WHAT HAPPENS IF A RI CONDO ASSOCIATION GOES UNDER?

Reblogger Ginny Gorman
Real Estate Agent with RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate

 

There has been alot of talk lately regarding the health of RI condo associations especially in other states.  I would like to share Lenn Harley's informative post about condo associations that are not financially sound.  What do you need to know prior to buying into a condo complex?  If you work with a knowledgeable and investigative Realtor who protects your interests, they will 'root' this information out early.  Be aware, be knowing and always ask the right questions.

 

Original content by Lenn Harley 303829;0225082372

"WHAT HAPPENS IF THE CONDO ASSOCIATION GOES UNDER?"

That was a question from a home buyer yesterday.  This is a cash buyer in the market for a condo in Prince William County to use as rental property for a few years and then live in when he sells his present home. 

THE QUESTIONS WERE PROMPTED BY THE LISTING REPORT.  There are three properties offered for sale in that community, two short sales and one regular home owner sale.  One of the short sale listings wants "Cash Only, too many distressed sales for financing.  Condo assn. in trouble" 

HOW CAN THE CONDO ASSN. PAY THEIR BILLS?  The buyer's question is well founded since, under normal circumstances, when there is a high percentage of delinquent owners, the condo fee will be raised for remaining owners to cover condo expenses.  Maintenance of condo buildings, trash removal, grounds maintenance, snow removal, insurance, etc. are critical to protect the value of the property. 

WHAT DOES "Condo assn. in trouble" mean?  Condo associations are required by law to maintain certain condo"reserves" to protect the owners under special circumstances or a dramatic increase in expenses OR a high degree of delinquencies.  As delinquencies increase, the remaining owners will have to pay higher fees or assessments to cover necessary expenses.  If there are insufficient funds to operate, condo associations may not be able to make payments for contracted services and loans.  Condo owners who refuse to approve increased fees to compensate for delinquencies are merely putting the entire community at risk if the condo association is forced into bankruptcy or receivership. 

IT GETS WORSE.  As delinquencies increase, the condominium project may also lose FHA and VA financing approval.  In all but super luxury projects, that's usually deadly for property values and purchase financing. 

OWNERS STOP PAYING FEES.  This is a trend in many condo and HOA associations.  Sadly, it simply makes matters worse, puts the home owners' credit at risk and further limits the ability of the condo associations to perform critical maintenance.

WE DON'T GIVE LEGAL ADVICE.  Since the buyer's question involved a legal matter, my suggestion to my broker partner was to speak with a real estate attorney with whom we do settlements,   This questions is clearly "above our pay grade".  That said, I suggested that they search a bit farther for a condo to buy in a building that is not "at risk". 

CAN YOU GET A "PEEK" AT THE DOCS?  I also suggested that the listing agent or owner may already have a copy of the condo docs and would permit a "peek" prior to writing an offer.  The association docs must disclose the financial condition, any liens against, etc. the association.  It's worth a phone call. 

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.


Homefinders.com offers home buyers help throughout Prince William County in:

  • Bristow * Dumfries * Gainesville * Manassas * Triangle * Woodbridge * Haymarket

Woodbridge Homes and real estate.Lenn

HOMES FOR SALE IN PRINCE WILLIAM COUNTY.
MORE ABOUT PRINCE WILLIAM COUNTY REAL ESTATE
ABOUT DALE CITY REAL ESTATE

SEARCH Homes for sale in Prince William County in Catharpin, Dumfries, Haymarket, Gainesville, Manassas, Manassas Park, Bristow, Nokesville, Dale City, Woodbridge, Quantico, Triangle.  If you have questions about real estate in Prince William County, just call Lenn at 800-711-7988.  Ask about our Home Buyers REBATE.

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

 


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Ginny Lacey Gorman knows North Kingstown RI and the geographic areaschools, local happenings, important tidbits of information and businesses well If you are looking for someone to guide you through the home buying or selling process, Ginny is a licensed Realtor® and would be happy to assist you. Waterfront, oceanfront and coastal RI homes for sale are her specialty but all of RI is her backyard.  So feel free to search for  RI homes for saleWhen you are in need of more information from an internet savvy Realtor® who sells RI houses in this real estate market,  call Ginny at 401.529.7849.

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Rainmaker
722,837
Patrick White
Home Driven Realty, Inc - Baldwin, NY
Driven to bring New Yorkers home

Good Morning Ginny

Thanks for the re-blog and excellent information. Have a great day.

Jan 29, 2011 11:00 PM #1
Rainer
18,933
Vincent Cascio
Black Hawk Virtual Media - Reno, NV

I'm pleased that someone addressed this, I know someone that is considering a purchase of a condo.  I'll have to tell him to read it as well.

Great stuff - thanks.

Jan 29, 2011 11:05 PM #2
Ambassador
2,758,931
TeamCHI - Complete Home Inspections, Inc.
Complete Home Inspections, Inc. - Brentwood, TN
Home Inspectons - Nashville, TN area - 615.661.029

Never thought about condo associations going under, but I guess in this economy, anything can happen...

Jan 29, 2011 11:20 PM #3
Rainmaker
2,344,147
Anita Clark
Coldwell Banker Access Realty ~ 478.960.8055 - Warner Robins, GA
Realtor - Homes for Sale in Warner Robins GA

I heard this in Dec. and it seems to be picking up alot of momentum.  Scary for those that live in Condos...good re-blog Ginny!

Jan 29, 2011 11:26 PM #4
Rainmaker
1,816,979
Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in Southern RI and beyond
Patrick, it really is important...i have a friend & their mother had to walk away from their condo in FL because so many of the condos in their complex went into foreclosure & the condo fees quadrupled that noone could afford the mortgage & condo fees! Look at it for your buyers. Michael, it's a big deal....just takes some due diligence here.............................................................. Vincent, i'm glad i re-blogged it for you............................................................................................... Anita, haven't found any in jeopardy in my area as of yet...but that's why FHA approved ones are so important. thanks
Jan 29, 2011 11:37 PM #5
Rainmaker
3,922,889
Dorie Dillard CRS GRI ABR
Coldwell Banker United Realtors® ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good morning Ginny,

Thanks for the re-blog..I missed this post. Condo associations are vunerable just like everything else out there!

Jan 30, 2011 04:41 AM #6
Rainmaker
218,351
Mark Organek
And the United States of America - Mesa, AZ
It's not a game, it's your life.

Ginny - Thank you, I missed this the first time through.  I like the idea about taking a "peek".

Jan 30, 2011 07:14 AM #7
Rainmaker
1,816,979
Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in Southern RI and beyond
Dorie, Lenn did a great job with this blog............................................................................................ Mark, it's important to do your follow-up right up front with the agents...best
Jan 30, 2011 07:47 AM #8
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Ginny Gorman

Homes for Sale in Southern RI and beyond
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