 650-unit development on the west side of Sixth Avenue between Lenora and Blanchard streets; and Laconia’s 32-story, 283-unit project at Sixth Avenue and Wall Street.

    Hoy said rents in moda will be more competitive than in those projects because moda isn’t high-rise and many of its units will be smaller. Rents haven’t been set yet, he said.

    In September of 2006, a crowd showed up at the presale offering of the moda condos, and reservations were quickly put down on the units. Some people intended to use them as second homes. Others jumped at the chance to buy a lower-than-market condo after being priced out of other projects.

    Demand was so strong that the developer cancelled a broker’s open house.

    “It is unfortunate,” said Hoy, “that from the time that we sold out in less than a week and today it’s like day and night.”

  • http://twitter.com/mattgoyer mattgoyer

    I guess going with reservations was a really bad call!

  • http://blog.mattgoyer.com Matt

    I guess going with reservations was a really bad call!

  • Rick Smith

    My wife and I reserved a unit at the Sales Center when MODA sold out. To reserve a unit we were required to put down 5% earnest money, as did everyone who reserved a unit was also required to do. We backed out of our unit, not due to financing issues, but due to the significant change in square footage. This was going to be a second home for us and we reserved unit 309, which was 338 square feet. We did not recieve the public offering statement for more than 1 1/2 years following the initial paperwork, which included the required the 5% earnest payment. When we received the POS, we saw our unit decreased in square footage by over 10%, from 338 square feet to 302 square feet. The decrease in square footage raised the cost per square foot from $479 per square foot to $536 per square foot. This was no longer acceptable, as the company had not been forthcoming with the reduction in the square footage even when we would ask direct questions regarding any changes in the unit. We were not told about the reduction, but found out when we received the POS. In our opinion the developer withheld pertinent information about the project, and that is why we, and most likely many others, backed out. We would never recommend working with this developer, as he appears to be duplicitous in his dealings.

  • Rick Smith

    My wife and I reserved a unit at the Sales Center when MODA sold out. To reserve a unit we were required to put down 5% earnest money, as did everyone who reserved a unit was also required to do. We backed out of our unit, not due to financing issues, but due to the significant change in square footage. This was going to be a second home for us and we reserved unit 309, which was 338 square feet. We did not recieve the public offering statement for more than 1 1/2 years following the initial paperwork, which included the required the 5% earnest payment. When we received the POS, we saw our unit decreased in square footage by over 10%, from 338 square feet to 302 square feet. The decrease in square footage raised the cost per square foot from $479 per square foot to $536 per square foot. This was no longer acceptable, as the company had not been forthcoming with the reduction in the square footage even when we would ask direct questions regarding any changes in the unit. We were not told about the reduction, but found out when we received the POS. In our opinion the developer withheld pertinent information about the project, and that is why we, and most likely many others, backed out. We would never recommend working with this developer, as he appears to be duplicitous in his dealings.

  • http://Equinoxcondos.com REGUY

    Equinox on lake union is going to go apartments next is my guess. They have to. Way to expensive of a product for what you get. They are 28% sold and havent had a bite all year. They are getting rocked.

  • http://Equinoxcondos.com REGUY

    Equinox on lake union is going to go apartments next is my guess. They have to. Way to expensive of a product for what you get. They are 28% sold and havent had a bite all year. They are getting rocked.

  • EconE

    1. How is it that you guys are able to find out what percentage of condos in a yet-to-be-completed project have sold?

    2. What percentage (of these low percentages) are flippers? How many will back out after seeing that most flippers (as of late) are getting creamed?

  • EconE

    1. How is it that you guys are able to find out what percentage of condos in a yet-to-be-completed project have sold?

    2. What percentage (of these low percentages) are flippers? How many will back out after seeing that most flippers (as of late) are getting creamed?

  • http://twitter.com/mattgoyer mattgoyer

    The site agents all talk to each other and compare numbers. You can also purchase the Fat Report, http://www.fatreport.com, which presumably calls around to all the sales centers to get numbers.

  • http://blog.mattgoyer.com Matt

    The site agents all talk to each other and compare numbers. You can also purchase the Fat Report, http://www.fatreport.com, which presumably calls around to all the sales centers to get numbers.

  • Chris

    New Home Trends has a summary as well for purchase

  • Chris

    New Home Trends has a summary as well for purchase

  • http://eee.Equinoxcondos.com bossman

    You know people in the industry. But my guess is they need to convert. Also, I know a buyer in Equinox and they want to get the buyers together and file a class action suit. Sounds like a lot of those buyers want out. How can you blame them, nothings selling and they paid too much and if you have looked around the message boards, it sounds like a lot of them got ripped off or got tricked into waiving financing contingencies because of a pre-approval that was way too high to begin with. No way can buyers get that rediculous financing anymore. Oh well, they can deal with it.

  • http://eee.Equinoxcondos.com bossman

    You know people in the industry. But my guess is they need to convert. Also, I know a buyer in Equinox and they want to get the buyers together and file a class action suit. Sounds like a lot of those buyers want out. How can you blame them, nothings selling and they paid too much and if you have looked around the message boards, it sounds like a lot of them got ripped off or got tricked into waiving financing contingencies because of a pre-approval that was way too high to begin with. No way can buyers get that rediculous financing anymore. Oh well, they can deal with it.

  • Affluent Bitter Renter

    “it sounds like a lot of them got ripped off or got tricked into waiving financing contingencies”

    Forgive me my lack of sympathy – if you waive financing contingencies, you have only yourself to blame.

  • Affluent Bitter Renter

    “it sounds like a lot of them got ripped off or got tricked into waiving financing contingencies”

    Forgive me my lack of sympathy – if you waive financing contingencies, you have only yourself to blame.

  • jon

    Affluent Renter – No developer would allow you to keep your financing contingency in place till closing. That would be absolutely ridiculous and would not have received Mutual Acceptance.

    You should have sympathy for the buyers… they bought thinking the market was going to continue up, hoping to cash in on 2005 pricing for 2008 products, and lost.

    Sadly, that doesn’t make them bad people, or even people that make bad decisions… it makes them human.

  • jon

    Affluent Renter – No developer would allow you to keep your financing contingency in place till closing. That would be absolutely ridiculous and would not have received Mutual Acceptance.

    You should have sympathy for the buyers… they bought thinking the market was going to continue up, hoping to cash in on 2005 pricing for 2008 products, and lost.

    Sadly, that doesn’t make them bad people, or even people that make bad decisions… it makes them human.

  • Mark W

    Hoping to cash in on 2005 pricing for 2008 products certainly doesn’t make them bad people. But it’s also no reason to have sympathy for them. Buying anything that far ahead has a bit of a gamble to it. Gamblers don’t always win.

  • Mark W

    Hoping to cash in on 2005 pricing for 2008 products certainly doesn’t make them bad people. But it’s also no reason to have sympathy for them. Buying anything that far ahead has a bit of a gamble to it. Gamblers don’t always win.

  • Affluent Bitter Renter

    “No developer would allow you to keep your financing contingency in place till closing. That would be absolutely ridiculous and would not have received Mutual Acceptance.”

    It sounds as if these people waived financing contingencies a long time before closing. I don’t particularly object to people speculating on condo purchases, but I also don’t feel a great deal of sympathy – speculation doesn’t always work out.

  • Affluent Bitter Renter

    “No developer would allow you to keep your financing contingency in place till closing. That would be absolutely ridiculous and would not have received Mutual Acceptance.”

    It sounds as if these people waived financing contingencies a long time before closing. I don’t particularly object to people speculating on condo purchases, but I also don’t feel a great deal of sympathy – speculation doesn’t always work out.

  • http://eee.Equinoxcondos.com REGUY

    Affluent Renter…jon is right. No developer would allow you to keep your financing contingency in place till closing. The developer would be taking all of the risk. Having said that, yes, the buyer MUST waive the financing contingency. When the developer and preferred lender “pre-screen” the buyer for a loan, the buyer thinks he WILL get the loan, therefor waives his contingency, but when the “pre-screens” are done with next to no standards and it turns out that they wont loan the buyer the amount they said they would and the buyer cant afford to put down more than they forecasted, that is absolutely not the buyers fault. It is theft. The buyer was lied to. And guess what…the developer takes the poor guys money! Its unethical corruption on the part of the bank and the dveloper. This needs to change. Middle class buyers are getting screwed by these people and that is a flaw with the “waived” financing contingency. Im sorry, but you must have sypathy for the buyer and something needs to stop this. We all have seen the horrible corruption on the banks and developers parts. It is hardly “speculation”.

  • http://eee.Equinoxcondos.com REGUY

    Affluent Renter…jon is right. No developer would allow you to keep your financing contingency in place till closing. The developer would be taking all of the risk. Having said that, yes, the buyer MUST waive the financing contingency. When the developer and preferred lender “pre-screen” the buyer for a loan, the buyer thinks he WILL get the loan, therefor waives his contingency, but when the “pre-screens” are done with next to no standards and it turns out that they wont loan the buyer the amount they said they would and the buyer cant afford to put down more than they forecasted, that is absolutely not the buyers fault. It is theft. The buyer was lied to. And guess what…the developer takes the poor guys money! Its unethical corruption on the part of the bank and the dveloper. This needs to change. Middle class buyers are getting screwed by these people and that is a flaw with the “waived” financing contingency. Im sorry, but you must have sypathy for the buyer and something needs to stop this. We all have seen the horrible corruption on the banks and developers parts. It is hardly “speculation”.

  • **

    REGUY, can pre-sale purchasers do anything except either come up with more of a down payment and close or lose their whole earnest money if they purchased presale under the pre-screening standards that were in place before? Any suggestions on what to do if you are in this situation?

  • **

    REGUY, can pre-sale purchasers do anything except either come up with more of a down payment and close or lose their whole earnest money if they purchased presale under the pre-screening standards that were in place before? Any suggestions on what to do if you are in this situation?

  • Mark W

    What if anything does the contract say about whether the pre-screening guarantees an actual loan? Does it say anything like “pre-screening does not guarantee that a loan will be available at closing time”? Whether or not the buyers were lied to may depend a lot on the language of the contract.

    If the contract states that that these pre-screened loans are not guaranteed, then it is up to the buyer to have contingency plans, ESPECIALLY if the developer won’t agree to a financing contingency in the contract.

    If the buyer isn’t comfortable with the responsiblities that come with waiving a financial contingency, the buyer shouldn’t sign the agreement.

  • Mark W

    What if anything does the contract say about whether the pre-screening guarantees an actual loan? Does it say anything like “pre-screening does not guarantee that a loan will be available at closing time”? Whether or not the buyers were lied to may depend a lot on the language of the contract.

    If the contract states that that these pre-screened loans are not guaranteed, then it is up to the buyer to have contingency plans, ESPECIALLY if the developer won’t agree to a financing contingency in the contract.

    If the buyer isn’t comfortable with the responsiblities that come with waiving a financial contingency, the buyer shouldn’t sign the agreement.

  • **

    “If the contract states that that these pre-screened loans are not guaranteed, then it is up to the buyer to have contingency plans, ESPECIALLY if the developer won’t agree to a financing contingency in the contract.”

    Yes this is what it says in the contract. So, there is nothing that can be done at this point other than to lose the Emoney.

  • **

    “If the contract states that that these pre-screened loans are not guaranteed, then it is up to the buyer to have contingency plans, ESPECIALLY if the developer won’t agree to a financing contingency in the contract.”

    Yes this is what it says in the contract. So, there is nothing that can be done at this point other than to lose the Emoney.

  • Mark W

    Reguy writes: “When the developer and preferred lender “pre-screen” the buyer for a loan, the buyer thinks he WILL get the loan, therefor waives his contingency, but when the “pre-screens” are done with next to no standards….”

    Assuming that the lender provided loans for other buyers and not just those buyers associated with this developer, did the lender use lower standards for the Equinox buyers as they did for other buyers? If so, that might support a “tricked” argument; if not, then it hard to make the “no standards” argument.

    Were buyers required to use the lender in question? If so, I could see how some buyers might read more into their pre-approvals. If not, then the buyer was no more committed to the lender than the lender was to the buyer.

    How many of the complaining buyers took themselves out of loan qualification? Obviously the current financial mess has resulted in tighter lending criteria, but even under normal circumstances some buyers take on additional debt or have lower household income than what was the case at the time of their initial approval or pre-approval, and the changes are enough to disqualify them. Most experienced realtors have run into this once or twice. Though I doubt this is the case for most Equinox buyers, if they’re going to organize they’ll want to make sure their spokesperson hasn’t undergone a 10% pay cut or some such thing.

    Not that I think organizing will get them very far.

  • Mark W

    Reguy writes: “When the developer and preferred lender “pre-screen” the buyer for a loan, the buyer thinks he WILL get the loan, therefor waives his contingency, but when the “pre-screens” are done with next to no standards….”

    Assuming that the lender provided loans for other buyers and not just those buyers associated with this developer, did the lender use lower standards for the Equinox buyers as they did for other buyers? If so, that might support a “tricked” argument; if not, then it hard to make the “no standards” argument.

    Were buyers required to use the lender in question? If so, I could see how some buyers might read more into their pre-approvals. If not, then the buyer was no more committed to the lender than the lender was to the buyer.

    How many of the complaining buyers took themselves out of loan qualification? Obviously the current financial mess has resulted in tighter lending criteria, but even under normal circumstances some buyers take on additional debt or have lower household income than what was the case at the time of their initial approval or pre-approval, and the changes are enough to disqualify them. Most experienced realtors have run into this once or twice. Though I doubt this is the case for most Equinox buyers, if they’re going to organize they’ll want to make sure their spokesperson hasn’t undergone a 10% pay cut or some such thing.

    Not that I think organizing will get them very far.

  • Clang

    At the end of the day it is a 5% earnest money at stake for not closing. I would bet Equinox has seen a 15% to 20% reduction in value since it went to market. Although the 5% earnest money is a lot to lose, it really does not compare to the loss realized upon closing at 2006 pricing. Cut your losses and buy in a project that has adjusted to the new market.

  • Clang

    At the end of the day it is a 5% earnest money at stake for not closing. I would bet Equinox has seen a 15% to 20% reduction in value since it went to market. Although the 5% earnest money is a lot to lose, it really does not compare to the loss realized upon closing at 2006 pricing. Cut your losses and buy in a project that has adjusted to the new market.

  • EconE

    I think that this is a tough situation, and one that I feel we will see over and over again.

    Although I usually side with the consumer, this time I feel that it is a two way street due to unforeseen (to most) circumstances.

    Is it really worth it for both sides to throw money at attorneys to solve the problem? Who benefits the most? The buyers? The sellers? The attorneys?

    Perhaps there is a way that they could meet in the middle. I’m not sure what that way is…but really…there has to be one.

    Could the people who can’t qualify receive an option to rent the unit they were to close on?

    Assuming that renting would cost them less than mortgage payments, could this possibly allow them time to save additional funds, build up their credit score, find another job if they had been laid off, etc. thus allowing them to qualify at a later date?

  • EconE

    I think that this is a tough situation, and one that I feel we will see over and over again.

    Although I usually side with the consumer, this time I feel that it is a two way street due to unforeseen (to most) circumstances.

    Is it really worth it for both sides to throw money at attorneys to solve the problem? Who benefits the most? The buyers? The sellers? The attorneys?

    Perhaps there is a way that they could meet in the middle. I’m not sure what that way is…but really…there has to be one.

    Could the people who can’t qualify receive an option to rent the unit they were to close on?

    Assuming that renting would cost them less than mortgage payments, could this possibly allow them time to save additional funds, build up their credit score, find another job if they had been laid off, etc. thus allowing them to qualify at a later date?

  • newbuyer

    I think these are excellent points, EconE. I don’t know why developers aren’t willing to negotiate on this.

  • newbuyer

    I think these are excellent points, EconE. I don’t know why developers aren’t willing to negotiate on this.

  • Mark W

    Before the credit market froze, commodity prices were soaring, which would have impacted the developer a lot during construction. If that’s where things stood today, do you thing buyers would renegoitate to make up for the developer’s bad luck?

    We don’t know whether the developer is wiling to negotiate or not. We don’t know how many buyers are having problems getting financing. So far we haven’t been given any evidence that developer is failing to deliver on its contracted obligations to the buyers.

    The builder may or may not be everything described in some of the posts here. But if the buyer signed the agreement without a loan guaranty and without a financing contingency, then the buyer found those terms to be acceptable. They didn’t have to sign the agreement. And given that housing bubble speculation was becoming a regular feature in the Times and P-I in 2005, perhaps they shouldn’t have.

  • Mark W

    Before the credit market froze, commodity prices were soaring, which would have impacted the developer a lot during construction. If that’s where things stood today, do you thing buyers would renegoitate to make up for the developer’s bad luck?

    We don’t know whether the developer is wiling to negotiate or not. We don’t know how many buyers are having problems getting financing. So far we haven’t been given any evidence that developer is failing to deliver on its contracted obligations to the buyers.

    The builder may or may not be everything described in some of the posts here. But if the buyer signed the agreement without a loan guaranty and without a financing contingency, then the buyer found those terms to be acceptable. They didn’t have to sign the agreement. And given that housing bubble speculation was becoming a regular feature in the Times and P-I in 2005, perhaps they shouldn’t have.

  • Craig Tymony Jr

    Well I’m glad I’m not the only person who left Moda hanging high and dry. I dealt with the same issue that Rick Smith did. I recieved my POS and realized that my sq. footage had shrank, they rearranged the total layout of my unit, had it sitting over the garage door of the entire building, and turned my ceiling into some sort of loft look…..not appealing for a condo the size of a shoe box. All that and they still expected me to sign for the same agreed price….lol…yea right! I am perfectly satisfied with what happened to them, they were a little to smug and arrogant for my taste. Perhaps they will not try to screw people anymore….Kharma is always a beast.

  • Craig Tymony Jr

    Well I’m glad I’m not the only person who left Moda hanging high and dry. I dealt with the same issue that Rick Smith did. I recieved my POS and realized that my sq. footage had shrank, they rearranged the total layout of my unit, had it sitting over the garage door of the entire building, and turned my ceiling into some sort of loft look…..not appealing for a condo the size of a shoe box. All that and they still expected me to sign for the same agreed price….lol…yea right! I am perfectly satisfied with what happened to them, they were a little to smug and arrogant for my taste. Perhaps they will not try to screw people anymore….Kharma is always a beast.

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