According to a plugged-in tipster, the first wave of homes at Esprit Park have received thier temporary certificate of occupancy (TCO) and the development will be “moving to close [their] first units imminently.” Also noted:
No word on how many new contracts written recently, but several people who have been in contract for a while have been told that the price reductions and refundable deposits announced during October do NOT apply to anyone in contract before October, so if you are in contract for more than they are selling the unit next to yours today, you are SOL.
“First floor of the Minnesota building this week, and supposedly second floor next” (with regard to the TCO). And SOL being another industry acronym of course.
∙ Homes On Esprit Park: Now Offering Refundable Purchase Deposits [SocketSite]
Didn’t they also have a price “guarantee” program back in 2007? I thought early buyers were guaranteed the benefit of any price reductions that later took place. Did this program go away b4 the refundable deposit program started? so, who is exactly SOL?
This is really really frustrating to know that folks like us (who signed contract after the gurantee and before October) have no way out – we can’t just back out as we’ll loose the deposit. Is there anyone who has been able to get some negotiation at all during escrow or close of escrow? Please…anyone out there?
The did have a guarantee program in the fall of ’07, but I don’t know whether it was in force through ’08. Looking back through the ss posts, I did find this comment from Esprit made in the fall of ’07, which now sounds rather “interesting” in the light of what’s happened since then:
“With our model units expecting to be delivered at the beginning of the year[’08], a rebound in the lending market (already underway) and much greater progress on construction, we anticipate vibrant activity and sales in the new year.”
Against my recommendation, I sold for a developer in AZ that did something similar to this. I requested the backlog get the discount but management denied it. The higher priced units ended up not appraising and per our contract we had to cancel the contract or sell the units at a reduced price. If we would have discounted the units accordingly we would have looked like good guys and maybe got some referrals instead of making everyone hate us!
I am assuming the deposits are 3%… Is that correct?
Esprit Park,
You know, and most of your current and future buyers know, that we’re in a declining market for the foreseeable future. Judging by comments from some of your committed buyers on the previous thread, you have a storehouse of goodwill. Going forward, you can continue to follow the traditional, industry-standard, close-to-the vest, screw-the-buyers, maximize-sales-prices-and-profit playbook. We have already many examples of developments working that playbook and seemingly not going anywhere. Let me propose a different playbook.
1. Become transparent. Open your books. Submit yourself to extreme scrutiny on a site like this.
2. Set your prices smartly. Leave money on the table. Leave a little upside for your buyers. Become transparent on inventory, prices and comps.
3. Offer to refund all deposits and renegotiate with all buyers. Offer to refund the difference if you make any sales for less within 6 months.
4. Openly and continously update inventory and sale prices.
You may just find that there are enough qualified buyers in SF for whom your development is the right, long term fit and a win-win for all. You may also discover that you can do well by doing good. Don’t burn the people who have already committed to you by making non-refundable deposits and who love your development. Partner with them. It’s time for someone to try a different approach.
Sincerely,
chuckie
BALONEY!
If prices had gone up, would any of these buyers have done anything but say “I put down a deposit and you took the risk of not being able to increase the price in return for a deposit, I expect the unit at the agreed upon price!”
Now the deal doesn’t work out in the buyers favor and the developer is supposed to be Mr. Nice Guy?
The 3% was provided to the developer as compensation for locking in the price. You got the price lock you paid for, the market just didn’t work out.
Your choices are to take the unit, walk away from the deposit, or renegotiate the price as FMV plus 3% of the original purchase price. If I were the developer, I might throw in an upgrade if you took it or renegotiated, but why they should hand you your deposit back is just beyond me.
You got what you paid for: the developer did not get to raise his price. That’s really all you can ask for.
If the developer stupidly refunds it, great, but I wouldn’t be mad if he didn’t. You were an adult when you signed the contract and the developer delivered exactly what he said he would. Someone in business delivers exactly what they say they will for the price I agreed to, then I think I’m doing pretty well. I’d hardly get mad at them for doing that.
Dear chuckie,
Thank you for your letter to the EP management team. As their lender, they have forwarded your letter to us for response:
No.
Thanks very much,
Foolio Bank, Member FDIC
*Strictly for satire. Foolio Bank is not now and has never been FDIC insured and in fact is not evan a bank, although if I can figure out a way to get some of Paulson’s bailout, perhaps I’ll organize as one. In any event, if anyone would like to give me money, without repayment or return obligations, I’d be happy to take it. 😉
seems pretty obvious what early buyers should do.
1. walk away from the 3% deposit;
2. walk away from the 3% deposit, and immediately renegotiate a purchase of the same unit for 10-20% less than the contract price; or
3. walk away from the 3% deposit, rent something for a year, and then come back and buy one of the units for 25-40% less.
Or, if it was never intended as an investment, and it’s not a big part of your net worth, just close and enjoy the place you bought for the price that you thought made sense when you signed on the dotted line 2 years ago.
Agreed with Tipster. The 3% is to make sure you have some level of commitment. This is a home purchase after all. I proves you are engaged into a transaction and it does matter, both for the seller but also for other prospective buyers interested by the unit you are buying.
In this (now defunct) highly speculative market, you need to put some money upfront to play. The risk of losing it is also part of the game and it reminds us all that there’s no such thing as a sure thing. Seriously 3% is not a lot considering the 10+% a year that were common not long ago.
Here are some more suggestions for Chuckie’s list:
5) Free backrubs by the sales agents.
7) Lots of silver certificates for the buyers just for being nice people.
6) A pony with each closed unit.
@tipster! I’ve been harsh towards you recently but I totally agree!
In commercial financing, when you put up a deposit to lock a rate you don’t expect the bank to increase the rate and you can’t ask the bank to decrease the rate if the market changes. You buy a rate. You can walk, but your deposit stays.
I’m a buyer at Esprit Park planning to hold long term and I’m closing. Would I have made the same decision now that I made in May. Nope. Will I be Ok in the long run? Yes. Could things have worked out better? Yes. But when I put up my deposit it was because I felt I got a good deal well within my price range at that time. World changed dramatically, more than I thought it would, but I can’t expect a seller to just change their terms to suit your needs. Why bother with contracts at all if the buyer is just supposed to get exactly what they want at COE?
Besides, the refunded deposits were really only for those who could no longer get financing. Perhaps those trying to get out of contract can force their lender into denying the loan? Esprit Park was trying to address the changing lending market, not declining prices.
And I do think Build Inc. and crew at Esprit are solid guys. They’re trying to run a business and come out of this so they can build again. They’ve got family to think about, lenders to pay back, expenses to manage. Tough spot for all. Even though developers get capped on pretty hard sometimes I really can’t believe they’re all out to screw their buyers. They’re human just like us. They screw up too and try to make the best of it.
This whole process of delayed closing (originally told July) and a deteriorating economy hasn’t been fun. The only thing I can say I did right was picked a development I really like at a price I can afford even if the shit hit the fan. And boy did it ever.
This building is turning out to be one of the big exceptions to the rule that most of the recently constructed lofts suck. Who cares how much you have to pay to get in? That’s only money. What you are getting in return is primo living which is priceless.
Whatever happened to buying to avoid the waste of rent. . .or the tax benefit? Or the mere fact of homeownership and calling something your own?
@Mole Man – My condo isn’t a loft but it does come with “primo living” which per the contract is an 8 ball of coke, a case of Crystal, and some exotic dancers. Another instance where this developer stands above the rest.
“Whatever happened to buying to avoid the waste of rent. . .or the tax benefit?”
Ummm…are you serious?
A giant credit bubble happened. It drove real estate prices into the stratosphere, and buying, even counting the tax benefit, no longer made sense vs. renting unless you could count on significant appreciation. Now it’s deflating and people are moving into new condos that are worth less than they were a year ago. That’s what happened.
“A giant credit bubble happened. It drove real estate prices into the stratosphere, and buying, even counting the tax benefit, no longer made sense vs. renting unless you could count on significant appreciation. Now it’s deflating and people are moving into new condos that are worth less than they were a year ago. That’s what happened.”
If you are planning to hold, you can afford to get a loan today, and can afford the same loan in a year and so on. . .why not buy if you like the condo, neighborhood, etc.
What price is worth it? If you have an answer to this, then Dude, you are smarter than me.
Because I can buy that same condo (or a comparable one) in a year or two for less, that’s why. And in the meantime I save thousands by renting.
What price is worth it? If you’re really a banker, you should be able to run a buy vs. lease analysis and see where the breakeven point is, including all costs and taxes, to gauge when it makes sense to buy. Not that difficult to see how much cash goes out the door every month under each scenario. SocketSite has posted several models that do this quite well, in fact.
“Because I can buy that same condo (or a comparable one) in a year or two for less, that’s why. And in the meantime I save thousands by renting.”
The fact that you rent and think that in 2 years values will not return in San Francisco, is why you will end up buying a condo in concord.
Add one more to list of people that completely agree with Tipster on this one.
“Add one more to list of people that completely agree with Tipster on this one.”
What is tipsters take?
“The fact that you rent and think that in 2 years values will not return in San Francisco, is why you will end up buying a condo in concord. ”
i must be buying a house in concord too. not only will values not “return” in SF in 2yrs, they will most likely be signifianctly lower. this is not a “normal” cycle
http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html
TheBanker,
Rent is not a waste.
Someone who was standing still in 2006 would have had:
– 10% return on the downpayment
– + savings
– + 15-20% loss in RE value
= more or less 40% extra purchasing power without the burden of home-ownership.
Try and beat that with the “any time is a good time to buy RE” gimmick.
The time of house flipping and ATM-homes is over. People are earning less and expect to earn less as the RE-triggered recession unwinds. Debt has to be repaid and no one will lend freely until this bubble debt is repaid or forgiven (hint: not gonna happen). Flippers and cheerleaders will have a hard time in this new territory.
It’s probably time to update those “debt apocalypse” charts by now. The one above looks like it ends at 2006…
After you reach terminal velocity it doesn’t feel like you are falling anymore, but things are still contracting as we speak, and that chart is too out of date to be credibly posted anymore.
“The fact that you rent and think that in 2 years values will not return in San Francisco, is why you will end up buying a condo in concord.”
Very mature and rational analysis there. What do you base that on, exactly? What will support these bubble values at egregious levels of income now that credit is tight and layoffs are starting?
Are you seriously a banker? And what kind? Because I know a lot of bankers, and none of them think this will be cleaned up that quickly.
“Flippers and cheerleaders will have a hard time in this new territory.”
I can’t speak for chearleaders but the reason I am having a hard time is that prices haven’t come down on any fixers, while finish prices keep come down; so there is nothing to flip (and make money).
Like, Dude, what are you _really_ going to do with all that money you save ?
Throw a massive party?
Buy a nice car?
Buy a cult cab?
Buy a nice painting?
Sooth insecurities by knowing that you have that money in the bank?
To each his own.
Uhh…nice snarky comments, but I am seriously interesting in the answer to the following question:
What do people think (I know, no one knows for sure) these condos at Esprit Park will be selling for in 2 years? Clearly they WILL still be selling new units then, given the rate of contracts and the falling comps…are we looking at 5% depreciation? 10%? 20%? It DOES make a difference to those people who have been in contract for 6 months or more…
“What do people think (I know, no one knows for sure) these condos at Esprit Park will be selling for in 2 years?”
Absent larger economic issues, I’d guess that a 20% decline would be a reasonable forecast.
However, IMO we are going into what will be a long, deep and painful consumer-led recession that is centered on excesses in financial services and real estate, and SF will be hit disproportionately hard in such a recession. Therefore, 25-40% declines (depending on the relative desirability of the unit’s plan) should be considered very possible, and perhaps even likely.
“Like, Dude, what are you _really_ going to do with all that money you save ?”
I don’t know about Dude but I’ll go with…
Retire a few years earlier.
Travel the world with my kids.
Spoil my grandkids.
Invest in a better performing asset class than San Francisco real estate.
It’s only money so why not waste it? Jesus, is that really the latest realtor/bull campaign?
parkster,
10% to 40% declines in 2 years are within the realms of possibility… I would be willing to bet that prices go down 20-25% in two years, although I don’t know if this speculation helps anyone.
There is another way to think about the issue. It’s highly likely that the high water marks set recently may not be breached for 10 years or more. Last time around, the peak prices that were reached in 89-90 were not breached until 96-97. Most people will agree that the current/recent highs are especially spectacular.
Just my 2 cents.
thanks Chuckie and No Brainer. I must say, I get the whole, “you made a bet and you came out on the short side, so you lose your 3% deposit” argument and it has some merit. Equally, though, it seems likely that many of the people who put deposits down early, which clearly helped the developer, will simply see no reason to complete a purchase that virtually guarantees a short term loss with little visibility on long term gain. Pretty basic self preservation stuff here in what is most people’s largest investment of their lives…
What do people think (I know, no one knows for sure) these condos at Esprit Park will be selling for in 2 years?
I think these condos could come down 40% in 2 yrs. They were severely overpriced for the perpetual “up and coming” neighborhood from the get go. I would bet my left nut that they will come down at least by 20%
Maybe they will be helped by the new blight penalty law, as there are quite a few blighted buildings (grafitti) in the area.
I can’t speak for chearleaders but the reason I am having a hard time is that prices haven’t come down on any fixers, while finish prices keep come down; so there is nothing to flip (and make money).
That’s a market anomaly and where you have anomaly you have an opportunity in disguise. I just wish I knew what it was because I still find SF RE very much overpriced.
Maybe waiting IS the opportunity. I lay back and enjoy the renting (and the savings) in a great neighborhood for 1/2 what others are paying in owning costs in worse places.
Ouch. Has anyone actually closed escrow here yet?
[Editor’s Note: You can’t close escrow without a certificate of occupancy.]
80% of the people on SS are people who have waited, for whatever reason, for a long time for the price to drop to a level that makes sense to them. They are still waiting, or hoping that the prices will be down another 40% from here.
15% of the people are homeowner, who are more or less in denial, or at least more confident than the reality of today’s market.
5% of people are truly shopping around for the right opportunity to buy.
Price will fall more, for sure. Not to a level that makes sense to the bears.
[Editor’s Note: Not quite: The Average SocketSite Reader (Is Anything But).]
Well, fair enough. Assuming the average Socketsite reader/poster owns a home AND is currently in the market (whatever that means) then it’s a pretty sophisticated group. And they are perhaps unreasonably bearish right now (does that mean we are approaching a bottom or at least the rate of actual descent might be slowing?) but they certainly are potential buyers, and if they say prices will fall then by definition they will, because this group is actually setting prices by entering contracts and/or closing (or not) on those contracts.
For condos in the general vicinity of Dogpatch then, I conclude that there is somewhere between 10 and 25% downside (my gut says 15% down from here is a reasonable place to find stability or make a bet??) and zero upside for the next 2 years, and after that who knows. I personally conclude that over the really long run (10 years or more) you can’t go wrong owning a limited resource in a city with nearly unlimited desire for housing. But it sure seems hard to buy today at prices set 4-10 months ago with more falling assured before the bottom.
I love this development but I think the developer has to reduce prices another 10% before they are in line with the market at the moment. Just my 2c gathered from reading these posts and poking about the neighborhood.
I personally conclude that over the really long run (10 years or more) you can’t go wrong owning a limited resource in a city with nearly unlimited desire for housing.
Tokyo. There is little, if anything, that SF has that Tokyo does not. I’m not saying that SF will repeat Tokyo. But it is in the realm of possibility.
Tokyo’s 2008 median home price after 3-4 years of gains is still less than what it was in 1998. and of course Tokyo RE depreciated from 1989 to 2003 (14 years). I believe that Japanese (not Tokyo) land values were roughly equivalent in 1981 and 2003. (22 years)
That said, SF never appreciated as fast as Tokyo did. There may be nowhere on Earth that has done that. SO I doubt SF will be as severe as Tokyo.
RE turnarounds are fairly slow. Credit events (bubble popping) adds extra time. SF’s last RE downturn took 9-10 years to play out, without a major RE bubble. Thus this one may take more time. but who really knows.
Before, my projection was that property values would fall until Dec 2011 (so 3 more years). I have never given a % amount because I’ve never had an idea on that.
The massive amount of govt intervention could alter the above date (make it turnaround faster or slower). Although at this point I still feel confident that we have 3 more years of real losses on residential RE. (note: I said real losses, not nominal losses).
That said, I fully expect that the govt will directly intervene in the US housing market (in more ways than they’ve already done). This may prop up prices, although it will come at enormous cost to us as taxpayers. (think a repeat of the fiasco caused by raising Fannie/Freddie’s conforming limits and increasing their balances…). My guess is that the next intervention will be outright buying of Mortgage securities, more modernization of FHA, a change in the FHLB structure/funding, or later on most likely a second Resolution Trust Corp. That’ll hurt.
Why has no one pointed out that the letter offering people a way out of their contracts if their financing fell apart or if they simply decided they didn’t want their units anymore (getting back 75% of their deposits) went to those who had been in contract for some time? There was NO exclusion in that letter, and in California, email is considered a legal communication. Esprit screwed up here in a major way: they should have sent that letter only to those who had not bought yet. Their previous communication qualified those who were eligible for their offer (lowering their contract price if someone else bought their model for less). It seems to me that everyone who got that letter can take advantage of it. Comments?
Reading the email that was sent on another thread, I think you must be correct. There is no mention of any exclusions as to whom or when. It simply says if you fail to qualify for your loan you get 100% back and if you walk for any other reason you get 75% back (less a processing fee and any upgrades you bought). Seems pretty straightforward.
Has anyone either closed, renegotiated, or walked??
Hope this is true for the people who are planning to walk. Can someone post the email so that we can read it?
Ah nevermind. Just found the old thread if it’s the same letter?