but I had no mortgage contingency, and the building is not fannie mae approved

Not sure it has bearing on answer, but I'm curious if you realized you were signing a no-mort.-contingency contract and if so why.

The fannie mae underwriting rules are tough for new construction but there are other underwriters. Do you have a mortgage broker?? Are you saying you can't get a mortgage at all?

I thought everyone was walking on down payments made at the height of the market. What's the market value of the apartment vs. when you signed?

I did know I was signing a no mortgage contingency contract but at the time this was fairly standard for new construction and I obviously did not forsee a situation where nobody in the building would be able to be funded for mortages whatsoever. Admittedly this was my first home purchase and I was not that experienced but again these Fannie Mae rules came up in March 2009 so they were not anything that had existed previously.

Mortgage brokers laugh at me when I contact them, anyone i contact about a mortgage for this building, including the major bank that holds the contstruction loan on the building, all say that they are working on getting Fannie Mae approval but dont ahve it quite yet.

Nonetheless the building is seeking to close me next week. When my lawyer talked to their lawyers, they were told that people are getting mortgages!!! Which is obviously a lie considering their own bank told me that they arent.

Seeing how you don't think ahead or read, I'd Just like to let you know when you are old and can no longer work.

.......I would NOT count on ss.

daphne - how under water would you be if you got your mortgage?

By which I think spinnaker1 means "are you better off just forfeiting your deposit?"

daphne280, if the building is just beginning closings you can be sure that many of the buyers are in the same situation as yourself, despite the developers attorney touting the party line that "everyone else is ok"- there is no question that they would rather keep the current buyer (yourself) in place than find a new one in this current climate, so despite what they say you have some power to negotiate extending the closing date and perhaps the contract price as well. What neighborhood is this building in? Did you look up in Acris to see if anything has officially closed yet, and if so what banks might have provided the funding?

There are banks that will lend even though the building is not fnma approved, how much are you looking to put down? have you explored fha financing?

its not clear how underwater i would be as we didnt get to the appraisal phase of this process. of course the building wrote everyone a letter that appraisals they had done, using other UNSOLD units as comps, are "in line" but there are a number of buildings in the area that have had all sorts of issues and drastic price chops. So i would say that i would be about 100k underwater on this unit if i could close.

I have reached out to 3 banks and 3 mortgage brokers and nobody had anything or any leads, the best I got was to wait and see until they are fannie mae approved. menawhile they are losing 1 or 2 contracts a week as they shake free the people who are walking away, so they are pretty much treading water as far as reaching the threshold that they need to meet for Fannie's blessing

Not to pry, but is that 100K greater than your deposit? Because this sounds like a situation where you may be better off not executing your contract and walking away. Also, do you have a google or yahoo group for fellow contractees? I would look for one because it may already exist. If not, start one. I'm sure there are others in the same situation.

How much would you stand to save by walking on your deposit and then offering market price for a similar unit? (conceivably in a development that meets the underwriting rules, and with a finance contingency... and maybe a better tiki bar )

I heard that this Fannie Freddie thing is causing issues all over -- no refis -- if sponsor holds too much of a unit. A nightmare on resale value.

Can you try negotiating something with the sponsor? They must be desperate to keep their purchasers in this market. Perhaps they would agree to finance you at a favorable rate until the building gets to 50% sold . . .

fannie and freddie are now doing 90% of all mortgages

yes 100,000 is well over my deposit.

i could walk and make an offer elsewhere except that i already gave this building my offer money and now its tied up in escrow until a judge decides what to do with it. anyways i only had enough to put 10% down and these days you need more like 30% to get anywhere with financing.

So ironic how prices in the real estate market have dropped so much yet entry level buyers are still shut out because financing is not there for people with only 10% down.

this building is not FHA approved and it wont be due to new FHA rules

so...why not cut your losses and move on?

I don't normally question anyone on their personal choices but you have been given a gift. It may not seem like it now but I can't imagine a worse spot to be in than to have purchased a new construction condo in 2008 with 10% down. And it seems your only reason for wanting to proceed with the purchase, despite the bottom falling out of the market -and particularly THAT market, is that you don't have the money for another down payment. Please run, don't walk.

my question has gotten lost in this conversation.

My question is: has anyone seen a case like this, where the lack of financing is due to the building, and not the buyer, and if you do know of such a case, what happened to the deposit??

We get it. You want want to transform what was a poor move on many levels into one where you are made whole on all counts and leave others holding the bag.

Does that about sum it up?

it's hard to expect getting advice specific to your case when you're so general about the facts. (Your lawyer obviously knows the facts and s/he is advising you that you may be SOL.)

Is your bldg one of these? http://therealdeal.com/newyork/articles/where-are-buyers-backing-out

if so, you may have company.

daphne280 i am not aware of this. i did get a mortgage on new construction last year when the market was collapsing but i put down 30%... Is the 10% down really the issue?
what location is the building in?

there are mortgage brokers out there that can get a deal like this done but you will be paying >6% for an adjustable mortgage. they are called portfolio banks/lenders. keep researching out there. use your real estate broker contacts. for the record, all new construction contracts were written this way.

It is exactly this sort of situation that i feared when put in a bid on a new condo. the contract came back with no mtg contigency whatsoever. i had my lawyer add it, very strongly worded that if the building or the bank flubbed i would get my deposit back.

Daphne--mortgage contingencies protect buyers when they're unable to secure financing due to their own failings or due to failings of the building or any other reason. You seem to be asking if there's a special unwritten partial contingency if the fault is the building's, but there's not. This is exactly why many people insist on mortgage contingencies--it protects you from a situation that would prevent you from being able to fulfill your part of the contract.

Your options seems to be to try to negotiate something with the building since the developer will be worse off keeping your deposit and then re-selling your unit or, because you come out ahead financially by doing so, simply walking away and forfeiting your deposit.

In wannabuy' situation is the deposit in some kind of protected escrow...meaning, if the project fails for whatever reason, and the seller/developer is bankrupt, is wannabuy an unsecured creditor of somebody or is there an escrow fully protected account?

My question is: has anyone seen a case like this, where the lack of financing is due to the building, and not the buyer, and if you do know of such a case, what happened to the deposit??

will someone answer her question,,,,,

this obviously depends on what the language says in her contract but on the face of it, no contingency means no contingency.

cc..agree on the legality..but she's also just asking if anyone has seen this in another building, and as a followup, what happened

not to beat this to death but of course whatever did or did not happen in any other situation will not change the reality of the contract. the more you think about it the more it would seem that the whole reason that developers didn't want mortgage contingencies was to avoid grey areas such as this one. oh well.

I think the part that sent this into a bit of a tailspin was when she said she was reaching out to multiple banks and mortgage brokers trying to get financing despite the obvious "issues".

My deposit is in escrow too.

I want to reiterate that at the time I signed this contract, these Fannie Mae rules that are making it impossible for anyone in my building to get financing were not in place. So these rules were in the deep deep grey area that had never existed before, and were therefore not considered as possibilities.

I signed the contract in Summer of 2008, and these rules were started in March of 2009. I obviously did not forsee that it could be the building's woes that would make it impossible for me to get a mortgage, and its not really something that my lawyer or anyone else could have advised me on, because up until then Fannie had been making it overly easy to get mortgages in these buildings.

I assume that there are many other buildings where this is happening now. Any building that is now ready to close people, but that is not 71% in pre-sale contract (51% in contract where an exemption has been made by Fannie) and where the developer or a portfolio lender has not stepped in in a significant way to take the place of the banks that would have normally been providing mortagages. The same banks who were all over me up until March, now won't touch the thing until it is 71% in contract. Which it won't be for a very long time, because everyone who already signed up is getting shut out and can't close on the apartment they are in contract for.....and logically some percentage of these people will be walking away, thus lowering the percentage in contract.

Anyways even if mortgages were available, these apartments wont be appraising anywhere near the value that we agreed they were worth way back when, because all of the more mature neighboring developments have very publicly slashed their prices and even then have been sitting partly vacant ever since they started closing over the past year. So everyone is going to have to come up with 40%-60% desposits out of their a$$ if they really want to close on these underwater apartments. and I dont think too many people who bought in this "developing" neighborhood are able to do that.

daphne, people here are telling you what will happen, you just need to listen.

a contingency is exactly the thing to protect you against "unforeseen" events. nobody goes into a sales contract foreseeing that they'll be unable to get a mortgage. The mortgage contingency is there to protect you in case you can't get a mortgage, period. The reason for your failure to get a mortgage, whether you lost your job or fannie mae changing the rules on everybody, really doesn't matter. So it's really not a gray area. If there is no mechanism in your contract for you to get your deposit back when you can't put up the money on the closing date, then the building has the right to keep your deposit.

the other issues you raised also don't really impact the analysis. Now it might be financially unwise for the building to collect everybody's deposits and try to resell the units in today's climate, but it's entirely within its rights to do so.

As far as the legal aspects, your contract rules. So if you signed a contract with no mortgage contingency, and you can't get a mortgage ... You're screwed on that particular point. You may be able to invalidate your contract based upon another issue, but if your lawyer can't come up with anything, how could we? We haven't even read your contract.
That said, the developer's interest is not to make you default (it is a slow, declining market); he'd rather negotiate a bit to get you to close.
The main issue I see is that you planned to borrow 90%LTV. It's close to impossible to do these days, especially in new developments.
Do you have any extra funds? Figure out a new offer, that makes your original deposit plus additional funds add up to 20%, and try to finance that. Who knows, the developer might take a 30 or even 40% cut rather than let you walk away. You won't find out unless you try.

With the exception of an FHA approved new dev, I don't think you will have much luck getting financing if you only have a total of 10% down and are seeking 90% financing

but...why would you want to still buy this place?

maly, actually i think the main problem is that the building is less than 70% sold. I've heard of mortgages on 10% down if the borrower has a really good income-to-debt ratio.

Again, the reason we're in this mess is because people are financing 90% and don't have any more money in the bank. My wife and I just got pre-approved for a loan and the best rates: Why? Because we're putting 30% down and still have plenty of cash left, like you should if you have any business buying an apartment/house.

2 words:

SUNK COST.

Dafknee...Thank for laying out your situation clearly. But still not clear why you don't react to this dilemma by walking away, given market prices vs. your contract price.

Did you ever say what is the building? What is their to lose in revealing it?

Now, SE PEOPLE: This puzzles me. If Ｌａｄｙ　Ｄａｆｋｎｅｅ　ｃａｓｅ　ｅｘｉｓｔｓ　ｉｎ　ｍｏｒｅ　ｔｈａｎ　ａ　ｆｅｗ　ｂｕｉｌｄｉｎｇｓ　ｔｈｅｎ　ｗｈｙ　ａｒｅｎ’ｔ　ｗｅ　ｓｅｅｉｎｇ　ｍｏｒｅ　ｍａｒｋｅｔ　ｐａｎｉｃ，　ｇｒｅａｔ　ｄｅａｌ　ｆｏｒ　ｃａｓｈ　ｂｕｙｅｒ，　ｅｔｃ．．．Ｍａｙｂｅ　ｗｅ　ａｒｅ，　ａｎｄ　Ｉ　ｊｕｓｔ　ｄｏｎ’ｔ　ｓｅｅ　ｉｔ．

（ｍｙ　ｌｉｔｔｌｅ　ａｓｕｓ　ｃｈａｎｇｅｓ　ｆｏｎｔｓ　ｓｏｍｅｔｉｍｅｓ．．．ｓｏｒｒｙ）

Because not everyone can walk away from thousands of dollars - which may be their only down payment amount for years to come.

so...instead they send good money after bad and commit to mortgages for properties with negative equity 2 to 3 times their initial deposit?

cc: I agree with you - they should walk away - no question. but obviously they are finding it very hard to do so.

CC and ph41...you guys two points above illustrate the dilemma. I think the answer should be a question of degree -- if the market price decrease exceeds the deposit by a very large margin (??..how much)..then walk away. People should think about how much worse off they would be if they had closed at the time they signed the contract.

guys/girls...how many buildings are "falling apart" because of this....is there one where I can go offer cash and get some amazing deal (or not, because no matter how bad the situation, a couple cash buyers won't help)

why would you even consider buying into a complete mess?

jim, buildings aren't advertising their distress. just go to the list of new developments, pull up each building and try to figure out how many units the building has and how many have closed/gone into contract, and you'll see a very ugly picture. how ugly depends on information you and i likely don't have until it is revealed in the news. but you'll get a better sense of why you should take your time. quite a long time.

but cc is right. you don't want that headache (and neither should daphne, it's not just getting into the building, it's whether or not the building remains solvent). wait until a healthier building with a small or overstretched developer has only a couple of remaining units to sell. frequently they let the last few go at a large discount.

During the heydey of the condo-buying waiting-all-night-to-be-the-first-buyer, gotta-get-that-offering-plan-before-the-general-public-does, bidding-war feeding-frenzy, the no-mortgage-contingency-accepting thing wasn't merely something the sponsors had the luxury of doing ... it was a key marketing tactic. Blue chip investment!

So I wouldn't exactly blame Daphne for her past decisions. But I do think she needs to go through some "stages of acceptance" and wind up walking away from the deposit. The bottom line is that REASON you can't get a mortgage (FHA, FNMA, job loss, new %-down requirements, collapse of the credit market) is irrelevant. You can't, you're not protected from that eventuality, and you're in the same boat as thousands of others in that respect.

Daphne, the good news is that if you start saving diligently and live below your means in a modest rental, you will probably be able to take advantage (in 3-5 years or so) of much lower prices and a healthier mortgage market. But no guarantees.

I hear you guys. My personal feeling is that there is sort of a rose-colored conspiracy among finance providers and developers to pretend things are not as bad as they are (because that would involve admitting that the project is bankrupt at market clearing prices, which would imply finance write-downs), in the hopes that their buildings will weather the storm, things won't gap down further, etc. At some point, if this strategy doesn't work then there will have to be a day of facing reality.

Columbia..why buy into a complete mess? Well. it is a question of degrees of problems vs price. Maybe there will be a price at some point where it would be worth it. If a place with seriuos problems is not currently occupiable then I wouldn't consider signing a contract. I have read about the horror stories in Miami where no one is maintaining the building.

I wonder if you would consider The Edge, at 30% in contract as distressed. I think they are following the rosy scenario approach (only discounting 10% or so) , in hopes they can bluff through this market downturn without seriously undermining the whole project original revenue estimates.

Unmaintained building in Miami = no airconditioning/dehumidification = mold mold mold

i would be super careful...at the end of the day, the old cliche about getting what you paid for is almost always true. there are so many things that can go wrong--i just don't think you can reliably beat the system. better to follow alan's advice and be patient.

jimstreeteasy, but isn't it the situation (regarding the Edge) that you can bluff for a while until somebody calls you out on your bluff? I mean, your suggestion is that this market downturn is temporary and not a unavoidable correction, and that it will somehow go away so quickly and completely as to allow a new building to be successful reverting to its 2007 pipe dreams if they can just bluff it with enough gusto and sang froid for how long? 3 years, 7 years, 15 years? Looks a pretty damn risky plan if you have lotsa millions on the line...

daphne - sorry if you mentioned this above but Im assuming the building is not even 50% in-contract? May I ask which building this is? And ultimately, to answer you question, the sponsor can take your down payment. I deal with a lot of new construction condos and most try to work it out with the buyers by giving them more time. But there are cases with no resolution and the sponsors just take the money. sunny.hong@bankofamerica.com

Trompolico....I was describing my feeling about what the finance-providers/developers seem to be doing...bluff your way through a mess and hope enough buyers buy it, and you sell the building out enough that it becomes a kind of self-fulfilling wish. I am NOT saying I think it will work. I don't know. But it could work. Anyone buying right now in one of these new buildings, or a nearby new building, is betting that the bluff is going to work, is going along with it. But if it doesn't work, if the Edge gets stuck at say 40% of sales, then at some point economic reality would force bigger cuts. I suppose the whole topic becomes more acute once the building is complete, and they can close, because at that point delayed sales = foregone profits as financing costs erode the projects net income.

jim: my deposit will be in escrow, protected from the financial situation of the developer.

buyers fail to get mortgages for 3 different reasons: the developer has not met the criteria for the bank, the buyer's financial situation collapses or the bank has a meltdown. in today's market all 3 are a distinct possibility. typically mortgage contigencies protected you from the developer screwing up but anyone who is buying should insist on protection in all 3 cases. not typical, but neither is this market. still a buyers market though, so i would be very adamant about having your mortgage contingency cover all 3 scenarios.

I am entering into the same situation except the building has not been completed. Have you looked at SONYMA they lowered their requirements http://www.nyhomes.org/index.aspx?page=300#PurchasingUnsoldCondos

Just a suggestion, BOA seem to be working with people like this also.