Beware! when purchasing a Condo

By
Mortgage and Lending with Bank of England Mortgage 385907

Why? you may ask?

Well in Southwest Florida, where I live, there are a lot of condo's and a couple areas of concern. As a lender the first question that I ask a buyer or a Realtor, in regards to the condo, is what is the investor ratio. Lenders feel, and the numbers back us up, that condominium communities with high investor ratios, generally, are not as well maintained as those heavy in owner and second home occupants. Loans are either difficult or impossible to acquire in communities with high investor ratios. This brings up the following point.

When purchasing a Condo, not only must the buyer be approved for a loan, the condo must also pass muster. That means that the condo must also be approved.

In days gone by a good downpayment would get you a limited review of the community, and while that is still true to a certain extent, it is not to the extent that it was previously. Like everything else the guidelines are now more restrictive.

Actually, my greatest concern is about $$$$$, that being cash reserves and/or the lack thereof, AND unpaid association fees.

In many cases the unpaid fees are responsible for the lack of reserves, but there are other issues.

Investors: in tough times the investors who own units either don't pay the association dues, or don't pay them on a timely basis. This is often due to the fact that the units are not rented, and are not generating any income.

Foreclosures: foreclosed properties or those working on it, have owners who are probably not paying their dues.

This puts an unfair burden on the "Good Guys" who live there, and do pay on a  regular basis.

Often when there are a lack of resrves, or no reserves, and items need to be taken care of a speciall assessment needs to be instituted. That would be a one time charge, usually to address work or upkeep which needs to be addressed, and funds are not available. And in case you've already figured it out, yes once again, it's the "Good Guys" who bare an unfair burden.

So the moral of the story is if you are considering buying a condo, don't cut any corners, do your homework, and in simple terms;

BUYER BEWARE!

    

 

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Rainmaker
218,087
Joan Mirantz
Homequest Real Estate - Concord, NH
Realtor, GRI, CBR, SRES - Concord New Hampshire

Jay...around here, in what I've experienced, the Lenders have always been strict on the ratios....I suppose it could be because the condominium concept, until recently, is not as familiar as elsewhere.

I was just listening to a program about how difficult a time is is right now for the "good owners" when many others are skipping payments.

Jun 04, 2008 10:25 AM #1
Rainmaker
288,859
Jay Beckingham
Bank of England Mortgage - Delray Beach, FL
Seniors ROCK!

Joan,

down here condos are everywhere. many were bought with subprime loans and others by buyers with 20-25% down and qualified for limited review, but like everything else, times have changed.

jay 

Jun 04, 2008 11:45 AM #2
Rainer
6,241
Kerry Constantine
Power Brokers Real Estate - Fort Myers, FL

Hey Jay- Condo prices are dropping like crazy in older and newer communities alike. I just got two condos for 1/2 to less than 1/3 of what they sold for in 2006. Unpaid fees are huge in the newer communities which will drive rental rates higher.  Cash is moving into our market now- I know that does not help your business but the buyers are absorbing the inventory and homes can actually generate income again.

On the flip side some of the older communities have crazy rules. I have an older lady 80+ moving into a 55+ community and they won't let her buy it until the condo commandos at the association interview her. That interview is costing my client and her boyfriend $1000 plus for a plane ticket and the association is refusing to conduct the interview over the phone. I guess they like a lot of inventory in their old outdated community, huh?

 

 

 

Jun 13, 2008 06:00 AM #3
Rainmaker
288,859
Jay Beckingham
Bank of England Mortgage - Delray Beach, FL
Seniors ROCK!

Kerry,

i agree the prices are great, but buyers often do not do their due diligience in regards the rules and finances until after they own the unit and have a problem.

jay

Jun 14, 2008 12:12 AM #4
Ambassador
1,486,777
Jim Crawford
Maximum One Executive REALTORS® - Atlanta, GA
Jim Crawford Atlanta Best Listing Agents & REALTOR

Condos were really over blown in the last few years, and have some major problems as a result of the frenzy!  HOAs have doubled fees.  Assessments are also doubled in many communities because of 50% no pays!  I can understand the need of tighter scrutany.

Jun 14, 2008 01:26 AM #5
Rainmaker
190,983
Susan Milner
Florida Future Realty, Inc. - Cape Coral, FL
Cape Coral Real Estate Broker, FloridaFutureAgents
Rainmaker
250,996
Michael and Cheron Lange
Solutions Real Estate - Chandler, AZ
Associate Broker, GRI

Wow...not surprised, this would explain why my mother-in-law is having such a hard time selling her condo in Clearwater...and she also paid over and above the appraised value.  Good information!

Cheron Lange

Jun 16, 2008 03:35 PM #7
Rainmaker
288,859
Jay Beckingham
Bank of England Mortgage - Delray Beach, FL
Seniors ROCK!

Jim,

buyers to a certain degree should act like the lenders and inquire about cash reserves, or the lack thereof, and deliquent assesments before buying. the current owners need to ask their mangagement companies some hard questions about their finances.

Susan,

do you think we'll be seeing associations that are unable to pay their bills, or is that already happening?

Michael,

it's very unsettling for both buyers and sellers.

jay

Jun 19, 2008 04:52 AM #8
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Rainmaker
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Jay Beckingham

Seniors ROCK!
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