CondoAdvisory Blog

It is a trend that I see happening more and more. With the decrease in market values in the condo market, and the often over inflated prices people have been paying for pre-sale condos the last couple of years, when buyers are faced with completing on the units they are finding that the value is often far below what they paid for them.

This poses some interesting problems for these buyers, first being that with the tightening credit markets and the fact that the value is below the price being paid, it may be very difficult to obtain financing for these properties. Not only that many people purchased a number of units under the assumption that they would be able to sell them before completion and make a substantial profit, it may be very difficult to obtain financing for a number of units, never mind come up with the down payments.

If buyers are able to complete they may be faced with substantial losses.

All of this leads to the possibility that buyers may decide that it is better to walk away form their deposits, or even worse they may have no choice. This is most certainly on the minds of the developers who less than a year ago would probably have been happy to take the deposits and re-sell the units for a higher price. Today those same developers would be faced with a financial nightmare should any number of buyers decide to back out, it could be disastrous.

For this reason it is quite possible that devlopers may decide to sue over breach of contract and try and obtain damages over and above the deposits. Of course I do not know of any specific cases of this yet but it seems to me to be quite possible. As a buyer of a pre-sale I would certainly be aware of this and seek legal advice if your are anticipating trouble completing on a unit. As well it would be best to talk with the devloper in advance and see if anything can be worked out.