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?
Buying into a building/condo with high default rates has multiple potential issues.
â€¢ Those units facing foreclosure are most likely or possibly in disrepair- a potential for
collateral damage could exist.
â€¢ The owners that are behind in mortgage payments are most likely behind in association fees and/or special assessments too.
â€¢ Once the lender takes over or a short-sale is approved, the selling price is usually at or below market value.
â€¢ There are rare occasions where a condo association will be taken over by the "COURT" and a recievership is established.
â€¢ 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, REALTORSÂ®
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
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!