Homebuyer's Remorse? Law Can Help
These days, a lawyer. They are getting adept at easing buyers, rich and poor, out of contracts on technicalities or simple clerical errors. That's thanks to a law enacted back in 1967. (Also see "Homebuyer's Remorse: How to Avoid and Cure.")
Did your developer fail to give you a legal description of your property? Did someone in the office not register the building properly with Housing and Urban Development? Lawyers have hijacked a federal law which was designed to protect consumers buying land out of state from shady real estate developers.
These were the guys who, from boiler room operations, marketed properties sight-unseen, took deposits and then disappeared without ever completing construction. Though called "interstate," it applies to properties in the same state and city, and permits buyers to cancel contracts within two years, and sue within three, if the contract does not include specific legal language. The law, known as the Interstate Land Sales Full Disclosure Act, or ILSA, has been recently revived by lawyers seeking to help homebuyers suffering from the recession wriggle out of real estate contracts and, in some cases, even retrieve deposits.
Two decisions in Florida also favored buyers, allowing one couple to get back a $50,000 townhouse deposit. And two Manhattan judges have ruled in favor of five buyers, over seemingly small potatoes: two buyers of a condo conversion had to prove that they would have pulled out of the sale earlier if the developer had informed them of their ILSA rights, which he apparently failed to do.
Developers fear that this could open the floodgates to many more buyer lawsuits.
"The laws out there to protect consumers ought to be fairly enforced," says Joseph F. Pitchford, senior vice president of development, Crescent Real Estate Equities LLC in Dallas. "But if more onerous laws are passed, developers may have to review whether development of a certain project is even feasible."
In other words: higher or prohibitive costs. There has been an explosion of ILSA cases in the last year, whereas prior to the real estate bubble burst, there were a handful. A 2009 analysis by The Real Deal found "that buyers of at least 131 New York City condo apartments worth $132 million were seeking to use ILSA to back out of their deals."
Markets have changed. Buyers feel they have invested their life savings into these projects, and in some cases, cannot find mortgages. But developers and the attorneys who represent them say buyers are just crying over spilled milk.
For insights on related topics see these AOL Real Estateguides:
- Guide to Settlement and Escrow
- Top Questions to Ask a Real Estate Agent
- Terms Every Seller Should Know
- First-Time Homebuyer's Guide
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