SEATTLE – For Olive 8 and Fifteen Twenty-one Second Avenue – a pair of glistening high-rise, high-end downtown Seattle condo towers – 2009 is a year of reckoning.
Both projects broke ground and began marketing unbuilt homes in 2006, just as the real-estate boom was cresting. Most of the units sold within months.
Now the 400-foot-tall buildings are nearly finished. Fifteen Twenty-one started closing deals with buyers in late November, Olive 8 earlier this month.
But the real-estate bubble, of course, has burst. And some of those once-eager buyers from 2006 and 2007 are backing out, often at considerable expense to themselves and, perhaps, the projects’ developers.
At Fifteen Twenty-one, developer Opus Northwest says more than one-quarter of the original buyers have walked away, some forfeiting deposits of $100,000 or more.
At Olive 8, at least 10 percent of the project’s buyers, who either can’t or don’t want to close, have retained lawyers in hopes of getting their earnest money back. “We’re talking $20,000 and up,” says Craig Blackmon, who represents five buyers.
It’s hard to gauge how many others are considering pulling out. On an Olive 8 buyers’ blog, however, some write – always anonymously – that they plan to just walk away from their contracts and deposits, usually because they don’t have the higher down payments lenders now require.
Some contend it makes more sense to forfeit their earnest money than to pay 2006 prices in 2009.
“There are some scared buyers out there,” says James Stroupe, a Windermere Real Estate agent who specializes in condo sales. “It’s a new dynamic in this market.”
Tom Parsons, an Opus Northwest senior vice president, and David Thyer, president of Olive 8 developer R.C. Hedreen, both say they’re pleased with how closings are going so far.
Some buyers always drop out before sales close, they say, and the attrition rate now isn’t especially high.
But they also acknowledge the downtown real-estate landscape has changed dramatically since 2006. And they are not the only Seattle condo developers working to adapt to it.
Some with lots of unsold units already have converted their buildings to apartments. Others have cut prices across the board. Still more have auctioned condos to the highest bidder, often at deep discounts.
In South Lake Union, Vulcan Real Estate has pushed back the start of closings on its nearly finished Rollin Street Flats project, where only one-quarter of the units have been sold.
One complication, Vulcan admits, is a new guideline from giant mortgage underwriter Fannie Mae that says new condo projects should have at least 70 percent of units presold before it will buy the loans.
Kitty-corner from Rollin Street, Vulcan recently dropped prices on eight of the 133 units in its 19-story, almost-done Enso project, where about 60 percent of the condos are under contract.
The developer won’t discuss its strategy for either Enso or Rollin Street.
Some observers speculate Vulcan may be trying to sell enough units at Enso to hit Fannie Mae’s 70 percent threshold, then start closing the transactions.
Blackmon and Steve Crane, another Seattle attorney who represents Olive 8 buyers, say that over the past 18 months they also have been retained by dozens of people who bought early at Enso, Rollin Street and other projects but now want their deposits back.