Losing Everything If Unable To Close.
Has anyone here had any firsthand experience or known of anyone who has lost their 20% down payment/deposit on a pre construction condo deal which they were unable to close on because they could not obtain any sort of "bridge" loan (or whatever term is used ) and thereofre had to forfeit their 20% downpayment/deposit due to breach of contract ? I have heard all about how this COULD happen,,,,,,but never have I heard of it actually happening to anyone ,,,,,,have you ?? Please advise ,,, Thank you 
If the contract did not have a contingency clause stating that the buyer must be able to obtain a loan,,,then they might well be out of luck. But I would go to arbitration or an attorney to try to get my money back. Who wrote the contract?
I have never heard of an actual loss of a deposited downpayment on a condo not yet constructed.
However I have seen a few disturbances.
25 years ago just south of the Sunset Strip a bunch of condos were begun and a red hot investor went in on a sweetheart deal and put up $2,000 a piece. Had six of them. The agreed price was $28,000 and it looked like money in the bank.
However do to intense and on going finger trouble the Developer found out that his costings were about $32,000 with no margin for profit. He freaked and started waving his hands around and tried to change the price to compensate. He now wanted $40,000 per. Said he could not continue unless all the friendly pre purchases came up with more downpayments, at least another $2,000 each.and agreed to the increased price.
Well there were meetings and much incrimination on all http://www.sides.The yells could be heard all the way downtown and finaly a heavy hitter came out from R.E. Allens Office (original big shot referee in Bankruptcy)
The skinny. All of the investors got their money returned a new investor came in and made available to the Developer an additional $2,000 per unit and, this is the skinny, the price remained the same. Yes Yes, $28,000 per unit. Best part, the increased downpayments were held as a special fund. Guess what? they were never needed.
Anyhow one of my investors bought all the shares at $32,000 each upon completion and then set up and sold the condos for $45,000 each. Kept three for grinders. Last reported sales about $400,000 each.
To this day I still do not know if all the screaming for money was real or was it just a ploy to change a deal as it started to get profitable. At that time by request of the investors, I went out on the construction site and talked to the subs. They were all on time and budget. Go figure.
Very imformative. Lucius <IMG SRC="images/forum/smilies/icon_cool.gif"> <IMG SRC="images/forum/smilies/icon_cool.gif"> [ Edited by Lufos on Date 01/31/2004 ]
To help you out on obtaining your deposit is a very unknown title policy:
1. If on your deposit check you made it payable to the title company ... you are in luck.
2. You can then walk into the title company and demand return of your deposit. The title company must return the money to you.
3. At least here in California, the title companies must return your deposit.
4. If your check was made payable to the condo ... check on loan as continguency (which most contract provide buyers 7, 10, 21 days on loan approval). If you did not excees the days stated on your contract ... you are in luck.
Then point that issue out in writing to their agent or representative.
5. If all else fails ... then small claims court. Most judges understand the buyer's situations. All small claims cases I have attended for my buyers or sellers ... the buyer wins ... seller loses.
Good Luck
Cheryl Lopez
It's time to visit your attorney to see what she can do for you.
I don't know California escrow law, but i doubt that you can "just walk in and get your money back" . Title companies act as third party agents who must remain neutral else they become embroiled in the dispute. If the title company does not have a release of funds agreement signed by the parties invovlved, they're not going to release them. It may go to interpleader.
Pre-Construction condo investing is something I spend a great deal of my time on. Yes, I have heard of people walking from their 20%.
If your contract has gone "hard" and you are not able to close, you potentially can lose your 20%.
You have a few alternatives to look at first.
Most contracts in Florida with developers are not assignable, but you can still sell the contract and execute a double close. I do this all the time.
My advice to my clients is not to get into a pre-construction deal unless they can afford to close. You see, many of them buy 18 to 24 months prior to closing and with condos going up so fast in pricing, many of them assume (correctly so) they will sell at often double their initial deposit. But THIS DOES NOT ALWAYS HAPPEN!
In fact I just yesterday signed a contract to sell a condo I bought 13 months ago for $604,000 for $745,000. I had it under control for only 10% down.
$745,000 is less than the price of the new offerings on the same ondo, new building, being offered by the developer now.
I also own five more pre-construction contracts in that same complex, (In Punta Gorda) I may not be able to sell these other contracts before I have to close. If I do not close I will lose ( in my case) 10% of the purchase price. ( That is all this developer required)
I will not let this happen. I watch this very closely and have immersed myself in the community. I know, for example, that in the absoluye worst case, I can sell my contract for less than I paid for it. This would mean that I would lose something less than 10%. The most likely worse case is I only make a small return - say 10 or 20%.
If you need help , PM me and I will direct you to some resources.
Gregg
_________________
Gregg Fous
Investor/Developer
"Under-promise and over-deliver"[ Edited by GFous on Date 02/07/2004 ]
I am in the process of purchasing a builder spec house in Florida, but have not signed the papers or sent in the deposit. The 5% down is non-refundable. I am interested in finding out more about the option of selling my contract ( if prices go up ) and doing a double close. Can you steer me in the right direction as to where to do research. I am new at this. I do own 2 investment properties that are rentals doing well and would like to get into new construction in the sunbelt areas. Thanks, Fran