Market Conditions in Chicago>Question Details

Sarah, Home Buyer in Chicago, IL

Do we cut our loses and lose our deposit? Or try to renegotiate our pre-construction condo price?

Asked by Sarah, Chicago, IL Fri Sep 26, 2008

We purchased a pre-construction condo before the market melt down in July 2007. We already own a condo, and are having a having trouble selling it. We will not be able to afford both. The pre-construction building closing is in summer 2009. With the home values lower - can we ask to renegotiate our pre-construction condo price after already signing for it? If we can how do we do it? In this market with the credit crunch and real estate values plummeting. What are our options? Do we cut our loses and lose our deposit 20% of 360,000? Or try to renegotiate our pre-construction condo price?

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Sarah,

Did you have an Attorney review the original contract? Have your Attorney check for any clauses in the contract that may allow you to exit the contract. Did you purchase with a home close contingency as part of your offer? Do you have a financing contingency that allows you to exit the deal if you cannot obtain financing?

Without seeing the contract it's difficult to determine if you have any way out of this deal. Developers often use a "Developers contract" when selling New Construction and such contracts are always designed to be in the Developers interest rather than the buyers in situations like these.

Depending on sales within the building and the location you purchased in, you may find that prices haven't plummeted. In such a case the developer may be only too happy to see you walk away from the deal and forego your 20% deposit so that they can resell the unit (they can now sell at a discount and still make money). Alternatively, they could force you to close depending on the contract and hold you liable for the full amount, not just 20%, should you walk away.

Find out all your options and discuss them with a good Real Estate Attorney (I can recommend one that specialises in new construction buyer deals). You may find it cheaper to reduce the price of your current condo so that it sells prior to your closing date to allow you to close. A 10% loss on a $250,000 condo is a lot less than a 20% loss on a $360,000 purchase).

Feel free to contact me via my profile to discuss in more detail.

Best of Luck, Ken.
Web Reference: http://www.KDRchicago.com
1 vote Thank Flag Link Fri Sep 26, 2008
Sarah, you might have your lawyer check the time frames offered by the builder in your contract. Most include a clause that limits the time that they have to construct a property- often, 18-24 months. If they exceed the alotted time, the earnest money is returned to the buyer, at their option, and the contract is canceled. This is a lawyer question- have them review the contents/time frames set by the builder. Good luck-
Web Reference: http://optionsrealty.com
0 votes Thank Flag Link Sat Sep 27, 2008
Perhaps this informtion will help with your builder? I remember the good old days when all you had to do was show the lender your current home was listed to qualify for the new mortgage as it was "assumed" your existing home would sell. Many homeowners have tried renting to offset the current home expense but because too many sellers are bailing on their prior homes new legislation has passed to stop this making rental options even harder to consumate your new purchase transaction. Use these links for more details and good luck to you!
http://activerain.com/blogsview/707930/FHA-enacts-policy-changes
http://activerain.com/blogsview/595950/Converting-a-Primary-…
0 votes Thank Flag Link Fri Sep 26, 2008
Definitely try to renegotiate with the builder.
They could be more likely to renegotiate to keep the property filled rather than vacant which leaves them at risk for vandalism, etc. Also, if they own the real estate, they are paying the property taxes on it which is another expense. Be realtistic with them after you do your due diligence and see what they say. They may be in big financial trouble by now. They may want to refund your deposit due to the big headache to come. In that case, problem solved.
0 votes Thank Flag Link Fri Sep 26, 2008
Sarah,
Your first course of action needs to be to have a conversation with your builder to explain your situation. Go in prepared with recent market information about this area, average home price, decrease in home prices, number od short sales and foreclosures etc....anything that will support your position.

Good luck,
The "Eckler Team"
0 votes Thank Flag Link Fri Sep 26, 2008
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