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]
K91, what you cite there seems pretty narrow…we are talking about contracts to buy new condos that were so tight that a mortgage contingency wasn’t even allowed in there. What is the likelihood that there was not written agreement regarding what to do with the escrowed funds that are the subject of your form? I’m pulling this out of my ass, but it I would guess that the subject contracts specifically said that the downpayments held in escrow would be turned over and become the property of the developer/sponsor if for whatever reason not caused by the developer/sponsor the buyer didn’t go through with the purchase. If any type of provision is made regarding what to do with the escrowed funds in the contract, then the provision you cite does not apply.
ITM- that’s a little disingenuous. If you’re buying a place and you’re told this is how it will be done, AND especially when all other factors look good, you may not feel you have the option to say no. Don’t forget- the Phams had gotten mortgage approval- it was the bank, that after everything was done changed the terms. I think, under the circumstances they should get their deposit back- they acted in good faith. It wiped them out- and they did nothing wrong.let the developer and the bank duke it out.
ITM…it has nothing to do with a “claim to future seller/developer income.” Its in the language dealing with the deposit escrow.
And, you took the second phrase out of context..it was “the developer made them sign contracts that did not allow for a mortgage contingency” I didn’t say they were forced to sign a contract, I said they had to sign one (of their own free will) that did not allow for a mortgage contingency. It says so in the story.
ITM, it didn’t sound like the Phams “walked away from a deposit”, instead, it seemed more like they lost it despite all efforts to continue with the sale. That said, I can’t speak to the veracity of Dave’s statement about the Phams being entitled to any $$ back.
DIBS – you said: “Yes, Snappy…up to the size of the deposit. If they contracted to buy it at $950k and put up $95k, they, theoretically would get money back as long as TB sold it for more than $855k. TB may have thrown in other fees that would get taken out as well.”
I am invloved with the development of “for sale” residential real estate and have never heard of a former buyer, one that walked away from a deposit, having any claim to future seller/developer income. Is this what you are stating? If so, would you be able to provide me with a sample of contract langauge that provides for such a claim? Thanks.
Also, your statement that “the developer made them sign contracts” is a little over the top. Developers never force buyers to do anything they don’t want to. Contracts are always entered into by two willing and able parties.
Down Payment Dispute Form:
http://www.oag.state.ny.us/bureaus/real_estate_finance/pdfs/etf_1_application.pdf
If there is no written agreement between the parties to release the escrowed funds, the escrow agent shall not pay the funds to the sponsor until the escrow agent has given the purchaser written notice of not fewer than 10 business days. Thereafter, the funds may be paid to the sponsor unless the purchaser has already made application to the Department of Law pursuant to the dispute resolution provisions contained in these regulations and has so notified the escrow agent in accordance with such provisions.
> “The Phams…live in a two-bedroom in Hoboken… they borrowed on their
> equity there to help put together the deposit on the new apartment.”
[sound of head exploding]
BKNY, “plain and simple people” is perhaps the nicest understatement/euphemism imaginable when speaking of the old owners! And yes, the fact that they had two children living in such filth and unsafe conditions was mortifying. At least the kids were gone before the maggots appeared. Sigh.
What is involved in a down payment dispute?