Divorcing... need to get out of new development purchase contract

marriage counselling

Sorry about the divorce. My guess, in the current economic environment, is that your perspective condo will go down in price before closing. Hopefully not much depending on the development. That coupled with the closing costs associarted with purchasing and then selling will make holding it cost prohibitive.

My guess, after crunching the numbers is that you would be better off just walking away. Not an accountant but maybe this loss is tax deductible.

I agree with Junkman. Walking away is a less risky path to take given the current environment. However, a better outcome would be to try to salvage your marriage if at all possible. Best of luck to you.

If her building is late getting its certificate of occupancy, as most of them are, isn't she able to get her deposit back? I remember reading that somewhere on these boards. I am a newbie and don't really know anything, but maybe there is a sliver of hope of getting your deposit back. Could someone "in the know" comment on this?

At some point the marriage can't be saved anymore - but thanks for suggesting it may be an option. I've read several great pieces of advice on other matters on this blog. I'm hoping someone can recommend something other than just walking away. It's a lot of money... it will take me YEARS to get out of this hole. I can't be the first person to ever be in this situation.

Butter,

Real Estate is an asset class just like commodities, stocks, bonds etc. Your putting a down payment for contract adds a wrinkle but it is still an investment.

In retrospect you made a poor decision to go into contract. Period. There is no magic bullet. We all make investment decisions that we wish we didn't get into. I bought Citibank at $35 and sold at $23. I made a poor decision to buy @$35 and a good decision to get out @$23. I cut my loses. Same as you will do when you walk away losing 5%.

If you land up going through with the closing and then have to sell an asset that has limited demand you will be wishing you sold @23.

Closing cost are generally around 5-6% of purchase price. If you are attempting to flip your condo you will have closing costs on both ends totally 10-12% of asset price. Add to this the fact that the condo market is not great in LIC. If it is a one-bedroom or studio the market is worse.

I can only assume that this condo is not in the luxury class, ie. 15 Central Park West, which seems to have inelastic demand. We are talking LIC. Sometimes the truth hurts. If someone offers a more positive assessment, I'd be wary.

Butters,

Sorry about your divorce. That sucks.

Is your contract assignable? Some are and some aren't -- but if it is you might be able to sell it. I don't know what building you're buying into so I don't know what pricing has done, but presumably it's six months more complete and that might be worth something to someone.

ali r.
{downtown broker}

You can try to do a contract assignment. Make sure your contract allows it, but if not, pleading with the sponsor could help in your situation providing enough "evidence" of your divorce. You may want to offer some incentive for the assignee like a % of your 10% downpayment, then perhaps you won't walk away with nothing.

Butters08, are you working with a divorce lawyer? You should consult with one. Consulting with a lawyer is free. This question should be the first one you ask. Ask several and you'll get an idea of what is and what is not possible.

I'm sorry to hear you're divorcing.

I know losing the 10% down would really suck, and cause hardship, but I think it would be better to walk away than be forced to close on the unit, where you'll pay more money in closing costs, taxes, fees, etc... PLUS the horror of paying monthly mortgage and maintenance costs for an apartment you don't want or can't afford to pay. The worse case scenario is that you'd be on the hook for those monthly payments and can't find a buyer to flip the unit. Remember, even if you find another buyer, that's *another* closing you'll have to help pay for. If you can find a buyer to take the contract before closing, it may be worth giving up the down payment to get out. If the building won't be ready til next year, like One Hunters Point, or Vizcaya, for example, you still have a little time to find someone to take over your contract. Best of luck. Hopefully one of the posters here can dig up more info for you.

My experience in New York City is that contract reassignments are extremely rare. In new developments they are, which is your case, basically non-existent.

Why don't developers in new developments allow contract reassignments? Good question.

They don't want individuals flipping the property. I know that is not the case in your situation but you can understand why they would have a transfer restriction like a 5%-10% premium on original price if they allow it at all which is doubtful.

I read in the NY Times a story about flipping a contract. Apparently, a buyer tried to do this at 111 Central Park North. They put money down and signed a contract, and then put the apartment on the market, effectively seeking someone to pay them more to take over the contract. It failed, the buyer didn't want to buy the unit, so they lost the money to the developer. So, according to that story, it seems theoretically possible to reassign the contract.

Ok, so in this case, the buyer put that condition into the contract. Here's the link.

http://www.nytimes.com/2008/04/13/realestate/13deal2.html?scp=1&sq=%22111+central+park+north%22&st=nyt

purple - why do you think Viscaya or One Hunters Point won't be ready until next year? They both look like closings should be starting in a few months.

They're still in the middle of construction...all the windows aren't in place yet, and the exterior wall can't be finished until the construction elevator is dismantled. A buyer would be foolish to close on a unit without a certificate of occupancy. Or a walk through, for that matter. Everything in the apartment needs to be installed, functioning, and finally, checked by the buyer himself, before closing. But that's not the point here - the original poster needs advice on unloading an apartment she can't keep.

I think you are confusing the Hunters Point buildings. All the windows and most of the exterior are finished on One Hunters Point.

My real estate attorney, the one who helped get the contract in the first place, says there's no way to save the 10%. Might a divorce attorney be more helpful? My real estate attorney doesn't seem very sympathetic... probably because he won't be paid for closing anymore.

Anyone know of a good affordable divorce attorney that is helpful in getting out of a real estate contract? This is NYC afterall.

You are better off if you and your husband can agree on everything and just go to a mediator. You'll save alot of money that way. Just hire a new real estate lawyer to work on getting out of the deal. Good luck!

Actually, no, I wasn't. If I were talking about Hunters View, I'd say they had hardly any windows installed, which is rather peculiar, considering the two started out being built simultaneously. One Hunters Point is now farther ahead, but has some distance to go. Can we please return to the topic of helping Butters08?

purpletulip95- They can take all the time they need, it's not like anyone is buying.

sorry bout the situation. for what its worth, i heard that there was at least one reassignment being marketed at 5sl. not sure whether it cleared, or even if there is demand. the broker was basically calling from a list of everyone whos ever showed up at the sales office, so at least theyll do the leg work for you. good luck

Butters--I would definitely consult a divorce attorney in this matter, not your real estate attorney.

If you are afraid of losing the deposit, which I imagine is quite hefty, there could be merit in considering going through with the purchase and then renting out the condo as joint owners. There may be some way to structure your settlement so that you and your husband remain business partners in joint ownership of the unit, at least until such time as you can comfortably sell the property.

Unfortunately, any time a buyer agrees to a non-contingent deal they are shouldering an enormous financial risk. Once you've agreed to this type of deal and put down a deposit you are bound to either complete the purchase or walk away and lose the deposit. There is likely no way you will be able to get your deposit back from the seller at this point, unless, possibly, something goes wrong on the sell side, such as the developer being unable to deliver the unit to you within the time specified in your contract.

Kudos to bramstar. Sounds like good advice to me.

Are you serious? That is the worst advice I ever saw. I'm sure Butter would love having joint ownership on a property with her ex that will be hitting the market at possibly the worst time in the history of NY real estate.

Love to see them working out the mortgage details and who pays back what. Additional lawyer and management fees should also help the bottom line. Hey guys, she is getting divorced. The last thing Butter needs is a mortgage liability over her head and worse it to be in joint partnership with her ex husband.

Are you Nuts?

There is an emotional compenent to this that is worth considering. If you and your soon-to-be ex have a decent working relationship that you foresee continuing (I realize marriages end for many reasons and sometimes the spouses don't mind continuing to deal with each other), perhaps treating the apartment as a temporary business venture to be dissolved asap will work. But in my experience it is a much healthier situation for many couples to have as clean a break as possible to allow them to move forward into the next chapter of their individual lives. Financial bonds that stretch indefinitely into the future make moving on and healing harder since continued contact, either directly or through costly attorneys, will necessarily have to occur and that is the last thing many people want. If you can afford to end this now, even if it creates a tight money situation, you may be better off. Of course, you can't be rendered homeless or completely broke for the sake of a clean break. I recommend assessing your situation with an independent financial planner (not one associated with a particular financial institution), coupling that information with the legal advice you get, and then charting a course. The financial planner can help you understand how much room you have to weigh the emotional factors in your final decision. This isn't 'just business' and crunching numbers. This situation is more than that and bears on the quality of not just your financial life but also your happiness. Resist panic. Tell yourself how the feelings you are having are not facts. Get as much information and counsel as you need. And realize only then can you make a wise decision about what is best for you.

Complete aside: if your employer offers an employee assistance program (EAP), it isn't just for drug addicts. It is for anyone in difficult circumstances who might benefit from a little emotional counselling. It typically costs next to nothing and a good therapist can make a huge difference in helping you through this challenging time.

Junkman, we're trying to help Butters here...she wants to find a way to keep her 10% down and not totally lose the money. It may not be possible, but we're tossing out scenarios to make it happen. If she has a civil relationship with her ex, then bramstar has a point in suggesting a business deal in co-ownership of the unit. IF they can afford it. On the other hand, kylewest is also very astute in pointing out the emotional risks in being financially involved with her ex, particularly if they're not able to speak. Only Butters knows this. I agree with you it may be dangerous to have the mortgage liability, which I already stated earlier. So, thank you, I prefer not to be Nuts.

Sorry if I offended you. Didn't mean it personally, don't know you. I meant your advice was nuts not you. Next time I 'll be more specific.

By the way, I'm trying to help also by being honest with her. Tough love.

Has anyone seen that Vince Vaughan/Jennifer Aniston movie where they broke up but still lived in the apartment together . . .

Junk--

What's 'nuts' is forfeiting what likely amounts to a year's worth of salary, possibly more, by walking away altogether. Because that's what's gonna happen if Butters pulls out of this legally binding deal. What are we talking here, $100,000? $200,000? More?? Are YOU nuts???

Yes, there is always merit to making a clean break, as Kyle points out. But--there is absolutely no harm, and possibly a great deal of good, in seeking a workable solution, with the help of an attorney, to this unfortunate predicament.

I was just imagining a scenario where after purchasing the condo and paying all the fees associated with this type of partnership transaction, Butter has a cash flow problem and needs to liquidate her holdings and the ex doesn't agree. Oh my goodness. That 10% loss is starting to look a lot better.

That type of concern can be addressed in any standard business contract.

I'll admit I'm curious too about how much is at stake. 10% cash down for a studio would be about $40-50k, $50-70k for a one-bedroom, and $70-100k for a two-bedroom. In LIC. If we're talking a hundred grand, yikes! I'd want legal advice on how to recover it.

I'm with Junkman (no relation) on this one. Assuming you cannot get a portion of the 10% back I would ABSOLUTELY walk. Holding till closing and then renting will tie up more capital (which it sounds like you need) and selling immediately would still erode capital. Forget about the emotional issues, walking is the right business decision.

I would also be weary of paying lawyers large sums of money to research this issue. These contracts are pretty tight and don't feel you will have much flexibility. Your best hope is an understanding developer which, I'm afraid, is a bit of an oxymoron.

Juice-- Without knowing all the specifics (like the actual amount of the downpayment, Butters' and her husband's finances, etc), how can you say with certainty that 'walking is the right business decision'? There are just too many unknowns here.

As for 'paying lawyers large sums of money to research the issue', it's actually not at all complicated to come up with a co-ownership agreement for a piece of real property--happens all the time, and doesn't require undue amounts of 'research'.

The real question is, what kind of money are we talking about here? There is, clearly, a significant difference between $40-$50k (which may not be worth trying to salvage) and $100k+, as tulip points out.

bramstar, I respectfully disagree. The difference between $40k and $100k has nothing to do with anything. The money is relative. If someone is buying a $400k place and puts $40k down, $40k is significant to that person. If someone is buying a $2M place and puts $200k down, $200k is significant to that person. The fact that person #2 doesn't believe that $40k is significant is completely irrelevant. You have to assume that 10% down on an apartment is relevant regardless of what the price of the apartment is.

That said, what we seem to be talking about is 5% (since she will split it with her ex). I would not attempt to close on an apartment one year from now hoping to sell it to recoup 5%. Why would you risk the added costs, market uncertainties, availability of inventory for 5%? Nor would I choose to rent the place for concern of tying up at least another 5% of capital (plus out of pocket closing costs) and would be fearful of rents in newly completed buildings.

This makes absolutely no sense at all and it is a bad business decision.

JuiceMan--you have a valid point regarding the relativity of money. But in a way that adds emphasizes the concern over the outright forfeiture of the downpayment. If the downpayment represents a year or so of the buyer's salary, then losing it will be a bitter pill to swallow. I agree that there are large risks attendant with completing ANY real estate purchase, especially in this market. But presumably Butters and her husband came to terms with those risks when they decided to buy in the first place.

Clearly, as you point out, an investment purchase assumes additional, and potentially daunting, risks, but again, without knowing anything about the buyers' financial resources, it is impossible to say whether the potential benefits may outweigh those risks.

Bottom line here is that it makes sense, in my opinion, for Butters to fully explore all possible options before deciding to simply leave her hard-earned money on the table and walk away.

paragraph one: --adds emphasis to---

"But presumably Butters and her husband came to terms with those risks when they decided to buy in the first place."

The risks are very different now. They initially made the decision with the idea of living there for a number of years. In real estate, a longer timeline translates to less risk (generally). The risks are much higher knowing that a sell/rent decision needs to be made immediately after closing.

I do completely agree with you that they "need to fully explore all possible options before deciding to simply leave her hard-earned money on the table and walk away." My opinion is focused primarily on the walk vs. rent/sell decision but hope she can find a way to get some of her money back.

Juiceman, I not only like the sound of your nickname but I love your logic. People trying to assist her are leading her down the wrong path. It sucks losing 10% but the alternative solutions suggested on the board are even worse. Much worse IMHO.

Just my humble opinion not a personal attack on Bramstar or Purple.

JunkMan--Just to be perfectly clear, it has never been my intention to 'lead' the OP down ANY 'path'--that is for her to choose based on counsel from her attorney and her own comfort level. My point, which I think I presented clearly in my first post, is that there is a benefit to her exploring and considering ALL potential options before making a final decision on how to move forward.

bramstar. I like your style. Very polite and rational. I tend to be abrupt and obnoxious. Personally, I prefer your approach. Wish more posters had your class and thoughtfulness.

"Wish more posters had your class and thoughtfulness."

---Nah, then it would just be boring. Why ruin all the fun? :)

When drafting the contract, did your real estate attorney add a condition that says 'money back if the building is not completed by a certain date'? If yes, you may take that chance and wait.

Thank you everyone - especially bramstar. I think we all know probably the easiest thing to do is just walk and leave the developer with an extra bonus. However, that's my (really ours) money and since it was going to be our first home, it represents a significant amount of cash - to me anyway, given my own income and how long it took to save enough to purchase something. A two-bedroom for those of you that are curious.

You've all helped me come up with a plan: marriage counceling while talking with a lawyer. Now, I won't feel stupid asking lawyers I'm paying for advice. Instead, I feel armed with some scenarios and options. Thanks!

Depending on the development, you could get someone to take over your contract with Sponsors approval. Places like 10-50 Jackson had people out the door at the opening and I am sure there are still some people willing to buy there. If it is the Powerhouse, you may have a tougher time, but the time contingency may assist you with getting out of the contract. The sponsors have an incentive to get the apartment sold instead of just keeping the deposit if they are responsible peoople. The idea of keeping the property as an investment may be the best option. You could ask your family to assist and buyout your ex or he may want to buy you out if possible. Rates are still relatively low and as first time buyer, this could be your opportunity to make a good investment decision over the long term.

The marriage couldn't have been in such bad shape if you made a deposit just a few months ago. I definitely recommend counseling. I also think of what Ann Landers or Dear Abby used to say: 'Am I better off with him or without him?' I have a friend who told me years ago that she was ready to walk but they tried counseling (they also had 2 kids; YOU have an apartment) & now she says, "We have such fun together!" - and this after more than 20 years. Good luck!

Butters, I agree with Luis. I think that many of the developers will accept you selling you contract to another buyer. You wont be able to make a profit but you will get you money back. Which development are we talking about?

most developers will not allow you to "Assign your contract" especially in this market. if there are other buyers out there.. they would much prefer they purchase from the sponsor. I am a broker that sells a lot of new development and i have even recently dealt with a similar situation. Feel from to contact me if you would like to discuss.

J-

I am sorry to hear about your divorce plans and even more sorry that people have the audacity to suggest counseling to you in this forum. I wish you all the best of luck and hope that your end result is a minimally disruptive to you both financially and personally as possible.

... the audacity to suggest counseling to you ...... I wonder what THAT is supposed to mean?

Butters--best of luck to you.

Butters08 - Talking to a lawyer and seeking marriage counseling seems contradictory. Also, marriage counseling may be of benefit when the reason you're seeking the service has little to do with averting the financial impact of a divorce. Just a thought.

Butters, I suggest that if you are going to approch the developer about assigning your contract do this yourself. Do not go through your broker. Aproch them yourself and they may understand the hardship. If the building is sold out you will have a better chance of them granting you a contract vendee (assign the contract to another buyer). The problem lyes with the broker as they would not want you to advertise this so you will have a better chance of sucess if you know someone who wants the unit. Remenber unless you dealt with an on-site salesperson ( another broker brought you to the building ) the commission may have alrady been paid. Bottom line, it is worth a try because you have nothing to loose.
Good luck.