A $152,000 Change of Heart
CATHERINE HOLMES, a senior vice president at Barak Realty, thought she had found the perfect urban pied-à-terre for a suburban couple looking for a big-city view, a touch of the dramatic or a glimpse of the water.
But in this uncertain market, even perfection does not guarantee that a done deal stays done.
After trudging through eight or nine apartments one day last summer, the buyers found exactly what they wanted: a fourth-floor apartment on the East River, at 45 Sutton Place South, a 20-story white-brick co-op built in the 1950s.
“Feel like you are on board a yacht living over the water in a unique apartment,” gushed the listing by Joan Sacks, an agent at Stribling & Associates who has several listings in the building and happens to live there as well.
The apartment had a large master bedroom, a dining room that could be turned into a second bedroom, two bathrooms and a maintenance fee of just under $1,600 a month. It was listed last spring for $1.775 million, but as the market slowed, the price had been cut to just under $1.6 million.
By the end of that long day of apartment hunting, the buyers made an offer, and the sellers agreed to accept about $1.52 million.
In late August, the buyers paid a deposit of $152,000, 10 percent of the purchase price. But by the time the board had approved the transaction, in mid-October, the market had slowed further, and calls to the buyers’ lawyers about a closing date were not immediately returned.
It turned out that the buyers had “lost confidence in the market and wanted a significant price reduction, $150,000,” Ms. Holmes said.
But with no contingency clause in the contract, the seller held firm, triggering a contest of wills. Lawyers for the seller set a closing for early December.
But the buyer did not show up to close and the seller kept the deposit — a first for both the seller’s broker, Ms. Sacks, and the buyer’s broker, Ms. Holmes.
“They are going to wait the market out and see what happens,” Ms. Holmes said. “Their prognosis is that a year from now they will be able to get something like this for $1 million.”
Last week, the apartment came off the market. The seller plans to spend some of the $152,000 to update the bathrooms to increase its appeal. And the brokers will receive a small consolation prize, a commission on the forfeited deposit.
E-mail: bigdeal@nytimes.com
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Can You Get Me Off the Hook?
Buyers who signed on before the economy tanked want out.
* By S.Jhoanna Robledo
* Published Dec 28, 2008
When the credit crunch slammed into New York at the end of the summer, brokers immediately noticed fewer deals being made. But people who had already signed on the dotted line were the ones who really got scared, and since then, their lawyers are finding themselves plenty busy—breaking those deals. Real-estate attorney Michael Carmody says new purchases have “come to a screeching halt as of late September,” and clients with existing agreements are calling to back out. Lawyer Jerry Feeney says he used to get two new calls a day from people drawing up contracts; up to 40 percent of inquiries these days come from clients trying to abandon ship. Attorney Brian Tracz adds that until the summer, “no one wanted to back out”; according to the Streeteasy .com data shown above, the number of contracts broken in Manhattan per week spiked sharply in August, and is only now showing signs of declining. The tailing off in November and December merely reflects the fact that there are far fewer contracts being signed in the first place.
The problem is largely confined to new developments. In new buildings, the path from deal to sale is long, and clients are closing “during a real-estate market that is vastly different” from the one under which they bought, explains Carmody. There’s a real chance they could lose money, and they’re panicked. It doesn’t help when they see other units selling for less than what they paid, or with extras like closing costs thrown in, adds Tracz.
Asking to break a contract is easy, but making it happen isn’t. “You can’t blame a buyer for trying, but a contract is a contract,” says Gumley Haft Kleier’s Michele Kleier. Certain contingencies—if an appraisal comes in too low or a building doesn’t close when promised—could provide just cause, but only if they’re spelled out in the agreements. Otherwise, buyers lose their deposits. “The seller might say, ‘Look, if they’re going to drop $200,000, I’ll take that $200,000 and risk that the market may be better next year,’ ” says Kleier. “Basically, [buyers] are paying you to wait it out.” Prudential Douglas Elliman’s Leonard Steinberg had clients who were serious about canceling an $8 million deal, but it would’ve cost them their $1.65 million deposit, plus they’d have to pay rent while they looked for a new place. “It seemed like a reactionary thing to do”—they intended to put down roots, not just buy and flip—“and in the end they ended up buying,” says Steinberg.
What about those who legally have no reason except cold feet? They can always try pleading their case to developers, say experts. But they shouldn’t hold their breath. Says Feeney: “If you can find a sponsor in this city with a heart, I will make an appeal to them. And you can quote me on that.”
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