Friday, November 10, 2006

WSJ: Condos Falter & Spark Lawsuits

In Southern Florida, it's been tempting to invest in condos. With low interest rates, the ocean breeze and a constant wave of visitors, condos seemed ripe for flipping. And for a long time, many investors and homeowners made tidy profits by trading in and out of homes. But recently, the condo market has been ailing in Southern Florida and other parts of the country.

I've heard that the latest trend in condo conversions is "reversions" in which condo buildings revert back into rental units, where there has been a real shortage of frugal or affordable units. (Many residents in Southern Florida have been turned out on the street, while their rentals were "converted" into upscale condos.)

Today's Wall Street Journal has an excellent piece about the condo market and the rash of lawsuits that have been filed in the real estate market.

With once-hot condominium markets across the country in sharp decline and many real-estate professionals predicting a further weakening, some developers are facing more than a glut of unsold inventory. Angry condo buyers from Boca Raton, Fla., to San Diego are taking them to court, alleging everything from breach of contract to fraud.

Some of the lawsuits claim that the amenities featured in glossy marketing brochures and model apartments never made it into the final product. Others involve much-hyped projects that went bust, leaving hundreds of buyers with contracts for condos that will never materialize. --WSJ



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