Purchase Contracts Invalid, Water's Edge Scrambles to Re-sign Buyers
by Carl Wagenfohr
CLEARWATER, Fla. - Only three months after spending $450,000 to buy themselves out of having built on a sliver of land with an unclear title, the 153-unit Water's Edge condominium project in downtown Clearwater has discovered another issue, one that could release buyers from their purchase contracts.
In a letter sent to buyers earlier this week, Water's Edge wrote that the project is on schedule and should be "substantially complete" this summer.
But the letter continued, "A matter has come to our attention that we need to share with you regarding the Water's Edge purchase contract form." The form, it turns out, was not compliant with the U.S. Department of Housing and Urban Development's (HUD) Interstate Land Sales and Full Disclosure requirements, nor did the form qualify for exemption from those requirements.
Tony Martin, Vice President for Residential Development for Opus South Corporation (Water's Edge parent corporation), explained that the error was discovered by outside council during a routine periodic review of its legal documents. HUD's Brian Sullivan verified that the department neither discovered the error nor forced any action on Water's Edge part.
While the issue with Water's Edge purchase contract form may be a mere technicality, the consequences for the builder could be harsh - not from any governmental agency but from those who had signed the flawed contracts.
Water's Edge is offering their buyers three options to resolve the contract issue. Having been informed of the issue, buyers could simply exercise their right to close under the existing purchase contract. This would be the preferred outcome for Water's Edge, Martin said.
Water's Edge would not prefer its alternative offer to allow buyers to rescind the flawed purchase contracts and obtain a full refund of earnest money and any deposits for upgrades to their units.
Finally, in an obvious effort to keep their buyers from walking away from their contracts, Water's Edge is offering buyers the opportunity to rescind their contracts and sign a new HUD-compliant contract at a reduced purchase price. Martin would not quantify the price reduction, saying that each of the 153 units had a unique discount.
Martin said that he would be happy if buyers accept the reduced purchase price with a new contract, and is "hoping that intelligent investors would see it as a good investment."
But with the recent meltdown in the residential condominium market, Water's Edge stands to lose some of their buyers. Jon Palasky, a residential realtor with Coldwell Banker on Clearwater Beach, said, "I imagine there's going to be some fallout," but he added, "I don't think there is going to be a significant number walking away."
Palasky said that buyers who were intending to live at Water's Edge either as a primary residence or a second home would likely want the discount and would sign the new HUD-compliant contract.
Investors who were looking to flip their units when construction completed may have a different outlook. Palasky said that there have been a number of Clearwater Beach condo investors who have walked away from deposits of $100,000 and more to escape from purchase contracts. Any such investors in Water's Edge may take advantage of the offer to rescind their contracts and gladly accept the full refund.
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