Home Buying in Miami Beach>Question Details

Sakine.june, Home Buyer in 33414

what happens if you buy/own a condo whose building has so high foreclosure rate (e.g., 60%)?

Asked by Sakine.june, 33414 Wed Jul 27, 2011

what could be a scenario if you buy/own a condo whose building has too high foreclosure rate? Does it get shut down by the city/county?

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I also have never heard of a condo building being shut down because there are too many foreclosures. If the building has safety violations that result from a lack of proper building care, they can be shut down. If the HOA has little to no reserves to complete necessary building safety repairs it could, in theory, result in the building getting shut down.

There is a give and take from a potential buyers point of view on buildings with high rates of foreclosure. There is inherent risk for a new buyer into a building with high rates of delinquency as HOA fee's will be very high to compensate for those not paying. That being said, you will probably be buying the unit at a price below market, when compared to buildings with healthy HOA's.

In the end a decision should be made after you interview the HOA. It's a reversal from years past where potential buyers had to pass an HOA's screening. Now the smartest buyers are sitting down with the HOA and asking what they are doing to fix the financial issues they are having. Are they foreclosing on units themselves to push the banks along? Are they renting out units they take posession of? Are they correcting their budget with the help of a CPA? What do they plan to do in the next 12 months to strengthen their reserves?
1 vote Thank Flag Link Fri Aug 19, 2011
SJ:

Buying into a building/condo with high default rates has multiple potential issues.

• Those units facing foreclosure are most likely or possibly in disrepair- a potential for
collateral damage could exist.

• The owners that are behind in mortgage payments are most likely behind in association fees and/or special assessments too.

• Once the lender takes over or a short-sale is approved, the selling price is usually at or below market value.

• There are rare occasions where a condo association will be taken over by the "COURT" and a recievership is established.

• I've yet to see, hear or read of a building being "shut-down" due to a high rate of foreclosures. A building or any business where the public interest could be compromised is another matter.

WATERWAY REALTY, REALTORS®
1 vote Thank Flag Link Tue Aug 16, 2011
STOP! Foreclosures don't pay their HOA. so guess who makes up the difference!
1 vote Thank Flag Link Wed Jul 27, 2011
Understand that you MAY be talking about 2 different foreclosures:
Your neighbors are going thru (heck) and that will affect your Value.
But you may have to consider that someone may hold the Mortagage on the Whole Complex. What happens if they default because they are not getting income from 60% of the units?

Would you call this a RED FLAG?

Good luck and may God bless
1 vote Thank Flag Link Wed Jul 27, 2011
No, it doesn't get "shut down" by anybody. You can read the origination documents for the condo, it will tell you what procedures need to be followed to dissolve it.

However. Ron's point is that if there's an underlying mortgage owner, they may have priority and if they foreclose on the building, they foreclose on you - even if your payments are current. Mott points out that the place is probably devaluing by the moment, and Casey's thoughts are useful if you are a speculator looking to make a killer deal.

If you're not, then I'm with Gerard - this isn't the place for you!
0 votes Thank Flag Link Fri Aug 19, 2011
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