Attention: Future 505 Residents & Contractees

I am in contract with 505. When I first signed the contract I was told an anticipated date. I sold a house with the intention of doing a 1031 Exchange. 2 years later, I obviously am now liable for a lot of money in taxes because the allotted time has long expired along with the legal and set up costs which had to be paid up front. While I was told there would be no problem getting a loan, since the crash, I am no longer able to get one. In addition, the idea was to buy at an insider's price as an investment. Clearly the value has gone down, no longer making it a good deal anymore. I am trying to find a buyer to replace me but no one can even get in to see the bldg. I really need to be released from this considering all the circumstances.I cannot afford to lose my deposit and want some compensation for the loss of the ability to do the tax deferment I needed.
I only recently heard about the group and am very happy to find you...to say the least. What do you think we can do?

ccook1, whose fault is it?

And I don't understand a few things, you sold a place, presumably got proceeds and made a profit because you are trying to do a 1031, but then you can't afford and get a loan for the new place?

You also sold at a better time in the market than today, so you probably saved more than 10% on your old place.

The value of the new place has gone down, but you want someone else to take your place and get you your deposit back?

You wanted an insider price for an investment but you can't afford to take a loss on an investment?

You hired lawyers to help you with everything, but none pointed out the hole in your timing for the 1031, but you want the new developer to pay you for it?

When I lost my job I tried to make a living with real estate investing. I got a large loan, bought and renovated a house, but then the market crashed and I couldn't get my money out of it, so I sold a house I had owned for 35 years, which of course was a profit from 35 years ago (even though it was much less than I could have gotten 5 years ago). I used the proceeds from the house to pay off half the loan on the new house. But now, because I cannot do the 1031 exchange I have to pay taxes on that money. When I bought this, I counted on renting it to make it pay for itself. I was told I could easily have gotten the loan at the time I bought it, but now I cannot...only because I am no longer employed and the rules have changed. When I bought the apartment, they were projecting a date that seemed doable. When I sold the house I believed it would all come together and no one indicated otherwise. Of course there was no real commitment to that effect. Just a verbal assurance. I had no idea they were so far from finishing. True, that was a major miscalculation on my part I also thought I had more time than I did and right, no one pointed that out until too late. Again, that is my fault. However, I bought the apartment because it was such a great deal and it was a way to build some retirement. Clearly as you say, the value is not there any longer. I don't think this rental market would now allow for enough rent to make it pay for it's self either. I'm now trying to find a way of making a living. I now do not have enough to pay the taxes on the house and cannot get the loan to buy the apartment. I've been trying to find a buyer for the apartment and had someone interested, but cannot show it yet. If the guy can wait and does want it, it will all work out. If not, I really need to get out of this contract. Do you think this is possible? What is happening with the group?

ccook1: So sorry to hear about your situation. I'm also a RE investor and had a very similar experience
with investments I made (pre-construction) in SW Florida in 2004-2005, although I didn't do any 1031
Exchanges. I lost a contract deposit on one and sued the developer for (a partial) return of the deposit on another. That's when I learned about the Interstate Land Sales Full Disclosure Act, which was the basis of my legal argument for return of my contract deposit. (I settled for a partial refund b/c the legal fees were mounting very quickly and I hit the 'knee of the curve' between legal fees and lost contract deposit. Even though the winning party is entitled to reimbursement of legal fees, I learned the court can decide you should only get a portion of the legal fees back - which was the case in FL. Courts were only granting 75% reimburse of legal fees for similar cases)

Anyway, If you haven't seen this yet, check out this recent article from the REAL DEAL (a NYC Real Estate Trade Publication). Apparently other buyers in your situation at the 505 are collectively suing the developer for return of the their contract deposits.

http://therealdeal.com/newyork/articles/505-condominium-in-hell%E2%80%99s-kitchen-at-505-west-47th-street-developers-warned-buyers-of-suits-documents-show-but-still-face-buyers-revolt

Don't know the status of the lawsuit, and of course, there's no guarantee the buyers would win it, but definitely worth looking into.

Also, talk to a CPA and/or Tax Attorney about your options regarding the owed taxes on the failed 1031 Exchange. The Fed Gov't is currently in "amnesty mode" - forgiving all kinds of tax defaults. I'm no expert by any means, but have seen many articles / service providers touting these (limited time) amnesty offers from the Feds. I'm sure if they exist, there are strict criteria to qualify, but again, worth looking into, I think.

All the best, and please keep us posted on how you're doing.

I am wanting to buy a studio in the building. Any advice?