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As Market Cools, Home Buyers Seek a Way Out
Builders Face Lawsuits,
A Rash of Complaints;
The $266,000 Refund
By MICHAEL CORKERY and RUTH SIMON
May 4, 2007; Page A1

In the latest fallout from the housing market's decline, disputes are breaking out between builders and buyers who signed contracts for new homes and condos when the market was hot -- and now want to get out of them.

Even as many of the new buildings are completed, buyers are filing lawsuits claiming they were duped into purchases they couldn't afford, or victimized through fraudulent investment schemes. Some are scrutinizing their contracts looking for loopholes, or searching out tiny flaws in finished homes that might allow them to back out without losing their deposits.

For some builders, the disputes are contributing to cancellation rates as high as 30% and writedowns in some markets. "People will go to great lengths to get out of a legally binding transaction," said Larry Sorsby, chief financial officer of Hovnanian Enterprises Inc. "They were willing to ride the real-estate boom on the way up, but some are not willing to ride it on the way down."

Newly constructed homes make up only about 15% of total home sales. But a wave of building helped fuel the run-up in housing prices during the real-estate boom, especially in Florida and California. As the market started turning last year, prices on new homes and condos quickly stalled, then began dropping. That gave skittish buyers time to get cold feet.

Florida, a magnet for housing speculators in the boom, is ground zero for such disputes. The state long has been a boon to housing attorneys, some of whom are now filing lawsuits against developers.

One lawyer recently took out an ad in a Palm Beach newspaper reading: "Do you want your money back? Your contract for purchase of a new house or condominium may be illegal...To see if you are entitled to a refund, call us for a free consultation."

Typically, buyers of new homes and condos put down a cash deposit when they decide to buy, then pay the balance when the home closes and is ready to occupy. But condo buyers, in particular, have a lot to lose by walking away from their contracts because their deposits can total as high as 20% -- and some buy multiple units.

Consequently, some condo buyers are aggressively seeking ways to back out, said Brad Hunter, director of the South Florida region for Metrostudy, a residential real-estate market research firm. He expects more to do so in the next year as projects sold during the boom become ready for occupancy.

"If they can find some way in which the developer has not delivered according to the contract, they're using that as a way to get out," he said.

Dennis Freeman, an attorney in Aventura, Fla., said he is representing a family who bought a roughly $1.6 million condo in a waterfront high rise, expecting a private entrance. But, he said, the family has now learned that the door to the garbage chute, which is shared with neighbors, cannot be locked. "The privacy of my client's apartment has been lost," said Mr. Freeman. He is suing to rescind the contract.

Mr. Freeman recently settled another case in which the developer agreed to return a $266,000 deposit to a condo buyer who claimed that the size of the pool deck and gym were smaller than the developer promised. Mr. Freeman said he was surprised by the settlement. "To me, it's a reach," he said.

Other disputes are more heated. Red Bank, N.J.-based Hovnanian, one of the largest builders in the U.S., currently is embroiled in one such dispute with buyers in Florida.

One of those buyers, Daphne Sewell, received three construction loans, totaling about $750,000, to buy three houses in Cape Coral and Lehigh Acres, Fla., in May 2005.

An administrative assistant in Broward County government, Ms. Sewell said she and her husband, a carpenter, earned $90,000 a year at the time of the deal and never should have qualified for their mortgages. She also claims a real-estate firm involved in the deal promised that it would find them tenants to rent out the houses. But the renters never materialized, her houses are vacant, and two of her loans are in foreclosure.

"If I close on them I deplete my savings in two or three months," said Ms. Sewell. "It's worth the fight."

After she was served with foreclosure lawsuits by the lender, she filed a countersuit, which names the builder, First Home Builders of Florida, the lender and a real-estate firm that she alleges promoted the deal, claiming she was defrauded by an investment scheme that promised minimal risk. A lawyer for First Home Builders said his client denies any wrongdoing.

Hovnanian, which bought the assets and contracts to build homes from First Home Builders in August 2005, said it has not been served by Ms. Sewell's lawsuit and that she took out her construction loans before Hovnanian bought out the assets of First Home Builders.

Still, complaints like Ms. Sewell's are causing a major headache for the company, which says it is trying to help buyers close on the homes by lowering prices by as much as $100,000 while fending off allegations of fraud. Hovnanian took a charge of $175 million in over the fourth and first quarters related to the Fort Myers market, partly because it had to lower prices on the First Home Builders homes.

Mr. Sorsby, the chief financial officer, said many of these complaints are from regretful buyers trying to take advantage of a public backlash against the housing industry amid the subprime mortgage meltdown. "They are going to great lengths to paint somebody other than themselves the bad guy," Mr. Sorsby said.

In Alexandria, Va., real-estate attorney Beau Brincefield said he has settled roughly 50 contract disputes and has another "50 or more" in the pipeline. They include a case brought last year by more than a dozen buyers who had contracts to purchase homes from NVR Inc., a Reston, Va., builder that sells homes in 13 states.

Mr. Brincefield said the terms of that settlement are confidential. In general, he said, builders have agreed to lower purchase prices by as much as 35% or refund 25% to 100% of a would-be buyer's deposit. NVR declined to comment.

Mr. Brincefield said that in many of the contracts he's seen, "the remedies are very one-sided." These contracts allow the builder to retain the borrower's deposit or sue for damages if the buyer cancels, he said, but only allow buyers to get their deposits back if the builder doesn't meet its obligations. In some cases, he said, builders may have violated the Interstate Land Sales Full Disclosure Act, which requires them to make certain disclosures and meet other requirements.

Some developers are not backing down. Ceebraid-Signal, a West Palm Beach developer of condominiums and condo-hotels across Florida, and its affiliated development entities are suing about 30 buyers who are trying to cancel their contracts. Ceebraid-Signal said it is citing a "specific performance" provision in its contracts requiring buyers to hold up their end of the deal and close.

"That's called chutzpah," said Marvin Moss, a lawyer in Aventura, Fla. He represents a client who did not want to close on a $375,000 condo because real-estate values had fallen dramatically since she put down her 10% deposit, from which she was willing to walk away, he said.

"This is to frighten people and force them to close," said Mr. Moss. "It costs a lot of money in legal fees to defend these actions." A couple of buyers hit with such lawsuits have backed down and gone through with the sale.

Said Richard Schlesinger, managing director of Ceebraid-Signal: "I don't think there is anything that we are doing that is inappropriate."

"These are not situations where a woman bought a unit and she's now a widow and can't pay," he said. "These are people who don't want to close because they can't flip and make $100,000."

Write to Michael Corkery at [email protected] and Ruth Simon at [email protected]

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I think these are frivilous...you need to know what ur getting urself into at the time of sale...

The generational divide between baby-boomer parents and their teenage offspring is sharpening over sex.
Oral sex, that is.

More than half of 15- to 19-year-olds are doing it, according to a groundbreaking study by the Centers for Disease Control and Prevention.

To adults, "oral sex is extremely intimate, and to some of these young people, apparently it isn't as much," says Sarah Brown, director of the National Campaign to Prevent Teen Pregnancy.

"What we're learning here is that adolescents are redefining what is intimate."

Among teens, oral sex is often viewed so casually that it needn't even occur within the confines of a relationship. Some teens say it can take place at parties, possibly with multiple partners. But they say the more likely scenario is oral sex within an existing relationship. (Related story: "Technical virginity" becomes part of teens' equation)

"My parents' generation sort of viewed oral sex as something almost greater than sex. Like once you've had sex, something more intimate is oral sex," says Carly Donnelly, 17, a high school senior from Cockeysville, Md.

"Now that some kids are using oral sex as something that's more casual, it's shocking to (parents)."

David Walsh, a psychologist and author of the teen-behavior book Why Do They Act That Way?, says the brain is wired to develop intense physical and emotional attraction during the teenage years as part of the maturing process. But he's disturbed by the casual way sex is often portrayed in the media, which he says gives teens a distorted view of true intimacy.

By Don Ramp
Walsh

Sex ? even oral sex ? "just becomes kind of a recreational activity that is separate from a close, personal relationship," he says.

"When the physical part of the relationship races ahead of everything else, it can almost become the focus of the relationship," Walsh says, "and they're not then developing all of the really important skills like trust and communication and all those things that are the key ingredients for a healthy, long-lasting relationship."

"Intimacy has been so devalued," says Doris Fuller of Sandpoint, Idaho, who, with her two teenage children, wrote the 2004 book Promise You Won't Freak Out, which discusses topics such as teen oral sex.

"What will the impact be on their ultimately more lasting relationships? I don't think we know yet."

Casual attitude is worrying

Child psychology professor W. Andrew Collins of the University of Minnesota says a relationship "that's only about sex is not a high-quality relationship."

In a 28-year study, Collins and his colleagues followed 180 individuals from birth. His yet-to-be-published research, presented at a conference in April, suggests that emotionally fulfilling high school relationships do help teens learn important relationship skills.

The researchers did not specifically ask about oral sex, he says. But relationships that are focused more on sex tend to be "less sustained, often not monogamous and with lower levels of satisfaction."

Terri Fisher, an associate professor of psychology at Ohio State University, says oral sex used to be considered "exotic." After the sexual revolution of the 1960s, it was viewed as a more intimate sexual act than sexual intercourse, but now, in young people's minds, it's "a more casual act."

Beyond shock, many parents aren't sure what to think when they discover their children's nonchalant approach to oral sex.

"It doesn't cross your mind because it's not something you have done," Fuller says. "Most parents weren't doing this (as teenagers) in the way these kids are."

But if parents are looking for reasons to freak out, the health risk of oral sex apparently isn't one of them. Teenagers and experts agree that oral sex is less risky than intercourse because there's no threat of pregnancy and less chance of contracting a sexually transmitted disease or HIV.

"The fact that teenagers have oral sex doesn't upset me much from a public health perspective," says J. Dennis Fortenberry, a physician who specializes in adolescent medicine at the Indiana University School of Medicine.

"From my perspective, relatively few teenagers only have oral sex. And so for the most part, oral sex, as for adults, is typically incorporated into a pattern of sexual behaviors that may vary depending upon the type of relationship and the timing of a relationship."

Data don't tell whole story

A study published in the journal Pediatrics in April supports the view that adolescents believe oral sex is safer than intercourse, with less risk to their physical and emotional health.

The study of ethnically diverse high school freshmen from California found that almost 20% had tried oral sex, compared with 13.5% who said they had intercourse.

More of these teens believed oral sex was more acceptable for their age group than intercourse, even if the partners are not dating.

"The problem with surveys is they don't tell you the intimacy sequence," Brown says. "The vast majority who had intercourse also had oral sex. We don't know which came first."

The federal study, based on data collected in 2002 and released last month, found that 55% of 15- to 19-year-old boys and 54% of girls reported getting or giving oral sex, compared with 49% of boys and 53% of girls the same ages who reported having had intercourse.

Though the study provides data, researchers say, it doesn't help them understand the role oral sex plays in the overall relationship; nor does it explain the fact that today's teens are changing the sequence of sexual behaviors so that oral sex has skipped ahead of intercourse.

Kinsey Institute
Sanders

"All of us in the field are still trying to get a handle on how much of this is going on and trying to understand it from a young person's point of view," says Stephanie Sanders, associate director of The Kinsey Institute for Research in Sex, Gender and Reproduction at Indiana University, which investigates sexual behavior and sexual health.

"Clearly, we need more information about what young people think is appropriate behavior, under what circumstances and with whom," Sanders says. "Now we know a little more about what they're doing but not what they're thinking."

The $16 million study, which took six years to develop, complete and analyze, surveyed almost 13,000 teens, men and women ages 15-44 on a variety of sexual behaviors.

Researchers say that the large sample size, an increased societal openness about sexual issues and the fact that the survey was administered via headphones and computer instead of face to face all give them confidence that, for the first time, they have truthful data on these very personal behaviors.

"There is strong evidence that people are more willing to tell computers things, such as divulge taboo behaviors, than (they are to tell) a person," Sanders says.

More analysis needed

Researchers cannot conclude that the percentage of teens having oral sex is greater than in the past. There is no comparison data for girls, and numbers for boys are about the same as they were a decade ago in the National Survey of Adolescent Males: Currently, 38.8% have given oral sex vs. 38.6% in 1995; 51.5% have received it vs. 49.4% in 1995.

Further analyses of the federal data by the private, non-profit National Campaign to Prevent Teen Pregnancy and the non-partisan research group Child Trends find almost 25% of teens who say they are virgins have had oral sex. Child Trends also reviewed socioeconomic and other data and found that those who are white and from middle- and upper-income families with higher levels of education are more likely to have oral sex.

Historically, oral sex has been more common among the more highly educated, Sanders says.

Is intimacy imperiled?

Teens and oral sex

Heterosexual oral sex among teenagers ages 15 to 19 varies by age and gender, with older teens more likely to engage in intercourse.

percentage of teens who have had intercourse and their ages:

Boys
15 ? 25.1%
16 ? 37.5%
17 ? 46.9%
18 ? 62.4%
19 ? 68.9%

Girls
15 ? 26.0%
16 ? 39.6%
17 ? 49.0%
18 ? 70.3%
19 ? 77.4%

percentage of teens who have had oral sex and their ages:

Boys
15 ? 35.1%
16 ? 42.0%
17 ? 55.7%
18 ? 65.4%
19 ? 74.2%

Girls
15 ? 26.0%
16 ? 42.4%
17 ? 55.5%
18 ? 70.2%
19 ? 74.4%

Source: 2002 National Survey of Family Growth, Centers for Disease Control of Prevention

The survey also found that almost 90% of teens who have had sexual intercourse also had oral sex. Among adults 25-44, 90% of men and 88% of women have had heterosexual oral sex.

"If we are indeed headed as a culture to have a total disconnect between intimate sexual behavior and emotional connection, we're not forming the basis for healthy adult relationships," says James Wagoner, president of Advocates for Youth, a reproductive-health organization in Washington.

Oral sex might affect teenagers' self-esteem most of all, says Paul Coleman, a Poughkeepsie, N.Y., psychologist and author of The Complete Idiot's Guide to Intimacy.

"Somebody is going to feel hurt or abused or manipulated," he says. "Not all encounters will turn out favorably. ... Teenagers are not mature enough to know all the ramifications of what they're doing.

"It's pretending to say it's just sexual and nothing else. That's an arbitrary slicing up of the intimacy pie. It's not healthy."

A survey of more than 1,000 teens conducted with the National Campaign to Prevent Teen Pregnancy resulted in The Real Truth About Teens & Sex, a book by Sabrina Weill, a former editor in chief at Seventeen magazine. She says casual teen attitudes toward sex ? particularly oral sex ? reflect their confusion about what is normal behavior. She believes teens are facing an intimacy crisis that could haunt them in future relationships.