Buyers Bailing vs. the Bank

I found an update today to the story about the pause in downtown’s dramatic residential facelift:

What happens to the banks who lent money to developers for condo tower construction when sales slow or buyers walk away completely?

The New York Times takes this fascinating look today at condo financing from a Chicago-based bank called Corus Bankshares in formerly hot, now cool, markets for urban condo development, like Las Vegas and Miami, and to a smaller extent, San Diego:

Javier Miglin may walk away from an $80,000 down payment on a condominium with water views in Miami. Randal Mills may give up a $130,000 deposit on a 15th floor condo on the Strip in Las Vegas. And in San Diego, Jeanette Graham would just like to meet the neighbors.

And, here’s more on the San Diego piece of the puzzle:

Then there are smaller markets like San Diego, where developers are also struggling to sell units. Corus helped finance 11 condo projects there, about 5 percent of its portfolio. More than half of the loans are for projects in downtown San Diego, which is scheduled to have 3,000 units completed by 2008.
Among the projects is the Icon, where Ms. Graham bought a one-bedroom apartment last year for $374,000. At the time, she said that she was able to negotiate a $9,000 reduction in homeowner association fees, $5,000 toward closing costs and a washer and dryer. She said that her building sold 80 percent of its apartments.
But she said that the building is now offering even better incentives. Residents who refer buyers get a $5,000 finder’s fee and an extra $5,000 for the buyer.
Still, she questions whether there will be any takers, especially since her building feels empty. “I can go a whole week without seeing a neighbor,” Ms. Graham said.