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Bob Moon: A ruling from a judge in New York could send shockwaves through the nation’s condo market. It involves a buyer in Manhattan who put down a deposit for a condo at the height of the boom back in 2008, and then backed out the following year when prices plunged. He’s been fighting to get his money back, and today, the federal judge ruled — yes, he can.
Marketplace’s Jeremy Hobson has more.
Jeremy Hobson: The case centered on a federal law from 1968 that requires full disclosure from developers. It was originally intended to protect out-of-state land buyers from getting duped into putting money down for a piece of property they’d never seen before. But the law also applies to condo buildings with more than 100 units. It requires developers to record each condo purchase with the government.
But real estate attorney Jared Beck in Miami says they often don’t.
Jared Beck: In a lot of cases, the developers want to leave themselves wiggle room to sell or resell those units if they can get a better price, even if a buyer’s already gone under contract with them.
In scores of similar lawsuits from buyers having second thoughts about their purchases, the developer has won. So Beck says this week’s ruling from a federal judge in New York could impact cases nationwide.
Beck: We’re going to see a lot of lawyers who have pending cases already in court. They’re going to try to use this decision to their advantage on behalf of their clients.
The ruling could impact condo builders looking for construction financing as well. Michael Heller is a real estate law professor at Columbia Law School.
Michael Heller: If the ruling stands, one consequence is it will cost more to buy condominiums, because if this is an additional risk that developers face, they have to price that risk into the cost of the final product.
He says that may mean fewer new condo buildings. But Heller says it’s more likely the ruling will not stand on appeal.
In New York, I’m Jeremy Hobson for Marketplace.
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