It seems that after Opus South Corporation cleared a hurdle on their Water's Edge development and thought all was well, another hurdle has reared its ugly head. This time is has to do with the sales contracts that were written on the 153 unit complex in downtown Clearwater, Florida.

It is unthinkable that a new construction contract could have been written that was non-compliant with HUD's Interstate Land Sales and Full Disclosure requirements. But, apparently, they were. In effect, the buyer's signed what amounts to an invalid contract. For the full article that hit the streets today in the Clearwater Gazette, click on the link...http://www.clearwatergazette.com/20080124/clw.html

Opus has had many developments in our local downtown areas, especially in revitalizing Downtown St. Petersburg. With their experience and expertise, one has to wonder how this slipped through the cracks? Were these different contracts from ones that were normally used? Did they not contain the same language as the contracts used on their other developments? Were they rushed when put together? At any rate, it could have some serious repercussions for our condo market.

We will have to wait and see what happens. I hope for the best and that the buyer's that planned on residing in their unit as a primary or second home will opt for the re-write at a lower cost - this is one of the three options.

 

19 Comments on Invalid Contracts Written On New Construction...What's a Buyer To Do?

JAN
24
2008
600,555 Points 45 Featured Posts Outside Blog
Due to changes in the contract market in the last two years, my buyers in Water's Edge quickly and happily took the option to cancel their contract. I don't know or understand the details, but I think many of the purchasers were speculators who will not proceed.
11:35pm • #1
JAN
25
2008
230,597 Points 2 Featured Posts Outside Blog
I would have to agree with Sharon...as we have seen alot of speculators around Clearwater.
5:17am • #2
332,686 Points 5 Featured Posts Outside Blog
Cris, it makes no sense how the company would not protect themselves and make sure that the contracts are valid.
9:47am • #3
This doesn't surprise me at all, greed has a certain way to bring out the worst in people. 
10:33am • #4
1 Featured Post

Sharon - I agree, as I think most were speculative buyers as well and will gladly opt out of their contracts. This gives us more vacant units to resell using a valid contract.
12:30pm • #5
1 Featured Post
BLR Guy - We do see it around Clearwater. And I also agree with Sharon.
12:31pm • #6
1 Featured Post

Danny - It does make one wonder where the ball got dropped. Time will tell how this will play out in the end. Hopefully not too disastrous.
12:32pm • #7
1 Featured Post

Wayne - You're right, but it is still surprising that it happened. One of our agents has sold several units on their two other developements in St. Petersburg and to our knowledge, nothing wrong with those contracts. So, it is a bit of a shock that this happened.
12:32pm • #8
130,235 Points Outside Blog
Cris - Indeed, I think Sharon nailed it correctly - this is indeed turning into a real mess! Time will tell the outcome -
2:45pm • #9
1 Featured Post
Bill & Barbara Jo - It is true...time will tell.
3:00pm • #10

The article implies it was "routine" outside review (and not acknowledging any influence of threatening buyers/attorneys wanting out) that found this? but... if routine why not previously?

Or one would assume certainly such double check would of been made before trusting a new contract on a multi million dollar 153 unit project...    

If HUD isn't requiring action again makes one wonder how serious  the "technical" flaw really was... and whether in a normal market condition what outcome would have been determined..

It would interesting to know what if anything was actually different from older projects  in the contract wording... or if somebody needing out finally started looking for loop holes, any out to cut their loss...

Is this just another case of LAWYERS digging deeper and much pickier about wording trying to find anything and everything that could possibly get THEM or one of their clients out of a speculative deal gone the wrong way?  i.e. and/or in the rush to close during the boom years, was nobody paying attention while counting the profits?

Maybe some of your agents can check their latest contract with one of the other successful closes and let you know...
4:36pm • #11
1 Featured Post
blreast - It still makes one wonder. I have heard of buyers asking their attorneys on other projects to find ways out and still leaving their deposits behind. This just seems to be strike 2 on this project, hopefully there will not be a strike 3.
10:16pm • #12
JAN
26
2008

 

If this project is already out of the ground. (as it seems for the article??? )-_--.. It will sell at some Price!...

And if the developers understand the full role of the proper Realtor to do so!

 

The beauty of the market is that it's just that.. a competiitive  place that  if one wishes to sell the willing buyer's price can be found..., hopefully with the  market corrected in 2008..  If marketed correctly  willing  buyers (with adequate cash or credit )should still  be available that can close....

And if this project is  yet to be constructed... likely it or something similar will be revived and built as future  demand builds as buyers more fully  understand the restrictions of Floridas  waterfront "condo " market and acreage limitations  in many markets going into the future...
6:38am • #13
1 Featured Post

blreast - It is out of the ground and yes, it will sell at some price. Just not the price originally wanted. As I said...time will tell how this all plays out.
8:36pm • #14
JAN
27
2008

 

Thanks again Cris for pointing out all of us should be much ever more careful about the details of the fine print and details on listings, contracts etc..

Having seen recent news articles on even buyers sueing their real estate agent  (they bought a house they now claim was "over market price" and that's  the realtors fault- you've likely seen it too).. Has it reached a point that agents are going to need everybody involved to sign a non-litigation agreement for just about everything?  non-representation likely won't stop the lawsuits either!

leaving anything less than technically correct should be avoided.  Just sound business practise I agree.. but like you've shown there's a risk as well as  a tendency to trust developers (often required) contracts or other agents work without "offending" by making good corrections...etc..  but this shows there's lots of worse things than being known as a "NIT-PICKER" 

    Of course sometimes you can just blame it on the broker for such thoughness of meeting such  requirements  (lol) or does the CEO get the credit for being the Contract Paperwork Double Checker?
11:26pm • #15
JAN
28
2008
1 Featured Post

blreast - you are welcome! One of our agents when selling new construction will add an addendum with further protections for the buyer. If the developer doesn't want to accept it, she moves her buyer to another developer. She was able to have her buyer back out of a deal and retain their deposit on a deal due to having this.

We just need to slow down sometimes, take a deep breath and read line by line.
11:29am • #16
FEB
27
2008
Any update on what the buyers did?  I am assuming the 15 day period is over.
diane
10:48am • #17
SEP
16
2008

This error was not found during a "routine review" of their contracts.  I brought the first ILSA lawsuit against the builder in early January.  Their outside counsel acknowledged that their contract was defective for not properly including language that would have exempted themselves from the reach of ILSA.  They resolved the cases by issuing a memo as referred to in the Clearwater Gazette article.  Later in the year HUD fined the developer $10,000 for issuing their contracts in violation of ILSA.  Just FYI.  Don't believe everything the newspapers report.

 

Hank Sorensen, Esq.
9:32pm • #18
SEP
17
2008
1 Featured Post

Hank...Thank you for the insight and update on this issue. I wonder how many of the buyer's took the option to rescind their contracts, as Sharon's buyer's did versus how many signed a new compliant contract? Hopefully, issues such as this are over.
10:12am • #19

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Cris Burlew, Broker ~ St Pete Beach FL Real Estate

Saint Pete Beach, FL

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Beach & Luxury Realty, Inc.

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