Flipper Alert: Buyers Walking Away From Deposits in 550 St. Clair
At least one developer is confirming that not all of its buyers are closing on units.
Mark Sutherland, of Sutherland Pearsall Development, developer of 550 St. Clair confirmed that slowing sales was the reason the company is going to build a hotel instead of a second condo tower in Streeterville. From David Roeder’s column in the Sun-Times:
Influencing the switch was difficulty Sutherland had closing out condo sales in an adjacent building, 550 N. St. Clair. He said less than 10 percent of his buyers have failed to close the sales, thus putting earnest money at risk. But Sutherland said he still has only about 20 units left in the 112-unit building.
The building only started closings two weeks ago.
We have seen the “walk-aways” in other buildings such as 600 N. Fairbanks. In that building, at least a handful of units have come back on the market from the developer.
Mish does great econ analysis. He was tlaking about a wile back.
http://globaleconomicanalysis.blogspot.com/2008/02/moral-obligations-of-walking-away.html
So these people just give up thier escrow and and walk away from the K?
I feel bad for the St. Clair! With only 112 units, the building is “boutique.” I think when all is said and done and the units are all sold and flipped, the building will be a nice addition to Streeterville. The building is pleasant looking, in a great location, and has nice amenities.
Jason, if you gave a $40K deposit and the unit already is worth $40K less, what would you do? The decision becomes easier when considering that buying and holding the unit means about a $1500/month loss after you get a tenant, along with being saddled with as illiquid an investment as could be imagined.
The amazing thing will be those who do not walk away.
Walk away. Will Comment on this later…
You have no idea the number of people that are walking away their deposits in South Florida. There are whole teams of lawyers that advertise deposit recovery services and try to find one material flaw such as a blocked view etc. to get people their money back. MASSIVE renting of condo units is now going on…or at least trying to go on since there aren’t enough renters when 40%+ of units in a building listed for lease or sale. Drive by at night and maybe 10% of lights are on if that. People are happy to give up the 15% deposit to avoid those debt-traps if they can’t get out of their contracts. I was in Florida last month and just could no believe what was going on in Miami which included beachfront, and there are more declines to come. Luxury condos have turned into nothing more than rental buildings. If this starts to happen in Chicago, there will be a lot more pain ahead, a lot more. The legal wrangling and desperation is just starting.
How I forgot to mention lawyers have been using some obscure HUD rule of registering something or another with HUD within two years to get people out of their contracts. Developers will go under.
I saw several units in the building and was amazed at how tiny the rooms are. The kitchen/living room combo will only work if your furniture if dwarf-size. I believe they only have two different cabinet options as well – a light colored one that they use for the 1bedrooms, and a dark colored option for the 2bedrooms. All of the units look identical.
I beleive occupancy on this building was suppose to be Summer 2007.
The typical contact has a closing date, and in the contract there are a number of days after the contract closing date where the buyer can walk away and get his deposit back. Anyone know the terms of the contract on this project?
Where can i find a listing of units in the building for rent. I am interested in a 1 bedroom, but looking on Craiglsit I could only find one studio for rent? Is there a good site (other than craigslist) that i could search for rental units in condo buildings?
Try Realtor.com for the ones for rent on the MLS.
How I forgot to mention lawyers have been using some obscure HUD rule of registering something or another with HUD within two years to get people out of their contracts. Developers will go under.
John, the developers could just as easily hire a lawyer to go find out all the rules they are supposed to follow. Laws and administrative rules are not hidden in this country. Don’t feel sorry for the developer if they were too lazy or too cheap to follow all the rules.
Tipster:
I think you are talking about a property report. If the developer does not finish the project within 2 years, he is required to provide a property report to the buyer. If the developer intends to finish the project within 2 years, he does not need to register with the state and provide a property report. This loophole is being used a lot inf Florida.
Tipster – Nope not feeling too sorry for the developers. But it may be swinging the other way where buyers should honor their contracts. Instead, the buyers are trying to recover their 15%-20% of their deposit because the market went down and are looking for the most minor of matters to get out….which of course they wouldn’t have cared about had the market gone up. The developers built in reliance on the contract, so to get out the buyers should forfeit their deposit. Both had bets in the game and if you want to walk you have to leave your chips. It is doubtful that the developers, even retaining the 15% are going to make a profit in this market anyway. At least that seems like the most fair thing. If the developer goes belly up, all these bad debts are going to be “socialized” that is we all end up paying for those bad debts through govt. bailouts, insurance, deflated currency, etc. I’d prefer that the speculator lose his 15% instead of getting it back and making the rest of us fiscally responsible people pay for it in the end. That’s just my thinking. No govt. bailout, let those how risked it lose it.
Tony, that’s not true about the units in this building looking identical. There were many more than two cabinet options available (for instance, in addition to all the wood finishes, there was smooth white laminate, textured white, silver, etc.). Also, even though the developer only advertised two flooring options, the buyers had many more choices.
Valasko, the purchase contracts for these units is pretty iron-clad. There is no specified closing date — just a wide, nonbinding range of “estimated” completion dates.
Saw a couple developer units today. Without furniture it’s hard to judge room size, but a corner 2-bedroom had some interesting touches that maximize the space. For instance, the second bedroom has one entrance off the hallway and a pocket door by the window wall. That way the room can serve as a study/extension of the living space but can be closed off for guests. For a galley kitchen (no island – a little surprising in a two bedroom), it was well done, with matching cabinetry on the sub-zero and (in the studios) housing the washer/dryer. Will be curious to see how these look with furniture. One odd touch: the building entrance is a sliding, rather than revolving, door, which will leave the lobby cold all winter. Maybe the association can redo this when the building is handed over by the developer.
another realtor,
I looked at a 2 bedroom corner unit around two weeks ago. The agent could not give me the sq. ft. of the unit, but it appeared small.
I agree that the units has some nice touches, but the true functionality of the living, dining, and kitchen are in doubt. The kitchen is tiny with no island, without the island there is no workspace. If you build an island then the living room is to small. These units appear to be designed for the suburban couple who wants a in-town condo and has no intent on ever cooking.
Hey,
I saw the same unit today. I liked it. But it would be hard for me to cook in there. I like cooking and need counter space.