A ton of people have been emailing me about the New Phoenix Condos in Arlington Virginia (which just started closings) after reading my blogs about: IO PIAZZA. Possible Class Action? Default? Deposits + Interest and Zoso Officially Drops out of the Arlington Condo MarketSo I thought I'd write about The Phoenix in Clarendon Virginia specifically.
Ok, so here is the scoop... oh wait, before that, how about a nonobligatory donation of $500 to the St. Bernard Pr0ject (Katrina relief)? All I'm saying, is if this blog saves you at least $10,000 in one form or another, will you give a donation to them? Yes, great, No? Shame on you!
First off, a little "Wow! How did you know!?" mind reading...
So you are in a contract to buy a Phoenix condominium and you thought... "Why don't I call and pretend to be a prospective buyer and see what the units are going for!!!!!!!!!!!!"
Low and behold... they are selling for MORE than your contract price! You are rich!
Yet you wonder why they aren't advertising, and how are they able to
sell units for a premium in this marketplace. Well, I'll tell you why... Probably 90% of their calls today are people FAKING as prospective buyers. They sniff you out like a 10 year old sniffs Elmer's.If you were trying to sell a ton of units to people under contract for 2 years, wouldn't you artificially keep your prices HIGH until they all closed?... and then after they close, start advertising your blue light specials!
Yes, my prediction is that after the current contracts close, the prices will fall and get more in line with other available units on the market, like at Clarendon 1021 Arlington Condo.
So you think you have two options...
1) Close on your unit at the current price and hope that you don't go bankrupt like 5 people over at 1021. Or hope that you can sell in 2 years and break even. Maybe. But a very possible, maybe not! (especially after those damn Realtor fees, check out Go FSBO! Save $20,000!)
2) You walk away from your $25,000 deposit.
I say you have a few options, but it will cost you a few bucks (but nothing compared to your options above)!
- Get a good lawyer. I don't care if you are a lawyer and you have read the contract and there is no way out, get a lawyer that knows specifically about new constructions.
- Get your own independent appraisal! What you are gonna use the condo recommended lender, who will use a lender recommended appraisal? If you already got one, look at it. I won't say they are fraudulent, but how about "highly suspect"
- Renegotiate. Oh, you tried? Of course they will say no. Even if you pant and yell and scream. For this, please see #1 above.
Best of luck, if you need the name of a lawyer or appraiser (no I don't get kickbacks, but I can guilt you into giving a donation as I mentioned above) please send me an email and post a comment about your situation (don't put your email in that comment).
Also I encourage comment postings so that others can be kept in the loop. My other Io Piazza blog had many conflicting comments, so lets get a good discussion going here.
- Written by Frank Borges LL0SA- Broker/ Realtor
www.FranklyRealty.com
(please email me typos, I don't like looking dumb, oh and sign up for new blogs via my main blog blog.FranklyRealty.com)
Keywords: 1020 N. Highland North Clarendon 1021 Zoso Mcwilliams Ballard ed peete The Phoenix at Clarendon Metro 22201
18 comments:
Update. As of July 26th 2007, The Phoenix has only had ONE closing!
- Frank
I found myself in a situation where I had to get out and I did have a very skilled attorney and that worked for me.
#3 was put on the table and though my contract would have been dropped by $10k, it wasn't what I wanted. So I hired a contract specialist. It was money well spent.
I am so glad that the Phoenix condo is starting to get exposed! I have first hand knowledge of their sales team as well as the developer and all they care about is taking your money and running. Business and moral ethics be damned. They are prime example of why the housing market is in the trouble it is currently in. The preferred lender inflates the appraisal to match the sales price knowing full well that it's a bogus number. The purchaser gets themselves in a situation where they are in the hole tens of thousands of dollars as soon as they sign the settlement papers. And even if you know that it's a bad deal, the developer will attempt to bully you into settling. The Phoenix is advertised to be a premium luxury condo in Clarendon. I can tell you that nothing in the units scream luxury. There is no wow factor. It's just okay. If you have a contract with them, renegotiate to obtain a fair market price so that you don't lose a ton of money! I personally thing we live in an overly litigous society, but in this case, the developer will not take you seriously unless you have a lawyer. So if you really want to live at the Phoenix, get the appropriate price.
What's the problem with the Phoenix? People agreed to prices in 2005 and because prices dropped in the 2 years since, these people are trying to weasel their way out? Well boo hoo! Nobody held guns to their heads and forced them to sign those contracts. If prices had continued to head up at 20% per year, could the developer have balked and demanded an extra 50-100K at closing? No! So people who agreed to contracts at what they thought were fair prices shouldn't expect developers to drop prices after both parties had already agreed.
To the comment above that the contract above was fair and that no one held a gun to head of buyers - you have no idea how contract law works. A one-sided contract is per-se illegal. To have a valid contract, you need consideration from both sides. If one side has nothing to lose in a contract, it is void. In this case, the only thing at risk is the buyer's deposit. If the units did go up in price by $100K, as you state in your example, and the developer chooses to sell out to a REIT to get more money (which he most certainly would entertain), the developer would be in breach BUT the ONLY thing the buyers would get back is their deposit. Does that make any sense to you? Some might say that the developer's construction lender demands such strict terms -- but that is patently false. No lender forces its borrower to get into a voidable contract. The contracts used by the Phoenix are outdated and illegal. Subsequent pre-construction developments have used contracts where buyers are entited to some form of liquidated damages over and above their earnest money deposit -- thereby correcting for the illegality. Real estate laws are in place to protect consumers from developers with unfair leverage. This is not Vegas -- people did not sign up (nor were they compensated) for the kind of market risk that ensued at the Phoenix.
(Posted on Craigslist)
"PLEASE READ IF YOU WANT TO BUY A CONDO IN CLARENDON - DO NOT BUY IN THE PHOENIX CONDO"
If you have never heard of The Phoenix Condominium at 1020 North Highland Street in Clarendon, consider yourself extremely lucky. The Phoenix Condo, which sold pre-construction condos in 2005 at the height of the real estate boom, started closing units a couple weeks ago. The prices on those contracts remain at 2005 levels, and the developer is unwilling to make reasonable market adjustments to account for the fact that prices in the last two years have actually decreased. The 2005 prices used by the Phoenix Condo were themselves inflated to account for the fact that so many people were flipping pre-construction units. In other words, a purchaser in 2005 was not even buying his condo at 2005 levels. A two bedroom apartment at Clarendon 1021 is selling for $100,000 less than the apartments at the Phoenix. Is the Phoenix $100,000 nicer than Clarendon 1021? No way. The buildings have many of the same amenities. Sure, 1021 Clarendon is 2 years older than the Phoenix and it feels a bit like a dormitory, but the differences in price are not that drastic. They just aren't.
If you look closer at the purchase contracts of the units at the Phoenix, you will see that not only are the condos being sold at unreasonable prices, but the terms of the contract are totally one sided. If you default on the contract by not closing, what happens? You lose your deposit. If the developer defaults by, say selling the Condo to a REIT and turning it into a rental building, what happens? You get your deposit back. Where is the mutuality in contract here? The developer has no skin in the game. The fact that YOUR deposit is the only thing at risk is even more ridiculous when you consider that you are the only one shouldering the 2 year market risk between the purchase and delivery of your unit. As we have seen in the last 2 years, this is a risk can be very costly. These are contracts of adhesion, and my personal opinion is that many courts would find them void if given a chance to adjuicate them.
If you try to call the seller's agent (because the developer is totally unreachable -- how is that for customer service), you will simply get the run around. The seller's agent will tell you that units are still selling at 2005 prices. Of course they are still at 2005 prices -- how can the developer drop prices before people have closed on their purchase contracts? Once those contracts are closed, the prices will drop. Isn't it curious that there is NO advertising on the open units of the Phoenix -- event though there are a number of units still available? The obvious answers is that the developer cannot sell anything in this market. And he cannot lower prices until people with contracts close. Plain and simple. The seller's agent also will tell you that your appraisal contradicts any arguments you have about the units being undervalued. That appraisal is totally unreadable (even to a lawyer), and it squarely contradicts what is out there in the market. Look at the units at 1021 Clarendon. They are comparable -- regardless of what the seller's agents say. Finally, the seller's agent may say that the future is bright for Clarendon, and you should not worry about market value because this is the hottest area in Arlington. No disputes here. However, you are buying a place today in 2007 -- not some option that you can exercise 2 years from now. You should be closing with the comfort that your purchase price is at market and that you are not digging out of a hole on day one.
So, what can you do if you have a contact. Well, let's start with this -- DO NOT CLOSE. How can anyone justify starting out $100,000 in the hole before moving into a unit? Factoring in closing costs and seller's commissions, it will take you at least 3 years just to get back to ground zero on the place. Do you know where you are going to be in 3 years? Doubtful. As I did, I suggest you get a lawyer and contest your contract. If you need information on what to do, please feel free to email me. Trust me, I get nothing out of this except the piece of mind that other innocent people are not making a GIANT, PERHAPS LIFE-CHANGING MISTAKE. If you don't trust some random Craigslist ad, please look at this blog: http://franklylocal.blogspot.com/2007/07/trend-phoenix-condos-backing-out-in.html.
I'll add my data point - I do not plan on closing on my unit. I have a feeling I'm not the only one . . .
I'm really happy to hear that only one unit has closed so far. Hopefully that means that everyone is trying to get a fair market price now or trying to get their deposit back. Please, please, please don't over pay for your unit! The negative effects of closing on an inflated unit will be several years. Why throw your money away knowingly?!?
I thought "renting" was throwing away your money.
I thought if buyers and sellers agree on a price, then that price IS "fair market price."
Fair market pricing is relative to location, time, and comparable precedent. Unbias appraisals provide support for what fair market value is.
"contract of adhesion" just means there are lots of terms that you simply cannot negotiate.... you either agree to them or walk away. It happens when one side has a lot of bargaining power (e.g., the government, an insurance company, Wal-Mart) over the other side. The consequences of entering into them and breaking them can be harsh, but it's totally voluntary. No contract would be considered void simply because it's a "contract of adhesion."
I totally agree with misterbunn's comment about contracts of adhesion. A contract is not void simply because it is a contract of adhesion. However, couple the fact that there was NO mutuality with the fact that this is a contract of adhesion, and you should have enough facts and circumstances to create a voidable contract. Late last year, a court in VA found a contract void with similar facts.
Wow...very insightful posting about how the seller won't lower prices until after the closings. Again, this is over-priced by a longshot IMO...at least $150K-$200K.
A lawyer is someone you DEFINITELY need in ANY real-estate transaction backing you up for exactly this reason. MANY contracts are completely one-sided towards the seller/developer and there are many loops that allow them to walk away with your deposit. What I don't understand though is why people didn't have 3rd party appraisals through their own private(not recommended) lender? That would have immediately broken the contract since most contracts will have a financing clause and if you can't get financing(from a real honest lender) you aren't forced to try and settle.
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