|By THOMAS S. BROWN
Posted August 24, 2003
Watch the sun rise on the surf as you sip
coffee on a 20th-floor balcony. Stay healthy by strolling the beach or
playing a round of golf. Let someone else worry about mowing the lawn or
cleaning the pool.
housekeeping, only to discover their condo
was far from finished. She's been temporarily renting a Flagler Beach townhouse
ever since, waiting for the unit to be completed.
|Such delights of
condominium living in Florida are vividly depicted at condo sales offices
up and down the Volusia-Flagler coast. So appealing are the brochures and
sales pitches that buyers give developers of new complexes advance payments
of four, five or even six figures to reserve their space before construction
Then they play a high-stakes waiting game,
often stretching two to three years, while they hope their dream will come
In most cases, it does.
Occasionally, though, the dream dissolves
into a nightmare.
Take the case of William and Christine
Tobin, an Alexandria, Va., couple who decided to buy a $1 million condominium
in Flagler County's Hammock Dunes just as construction was starting on
the community's Portofino building.
During the summer of 2001, they paid the
developer, WCI, three deposits totaling $200,000 for a seventh-floor Portofino
unit and were told the three-bedroom oceanfront home would be ready by
January 2003, Christine Tobin said.
The Tobins sold their home in Virginia
and she arrived in Flagler in January to set up
Patrick Flynn, a financial supervisor at the Florida Di vision
of Land Sales, Condo miniums and Mobile Homes, said state law allows
reser vation forms to follow any of three different patterns on pricing:
· This is the price you will pay.
· This may or may not be the price you will pay.
· The final price may vary from this figure by 10 or 20 percent.
In any case, the reservation can always be canceled by either side and
the initial deposit is refundable, Flynn said.
Another key provision for a buyer to check for in a sales agreement
is whether the right to purchase is "assignable" - or sellable to a third
party. Such provisions help protect a buyer in the event that illness,
death of a spouse or other circumstances change his plan to live in a condo.
Such a provision also allows a buyer to try his luck at "flipping" -
doing a quick resale to someone else at a higher price.
"Our life has been on hold all year," she
said. "They forced us to a final settlement (payment of the remaining $800,000
on their purchase price) on July 10 but the unit is still uninhabitable."
She cited such deficiencies as disconnected
plumbing in the bathrooms and the kitchen, cabinets missing doors and mistakes
in the flooring. She said she doubts the unit will be ready until September.
Several other Portofino buyers are facing similar delays.
Last week, Tobin reported things had started
looking up. After her husband consulted a lawyer and met with the developer,
she said WCI had agreed to cover their mortgage payments and condo association
fees while final work is being completed. But the experience has left her
"Why should you have to fight to get what
you're entitled to?" she asked.
Kyle Reinson, a WCI spokesman, said no
Portofino buyers were "strong-armed" to complete their closings before
their units were ready. He acknowledged construction lagged behind schedule,
saying that was partly because of a shortage of Flagler County contractors
skilled in high-rise building. WCI tried to make up for lost time by bringing
in additional crews from South Florida for a two-week period, Reinson said.
DEALING WITH DELAYS
The Portofino isn't the only project for
which buyers have been kept waiting for extended periods.
Last spring, many families wondered whether
their units in the 376-unit Links building at Harbour Village in Ponce
Inlet would ever get built after town officials challenged the proposed
70-foot height of the structure, halting construction. The town later relented
but stipulated that future buildings must be limited to 35 feet.
Retiree Frank Dolney was among the Links
newcomers who were caught in the crossfire. He had to rent another Harbour
unit temporarily but finally moved into his Links home in June.
Dolney said uncertainty about the unit
was a headache for him "off and on for a few months" but he's now put the
episode behind him. He said he feels settled now and is happy with his
"I don't blame the developer at all," he
said. "It was just a political thing."
In New Smyrna Beach, an eight-story, 19-unit
luxury condo called the Mediterranean may finally start taking shape within
a few weeks after languishing on a drawing board for nearly two years.
"We should break ground in about two weeks,
or 30 days at the most," said Jim Wichlacz, a broker at Central Florida
Realty in Cocoa Beach. "It will take about 10 to 12 months to build."
The project, at 707 S. Atlantic Ave., was
announced in the fall of 2001, and three buyers reserved units before developer
Mark Warner of Jacksonville Beach scrapped his plans. He blamed economic
uncertainty caused by the 9-11 terrorist attacks that year for his setback.
Earlier this year, New Smyrna Beach Properties
Inc., a partnership involving the Dorough family of Cocoa Beach, including
Backstreet Boy singer Howie Dorough, said it was taking over the stalled
venture. Rick McFadden, New Smyrna Beach's chief building official, confirmed
Monday the project is moving forward but has not yet received a building
Wichlacz said none of the original prospective
buyers have stayed with the project, yet all the units, priced at $579,000
and up, already have been sold to other customers.
"We're already doing some resales because
we have some investors involved," he said. One resale on the market has
an asking price of $749,000.
The Mediterranean's sold-out status shows
a continuing strong demand for condominiums despite a lukewarm economy.
The National Association of Realtors reported existing condominiums were
selling this spring for a median price of $163,500, or 15 percent more
than a year ago. Within The South, median prices have jumped 17 percent
-- double the escalation rate for single-family homes.
Every condo project has its share of minor
complications, developers say, but most proceed smoothly and on schedule.
They say prospective buyers have little to fear about the buying process
as long as they pay close attention to the details in their sales contract
and other condominium documents.
State regulators agree.
Patrick Flynn, a financial supervisor at
the Florida Division of Land Sales, Condominiums and Mobile Homes, said
very few condo complaints received by his office allege misconduct by developers.
The great majority, he said, involve a dispute between an individual condo
resident and a condo owners association.
"If people read their documents, they should
be OK," Flynn said.
Construction of a high-rise condominium
generally requires anywhere from one to three years, depending on the size
of the building. Over that time period, unit prices may change several
times as developers walk a financial tightrope. They need to lock up a
high percentage of sales before construction starts -- usually 50 to 75
percent of all the units -- to satisfy the banks providing financing for
Yet bigger profits can be scored on sales
that occur as the building nears completion and prices are ratcheted up.
Early birds get the best worms. That's
a theme that prospective buyers hear repeatedly when they start browsing
condo projects during the pre-construction phase.
Developer Wayne Gove illustrated how that
principle is working for Oceans Grand, a triangular 20-story, 189-unit
tower he plans to build in the middle of the Oceans West golf course in
Daytona Beach Shores.
Gove bought the land for the tower last
fall, had an architect prepare a design and opened a sales office near
the site last December.
The first marketing wave was a direct-mail
piece sent to all condominium residents from Ponce Inlet to Palm Coast,
offering them an early-bird price range of $199,000 to $460,000 for two-
and three-bedroom units.
By spring, the project had secured reservations
on 70 percent of its units. A "reservation," in Ocean Grand's case, is
a $2,500 refundable deposit that holds a unit for a prospective buyer while
he decides whether to go ahead and sign a purchase and sales agreement.
The crucial test comes when a developer
hands a buyer the official state-approved "condo documents" required for
a sale. These are the legally binding assurances the project has received
all its municipal permits and is ready to proceed to construction. The
documents also spell out how the condominium residents association will
work and what its first-year annual fee will be.
At that point, the buyer has 15 days to
decide whether to proceed and seal the deal with a down payment, usually
10 to 20 percent of the purchase cost.
Typically, some prospects get cold feet
and back out. Gove said he lost about 40 percent of his prospects when
the project started collecting down payments, but it has since recovered,
moving up to the 60 percent sold-out point.
"We're on an excellent pace," Gove said,
noting he has exceeded his original target of nailing down 95 sales deals
before breaking ground.
The project's timetable calls for a groundbreaking
in October and completion within 24 months. Gove said he expects sales
to accelerate as model units become available for display.
Although early-bird buyers have to base
their decisions mainly on architect's sketches and brochures, Gove said
they generally research a project carefully.
"There's nothing impulsive about these
buyers," he said. "Most of them already live in the area or are familiar
with the Shores from vacations. Those people come back to the sales office
four or five times before they make up their minds."
Gove has raised his prices to the $229,000
to $500,000 range and said further increases are likely as the project
To avoid an unpleasant surprise, a condo
buyer needs to understand at what point in the decision process he's locking
in a firm price.
Doug Cook, a developer building the 129-unit
San Maarten project and the 24-unit St. Kitts project, both in Daytona
Beach Shores, said he believes in honoring the price stated in the preliminary
"reservation" form but some developers do not. They will quote a price
in a reservation but reserve the right to raise the price when the sales
agreement is executed.
"It's legal for them to do that, but I
think it's unethical," Cook said.