New condominium question...

**MCHOI** · 10-15-2008, 10:29 PM

Back in 2006, my parents decided to get a new condo. It was supposed to be built in 2008. Now that the market is so low, we're afraid that if we purchase the condo at the price agreed upon two years ago, we would be paying too much for it. My parents would like to back out of the deal.

Here is the catch, we put down a 10% deposit two years ago. Is there any way to get this back?

Thanks in advance

**Mike Taylor** · 10-16-2008, 03:15 AM

Without seeing your contract it is impossible to know, but my best guess is no. These contracts are written to protect the developer, not the buyer. You might want to check if there is some sort of clause in the contract about it appraising at or above the purchase price.

**LookRealty** · 10-16-2008, 10:36 AM

You might have the condo appraised and then see if you feel it is worth it to loose the 10%, that is if the contract is secure for that. You may be able to renegotiate as well by playing the cards that if they don't except a more reasonable offer for this market that you are willing to loose the 10% and/or that they could put in incentives.

Mike is right that you'll have to read through the contract thoroughly to see what happens to the deposit. Generally after all this time it does go to the developer..... but there are Land Act Title laws that protect you so if they did not follow through with the State laws you may be able to back out and take your money.

Best of luck,

John Perkins
LookRealty
Blog and Stat Site

**MCHOI** · 10-17-2008, 02:09 PM

After reading through the contract, it does state that I will have to forfeit 5% (half of my deposit) plus additional fees (which aren't exactly stated in the contract). At this point, I think it is better to lose the 5% and back out because they aren't willing to re-negotiate the price or throw in any incentives. I am not aware of any state laws that can help me from this situation. I live in California, anyone have any ideas?

Thank you

**LookRealty** · 10-17-2008, 02:58 PM

Well a purchase contract is what it is. Its supposed to secure you the home from others taking it right? But it also has a risk and that is possible loss of deposit which is fair to the developer who could have sold it to someone who "Stuck" with the contract right?

So here are other points.
1. Did they complete their part of the contract ie timelines, all features, no issues with the home. If they haven't completed all issues on the home then you may have a case.
2. Have the home inspected by a Home Inspector and find out whats wrong with it. If there are things you may at that point have the ability to negotiate. I know of a situation in which the grading was done wrong and would have cost the Developer $20,000 to fix. The Buyers exited the contract with their deposit as the Developer did not want to redo the home and risk.
3. If there is an 80/20 loan it is possible the bank will not allow it to fund unless the price is dropped. They don't want to risk a homeprice lower than sales price and end up in Shortsale should something happen.
4. Did you prove that the value "is" in fact worth less now? Some areas are very secure. Not all homes are below value. Think it through as you may still have a great home. Are others continuing with their purchase in the development. Consider everything before making a wrong decision either way.
5. If I had a home that I liked and paid $15,000 more than the market I would be happy because I have the home I want. Interest rates are important as well. Do you have an interest rate so low that it would offset this $15,000 to essentially have it "Really" be a $10,000 overage? Plus, the value will increase again past that point generally and may be the "Best" home I could have invested in even at a higher price. This is a key aspect to me.

Hope you have a chance to review all options and really make the right decision. Don't just jump for one aspect (ie the homes value is now $5,000 less). If you found a comparible home at say $50,000 less then yeah, I would consider loosing 5% to make a $45,000 possible future profit. Again, it has to be truly comparible.

All the best,

John Perkins
HomeSpecial

**MCHOI** · 10-17-2008, 04:16 PM

The condo was supposed to be finished by September of this year. However, I am being told that move in expected to be late November. I am not sure if that makes any difference (since it is only two months). In terms of comparing the price to other similar units in the area, I wasn't able to do so because this condo is actually the first in the area. I have been told that another developer is coming in next year, but I havent found any other similar condos in the area.

**LookRealty** · 10-17-2008, 04:38 PM

1. When I said "have the condo appraised" I meant by an official appraiser licensed by the state you are in. Being an Agent I suggest Home Buyers and Sellers check for information but not rely completely on it because it generally is not from professional sources (ie Zillow.com or just by checking "what's for sale" in the area. Both of which are extremely flawed and I'll stake my pay check on it will not work). You need a professional that does this for a living and knows how to value homes.

2. The fact that they haven't completed the project could be an issue. If it is in the contract that they can delay then maybe it's fine. You'll have to check your local laws in regards to this or www.DRE.CA.GOV to see what the rules are including how the contract is structured.

3. Is hiring a Real Estate Lawyer worth it? Maybe. You'll have to decide this.

4. "I have been told that another developer is coming in next year". Have whomever said this to you from the company put this is writing. If this does not occur then they are basing the value on potential future developments. This can go in your favor.

5. You will have to be diligent in your efforts to protect your family. It requires a lot of evaluation and decisions. Do you hire a lawyer?, Do you hire a Real Estate agent by the hour to help you discover the truth which may cost less but may not provide (complete results if they are unaware of the laws)? Do you hire and appraiser?, Do you hire an Inspector?, Is the contract being fufilled and does that make it valid or invalid? What is the State CLTA say? What are the rules that bind the Developer... Have they properly filed the correct paperwork with the State? They are required to be on time with certain documents. If they do not they can be fined and/or it lets you out of the contract.

My suggestion at this point is to take my questions and answer all of them for yourself. Then contact a Real Estate Lawyer and discuss your options and costs as well. Bottom line is it worth the 5% loss or will it cost more in fees to hire a lawyer?

If it were me even as a Professional myself, I'd hire an Appraiser asap and then use that data to make my decision. Even second opinions are worth something to me.

All the best,

John Perkins
HomeSpecial.com