Arlington Condos, New Trend: Transform Back to Apartments

By
Real Estate Broker/Owner with Northern Virginia Homes - FRANKLY REAL ESTATE Inc

Summary: FranklyRealty.com discusses Arlington Condos switching back to rental units!

Update 2-13-08 The Phoenix Condo in Arlington Reviewed 

The Joule condos, formerly owned by Ed Peete (Arlington Virginia) recently announced a transformation from new condos (delivery Fall 07) ownership to apartment rentals. Canceling hundreds of contracts in the process.

A dozen local condo developments have taken this route and I predict that Zoso condos (also from Ed Peete) in Arlington Virginia will be next.

How can I make this prediction? Lets look at the obvious facts:

  1. Ed Peete just did it with the Joule condos in Arlington.
  2. Only 60% have been sold at Zoso. That is nothing. The bank will require certain milestones be met and I bet that most of those sales were in the first 6 months, with maybe a sale or two every month since.
  3. Pricing. The units were priced at Clarendon 1021 values (across the street) when flippers were making an $80k profit. Now 1021 sellers are lucky if they break even. (see NY Times Article)
  4. Withdrawn MLS listings. They withdrew their listings on the MLS on Dec 26th 2006. What company trying to feverishly sell their condos would withdraw from the MLS?
Why does this matter to buyers?
One savvy business man recently told me "I spoke to the builder... they are claiming to be on target for their delivery dates. They are definitely keeping it as condos."
He would rather know the truth so that he can get on with finding his perfect condo. Instead he gets strung along for over a year and then is left with nothing.

How can the contract allow for them to tear it up?
Most new constructions contracts have a clause that outlines the penalties for purchasers that back out of deals. However there is a clause that allows the seller to back out of the deal with no penalty (maybe you will get some interest on your deposit). This lack of mutuality is being contested by some lawyers (email me if you need a lawyer), and is being used by buyers to get out of new construction contracts.


How can a buyer get the facts and expose their Achilles heal?
First of all if you haven't bought a new condo yet, have your Realtor try to strike the clause that allows the seller to get out with no penalty. Or specify some damages. Whether it be $1,000 or $20,000 or your deposit amount.

If you already bought a place and they tell you they are "definitely keeping it as condos", then they shouldn't have any problem writing up a little bitty addendumy-poo to the contract that calls for damages if they lie to you verbally. Watch them shake in their pants and run for the hills.

Why are developers giving up?
A brief history... In the olden days, New Constructions were a great deal. Builders would sell units at 15-25% below market price in order to be able to sell 200-400 units. It is simple supply and demand. If you want to sell 200 of something, you better come in super low to make sure you sell out.
But then the market rocketed and flippers were able to pocket the 20% discount AND realize the 20% jump in the market (during the 1-2 yr development). I know a lady, straight out of college that made $80,000 just 2 weeks after closing.

So the developers saw everyone getting rich and they wanted their
money back! They also saw buyers line up in the thousands (3,000 for Clarendon 1021) and they started selling units at current market prices (no more discounts). Buyers were buying hoping for the same run up, since it was a "sure thing". (See my blog on a flipper that lost $150k)
Sure enough, with Clarendon 1021 the first 10 sellers made a killing, as much as $100k. But then the next 10 made $50k and the next 20 were lucky to break even, with some losing over $30k.

Zoso and Phoenix condos in Clarendon Arlington meanwhile priced their units at the TOP of the market when the flippers made $100k.


You know it is a bubble when you hear about 4 taxi drivers that decided to get rich and pool their money together to buy a new construction. Where are they now, I wonder.

So what happens when you sell "60%" of the building for $100k over the current prices nearby? You have un grande problemo (that means a "big problem" in Spanish). You can't drop prices for the rest of the units, or the current purchasers will want out. But if you don't drop, nothing sells. (Some builders have resorted to illegally fudging the MLS, see blog, which is why you should use a Realtor!)

Why does this matter for the Arlington area?
It helps the existing condos. Simple supply and demand. Remove the supply and people buying will look next door at 1021. Now does this inside scoop mean you should run out and buy at 1021? Yes! Absolutely, and from me, so I can get filthy rich! Nah, but each conversion back to apts. definitely can't hurt. And of those 100 buyers, lets say half are investors, maybe half of the rest (25) might look nearby. 25 active buyers? That helps values.

And for those of you that dislike Realtors
, you'll love this... When a condo development decides to convert to apartments a week before closing, guess what the Realtor gets? ZILCH!

- Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com

703-827-4OO6 Please report all typos, I don't like looking stupid. If you like this post, sign up for new blogs daily, use the form on the right of the page.

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Keywords: Housing bubble? Arlington, Alexandria, mls, homes, Real estate, Virginia, Alexandria, 22201, 22314, Fairfax Va, DC Realty, Realtor

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Anonymous
Maria
 Have you heard anything about Io Piazza, which is an Ed Peete condominium?  It's in south Arlington.  I am hoping that it will go apartments.
Mar 11, 2007 10:02 AM #5
Rainmaker
128,067
Tchaka Owen
Galleria International Realty - Hollywood, FL

I remember Io Piazza having somewhat odd marketing a few years back.  I was never even sure when it was going to be forsale, next thing I know it had been on the market for some months.  It never had the same buzz all the other developments in the area had.  

Tchaka 

Mar 11, 2007 12:04 PM #6
Rainmaker
138,119
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA

Hello Maria,

EMail me directly. But yes, I'd put it at 65% 

Mar 11, 2007 03:58 PM #7
Anonymous
Aman

I had the same question as well regarding Io Piazza- I just heard from a friend who sells units for a new construction in Crystal City that Io Piazza is going to become a rental-- but I don't know how credible that is?

Apr 08, 2007 09:17 AM #8
Rainmaker
138,119
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA

Hey Aman,

Oh, I got an update on that. It is under contract to sell the entire project. (as in not as condos)

Frank 

Apr 08, 2007 09:20 AM #9
Anonymous
erica
you mentioned the Phoenix pricing at the top of the market.  what's the latest with them?  are they staying condo?  bringing prices down to sell?  do they even have a sales office?
Apr 18, 2007 04:16 PM #10
Rainmaker
138,119
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA

Hey Erica,

Yes they have a sales office. Actually I heard they just changed their sales team to another company, so that is a decent sign that they will stay condos.

As for price, yes they are not at the same price as a year ago. 

Apr 19, 2007 01:23 AM #11
Anonymous
Bill

Frank,

I also signed a contract to buy a condo at IO Piazza.  Please keep us informed if you hear anything else.  If it's definitely not going to go through, the sooner I know the better.  Thanks for your help and this blog!

Apr 25, 2007 10:29 AM #12
Rainmaker
138,119
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA

Hey Bill,

It isn't looking good. The builder is sending out "feelers" (which they didn't do before) to see who is still interested. The property IS being marketed to apartment people, but they CAN'T tell you until it is 100% either under contract or closed.

If you want to know sooner, tell them that you want "out." And if they DO sell as condos, you will have PLENTY to chose from, and maybe for less!    

Apr 26, 2007 03:22 AM #13
Rainmaker
138,119
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA

Update 5-5-07- My sources say that Io Piazza Condos in Shirlington, Arlington Virginia is Under Contract to be sold. Once the property closes, all contracts will be canceled and the deposits returned. If you want to live in this area, you might want to beat the rush of 100+ buyers. You are ahead of the game by reading this blog, but not by much! Email me.
May 05, 2007 08:29 AM #14
Anonymous
aman
thanks for the update on 5/5/07-- since we'll getting back our deposits, what do you suggest staying in the area?
May 09, 2007 06:40 PM #15
Rainmaker
138,119
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA

Hey Aman,

I can't make that decision for you. everyone is different, heck I wrote a blog on NOT buying recently (depending again on your situation). Sure, Shirlington is a nice area, and still will be now that this is converting. I can send you a link to the 30 nearby properties and you can hop on them before others do.  

May 10, 2007 01:06 AM #16
Anonymous
Bill

Frank,

Thank you for keeping us updated and for your help on this blog.  As an FYI, I received an update for my realtor who is working closely with the builder of IO Piazza and she said that as of TODAY (5/11) it is still a condominium and no contracts exist between the developer and a third party investor.  At this point, I just want to know one way or the other.  Anyway, I thought I'd let you know.  Thanks again for your updates!

Bill

May 10, 2007 06:24 AM #17
Rainmaker
138,119
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA

Hey Bill,

The sales office and anybody talking to Realtors will say it is condos until it is SOLD. Nobody will tell you it is under contract. These contracts fall through. You know how homes do a $400 home inspection, well that happens for buildings too and it costs $40,000 sometimes. After the inspection MILLIONs are negotiated, so no condo owner in their right mind will consider it sold until it is SOLD.

It is under contract. 

I guess not all Realtors are privy to the same information. 

Frank 

May 10, 2007 06:46 AM #18
Anonymous
Bill

Good to know.  That makes sense.  Thanks again Frank!

Bill

May 10, 2007 06:53 AM #19
Rainmaker
128,067
Tchaka Owen
Galleria International Realty - Hollywood, FL

Bill, you probably wouldn't know if there was an existing contract anyway.  Developers tend to announce such deals after the fact.  Leaking such information prematurely could get other interested parties involved (bad for the buying developer) or perhaps undue criticism (bad for the selling developer if the buyer utilizes a loophole to break the contract).  Confidentiality is a must.

 

The bigger question was posed by Aman and there's no simple answer.  You have to determine your purpose before moving forward.  If you are buying to occupy, there are many options (refer to Frank for that) and if you're an investor, there's probably slimmer pickings - and that's probably determined by your timeframe of investment.  

- Tchaka

May 10, 2007 07:09 AM #20
Anonymous
Kevin
Frank: Any updates on the sale of Io Piazza?
May 29, 2007 09:07 AM #21
Anonymous
Frank LL0SA
Nope, nothing new yet. Just a buyer that is under contract still being given the run around as of today.
May 29, 2007 10:10 AM #22
Rainmaker
138,119
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA

Update on Io Piazza and a possible Class Action.

Jul 03, 2007 05:57 AM #23
Rainmaker
138,119
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA
Feb 13, 2008 07:34 AM #24
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