The other victims of the Real Estate Meltdown

April 22, 2009
Matt Isleib

 

The stories that you hate to read about are the ones where you have hard working citizens that because of the real estate downturn and the mortgage crisis end up getting hurt. The real estate boom brought with it a flurry of new construction. It was not just one town but everywhere. From Maine to Connecticut to Virginia to Nebraska and the West coast. The story that I am referring to are the people that have fallen victim to the boom in construction.

 

Real estate prices kept appreciating as they raised the builders kept on building. Brand new condominium complexes kept going up. In some parts of the country they were selling faster than they could build them and this is where the problem started.

 

Selling a condominium pre-construction became a normal practice in the real estate world. I personally bought a condo pre-construction back in 2007. Builders would accept offers and down payments often times before ground even broke. In some of the more speculative areas like Vegas, Arizona and Florida units would be sold out before a project was even complete.

 

The people who bought pre-construction had down payments and were left waiting for the condo’s to be finished. The problem lies where people purchased these units and had financing but amidst the mortgage crisis a lot of the programs do not exist anymore. So the people who put 10 percent down payments on these condos thinking that they had financing for the other 90 percent of the purchase price are realizing that they in fact have no financing leaving them and their down payments at risk.

 

I had a client that lost his deposit on a new condo complex in Stamford, Connecticut. He put his down payment down almost two years ago and had financing from a lender. The lender told him that they no longer offer the program he was approved for. He needed stated income financing. He came to my office at Everlsey Capital Mortgage in Norwalk, Connecticut to see if I could help him. Unfortunately stated income loans are no longer around and there was nothing I could do to help him. He ended up losing his deposit.

 

There was an article in the New York Times Real Estate section on this very topic. It featured stories just like the client that came into my office looking for a mortgage. These are the stories that you hate to hear about and it is unfortunate that these people are victims of the financial crisis. To read the New York Times article click here:    NY Times Article