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Originally Posted by GandL
jjwut - So what is the chain of events??? Do they start selling those units that are in default of their contracts at a lower price? Does the bank write-off a portion of loan? Do they wait for the real estate market to recover? Which development in NMB is better than NBP? Just Curious!!!
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If you are asking in general what banks do in these cases, I can give you a few examples right in BofA's hometown of Charlotte. One thing to remember, the bank will do what is good for the bank. period.
First is
Catalyst Condos This is a 28 story condo tower down the street from the BofA corporate tower and was finished earlier in the year. The developer Novare ran out of money so they turned it over to their bank. (I want to say that was Wachovia) They first tried to change the plans for the building to turn 1/2 into apartments, other 1/2 condos. This didn't work out, so they canceled all the contracts and it is now a full apartment building. It should be noted there are other condo projects in Charlotte that did take the mixed condo/apartment approach.
Banks will also simply foreclose on property and let them sit there. A good case also right in downtown was The Park. (pictured below) The developer ran out of money and the bank forced it into foreclosure. There was a sheriff's auction at the court house and the bank bought it back from itself which gave it full control of the building and had the effect, by law which is what foreclosure does, of removing all liens and claims on the property. The building had 100% sold out and all these people lost their rather substantial deposits. Meanwhile the actual building has been sitting in this state for close to 2 years.
Right next door to BofA, at the center of all the new development in Charlotte and direct access to a station on the new light rail line was the 50 story residential tower built on top of a retail/entertainment center.
EpiCentre (http://www.epicentrenc.com/live.php - broken link) This is another tower that has stopped construction, the developer has filed for bankruptcy, and the deposits are in question. This is a story that has yet to be played out. There are a lot of different stories floating around about this one, but one of them is the developer didn't price the units right and can't cover the construction loan with the bank.
There are a number of other stories like this here I will stop with this since this topic isn't about CLT. I posted it in answer to the question on how banks will handle and these are examples right in the banking city of Charlotte, with projects that have units purchased, by no doubt, their own employees and which can be view outside the windows of their corporate HQs.
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I'm from Myrtle Beach and have seen these kinds of things since the first condo tower showed up in the early 1970s. Myrtle Beach has experienced all kinds of booms and busts several times so this sort of thing isn't new. I remember in the late 70s, the city was littered with construction cranes that stood there for years because there was no money to take them down or to finish the projects. Eventually however things always recovered and the city moved on.
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