That's Me In The Corner, Losing My Deposit
While there have been a few tales of people voluntarily walking away from their down payments because their equity was already annihilated before it was time to close, there’s another side to the coin: Those people who are involuntarily losing their deposits because the declining market is causing banks to require buyers put up more…
While there have been a few tales of people voluntarily walking away from their down payments because their equity was already annihilated before it was time to close, there’s another side to the coin: Those people who are involuntarily losing their deposits because the declining market is causing banks to require buyers put up more than their original 10 percent. And in many cases, the buyers can’t come up with the extra cash so they are losing what they already put down. In these cases, the developer gets to keep the cash, but has to go out and try to resell the apartment at much lower prices. The poster children for this phenomenon are the Pham family, who scraped together every last penny they had to put down $93,199 on a two-bedroom condo in Hoboken in 2005; when it came time to finally close last fall the they found they were going to need to put up another $150,000 or so. It would take us another 15 years to save that money again, Ms. Pham said. End of story: The Phams remain in their old apartment and Toll Brothers keeps the dough. Another buyer had a slightly better ending: They were able to end up buying a smaller unit than the one they were originally in contract for from the same developer. Anyone know instances of this type of thing happening in Brooklyn?
Up in Smoke: The Deposit Vanishes [NY Times]
Mopar and all;
I once again refer you to my post above. I purchased a Boymelgreen-Katan condo almost 4 years ago to the day, right in the thick of the bubble. AT NO TIME did they propose a contract with no contingencies. It is simply not true that everyone was demanding no contingency contracts at that time.
That photo of Dr. Beitler on Page 2 with the Obama image in the background is the money shot. “Save us!”.
“‘We felt that this was through no fault of their own, so we offered them 20 percent of their deposit back, even though we had no requirement to do so,’ Mr. Gladstone said in a statement.”
Only 20%? “Sad Satisfaction”? ROTFLMMFAO.
***Bid half off peak comps***
I bought late last year, right at the start of the collapse, and I walked away from my deal when the seller tried to insist on no mortgage contingency. A day later, they came back and agreed to my terms.
This was a single unit resale, so obviously people’s MMV, but all the advice I got from all the RE professionals and homeowners I spoke to, even when I first started looking during the bubble, was not to move forward on any deal without a contingency. Even though I knew I’d 99% likely get a mortgage, I’m glad I insisted.
(For myself, I really don’t understand the allure of buying an apartment I can’t live in for two years under ANY circumstances! But that’s another story.)
This is simply untrue:
Mopar: “Before the October meltdown it was completely standard to sign a contract with no mortgage contingency. It may not have been reasonable, but no seller would allow one.”
As a buyer/seller in 2006, I can assure you there were contingencies in both contracts.
And yes, daveinbedstuy, mortgage commitment letters don’t last indefinitely.
And northsloperenter, I concede that ‘atypical’ buyers play a part in driving-up prices during a bubble. But I think that only explains the spike in condo prices – where financial shennanigans were allowed/encouraged. It doesn’t explain the rise in co-op prices where you couldn’t get past a board with the type of financing the Phams attempted. I suppose a rising tide lifts all boats, but the % of condos in NYC remains quite small relative to co-ops.
I also disagree with your assessment that this story will somehow convince prospective buyers to avoid this developer & this bank: your ‘average (relatively naive)’ buyer wouldn’t even be aware of this incident…
And a well-informed buyer would never have entered-into this contract in the first place.
> “I would urge anyone buying a place with less than 20 percent to…”
…wait until they have 20% saved up before they buy?
Time to get back to fundamentals, kids.
> ‘it was completely standard to sign a contract with no mortgage contingency”
Really? Almost nobody I know would agree to those terms. Then again almost nobody I know would by an unbuilt condo based on drawings and snake oil.
I’m surprised by the direction the top posts are taking. Before the October meltdown it was completely standard to sign a contract with no mortgage contingency. It may not have been reasonable, but no seller would allow one. Now, of course, that’s no longer the case.
The poor people in this article are caught between two markets.
I know of one house in Bushwick where the contract was signed more than five months ago and to my knowledge it still has not closed. They’re not having a problem with the mortgage, but they can’t get PMI.
I would urge anyone buying a place with less than 20 percent to get a PMI contingency in addition to the mortgage contingency.
4) They are clearly asshats
Let’s recap:
1) They only had 10% to put down.
2) They tapped the equity in their current apartment to put down that 10%, so they didn’t really have even that 10%.
3) They signed a non-contingent contract on an unfinished property when their mortgage was only pre-approved for an short time period.