July 30, 2009 – The most difficult aspect of being a Chicago real estate developer in today’s market may not be making sales, but actually closing them. The rate of buyers walking away from purchase contracts for some new construction Chicago condos has risen to about 40% according to a recent Sun Times report. Cancellations stood at around 25% earlier this year.

Appraisal Research Counselors noted that because most developers aren’t willing to disclose negative information such as contract cancellation rates at their projects, it’s hard to get an exact count. Some developers are also offering to push back closing dates in the hopes that the buyer will be able to close later on rather than never.

The article went on to say that insiders named 235 W Van Buren and R+D659 as two of the more prominent projects hurt by walkaways. This could explain the frequent price cuts and incentives at those buildings.

But many luxury developments aren’t yet experiencing the same problem with cancellations. The Lakeshore East and Central Station areas seem to be perennially popular with buyers. Central Station developer Gerald Fogelson of Fogelson Company told the Sun that in his buildings the cancellation rate is only around 15% and that, “The weekly traffic in our sales center is very close to what it was in pre-recession days.” Some 600 units ($300 million in revenue) in his Central Station towers closed and were delivered in late 2008.

Fogelson also said in the article that he believes developers who slash prices only hurt both their sales and sales at other similar developments because it lowers the appraisal value and buyers can’t get financing to close on units.

With more closings imminent at both the Legacy and Trump Tower it will be interesting to see if more buyers decide to walk away from contracts on these Pre Construction Condos in Chicago.

[tags]Trump Tower, Chicago Condos, Chicago Real Estate[/tags]

This entry was posted on Thursday, July 30th, 2009 at 2:04 pm and is filed under Mortgage Information.