Home Buying in Chicago>Question Details

Jenny, Home Buyer in Chicago, IL

Is there any way out of a new construction contract I bought 2.5 years ago?

Asked by Jenny, Chicago, IL Tue Dec 30, 2008

I bought at RD659 after I was pre-approved for financing at 95% LTV. But because the market has changed so much in the past year, I can not get approved for a loan unless I put 20% down or pay PMI - but the building is only 45% sold, they are unable to acquire PMI, and I don't have 20% to put down. Which means my only option is to wait until the building is 51% sold to close on my condo. Who knows when that will be! I've been living in limbo in the meantime and I'm fed up with being strung along. Unfortunately there is no mortgage contingency clause in the contract. Does anyone know if I have any other options or am I just screwed?

Help the community by answering this question:

Answers

15
J,

You should talk to your Attorney, Realtor & Lender to advise you. This forum can be great for information but I would look to those that are familiar with your specific transaction to advise you.

Best of Luck, Ken Dooley.
Web Reference: http://www.KenDooley.com
1 vote Thank Flag Link Wed Jan 7, 2009
Dear Megan,

I'd agree with a lot of what was written to you here, but I'd also add a few things. Definitely have your real estate attorney review the contract and determine whether or not you have an "out" first.

Even if the rest of the downtown condo market is selling well, you have to ask yourself (as the bank is asking itself and thereby demanding that the development be at least 50% cold out before closing) is this particular building (a market in and of itself) competitive with the rest of its competitive market?

If the value of the market has changed (and lowered), then you probably would not want anyone (developer, lender, third party) give you a 2nd loan that will encumber you up to 95% of the value of the unit when you agreed to purchase it. I would assume that if the values in the area are coming down that you would be in a very good position to find a similarly desirable property in the same market area at a lower price than the one you agreed to pay 2.5 years ago.

Consult with your attorney and if you can get out of the contract and still want to- do so (or at least retain the option to get out of it). There should be plenty of other places to purchase in this particular market. Good luck.

Sincerely,
Christopher Thomas
Broker Associate, Sudler Sotheby's International Realty
773-418-0640 (cell)
christopher.thomas@sothebysrealty.com
Web Reference: http://www.myagentchris.com
1 vote Thank Flag Link Tue Jan 6, 2009
The real issue is whether buying a unit in this project is a good idea at this point. My guess is that it is not a good investment, and pulling out and even losing the earnest might be the best option in the worst case. There is a reason mortgage insurance companies and most 2nd lenders won't touch it. A good buyers agent would have steered you away from this project and those like it downtown.

Just my two cents, but sometimes you need to look beyond whether it can be done to why it should be done.
Web Reference: http://www.1sthomegroup.com
1 vote Thank Flag Link Wed Dec 31, 2008
Megan,

I don't work for the Developer, Lender or the company marketing R&D 659 but I am familiar with the project having viewed it a number of times with current and past clients.

I've been informed that the Developer of R&D 659 is now stepping in to provide Gap Financing through second mortgages out of their funds up to 95%. The main lender for the project that has worked with many buyers will do 80% with the developer providing a 15% second mortgage.

I'm not aware of your specific situation and would also advise you to consult with a Real Estate Attorney to advise you of your options and obligations under the contract. Obviously a lot has changed in the past year but it appears the Developers are prepared to work with Buyers who are having difficulty obtaining financing through traditional sources.

Feel free to contact me via my profile and I'd be happy to connect you with the person representing the lender who can review your financing and an Attorney to assist you.

Best of Luck, Ken Dooley.
Web Reference: http://www.KenDooley.com
1 vote Thank Flag Link Wed Dec 31, 2008
Megan,

We recommend being in touch with a real estate attorney and have them review the document for you. This may cost you a little money....but it may be worth it in the long run.

Good luck
1 vote Thank Flag Link Tue Dec 30, 2008
Jenny,
I signed the same contract and got screwed over too. I heard that even though you beeing declined mortgage - Dags Des Plaines is suing people who got declined!. What a bunch of crap!
Let's get together and fight back.
0 votes Thank Flag Link Sun Jul 4, 2010
ANOTHER THING TO WATCH OUT FOR IN THIS BUILDING IS THE ALLEGED "1.5 % DISCOUNT OFF YOUR MORTGAGE" THAT THEY SO PROUDLY ADVERTISE. THIS IS A BUNCH OF CRAP. THEY CONVENIENTLY FAIL TO TELL YOU THAT YOU HAVE TO MEET ALL FNMA GUIDELINES FOR THIS DISCOUNT. ALSO, IT CAN ONLY BE YOUR PRINCIPAL RESIDENCE AND YOUR LOAN CANNOT BE OVER $417,000. MAKE SURE YOU ARE ELIGIBLE BEFORE PROCEEDING!!!
0 votes Thank Flag Link Sat Feb 21, 2009
I am just about to look at the building, what did you end up purcahsing and how much were you able to negotiate?
0 votes Thank Flag Link Thu Jan 15, 2009
Ok - I am unable to contact you through your profile.
0 votes Thank Flag Link Wed Jan 7, 2009
No, as of right now I am just waiting. I'm looking for a lawyer that will help to get me out of the contract and get my money back. I know a couple of others in the same situation so we are trying to figure out the best possible option at this time. If you would like to join us, send an email via my profile and we can link up.
0 votes Thank Flag Link Wed Jan 7, 2009
Have you been able to get out of the contract then, or are you just waiting? Now I am concerned what will happen in my situation, since I am below 20% as well, and this is all news to me. That along with the way things have went in the market, I'm sure If I am able to close, the value has decreased significantly.
0 votes Thank Flag Link Wed Jan 7, 2009
J-


it depends on how much you put down. if you put down 20% you will be fine to close without PMI, but anyone that put down less than that will need to wait until the building has sold enough units. If you did put less than 20% down I would check with your lender to make sure the financing is all set, because it may not be. My lender failed to tell me anything until 3 days before my closing.
0 votes Thank Flag Link Wed Jan 7, 2009
Megan,

My understanding is that financing options other that the traditional 15% 2nd Bank lender are being pursued. Investors along with sellers can step in and provide effective financing options similar to the 15% previously available.
Great that you have an Attorney to guide you through this process. It's likely the wait and see approach adopted by your Attorney is to determine what financing options being worked on are available to you as you approach closing.

Best of luck, Ken Dooley.
Web Reference: http://www.KenDooley.com
0 votes Thank Flag Link Wed Dec 31, 2008
From what I was told, The company doing the 2nd mortgage has backed out and now the developer is unable to find a 3rd party to facilitate the 2nd mortgage. I have a real estate attorney, but he doesn't seem to want to do anything but wait.
0 votes Thank Flag Link Wed Dec 31, 2008
Where is your buyers agent explain all particulars, if not only option confer with real estate attorney review every page of executed contract determine where the "out clause is". No person can render an opinion unless entire contract is reviewed.
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Tue Dec 30, 2008
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer