Perry_b, Home Buyer in Fort Walton Beach, FL

Should I buy a condo when over 75% of the units are not paying HOA dues because they are in some state of foreclosure?

Asked by Perry_b, Fort Walton Beach, FL Sat Aug 28, 2010

I am looking to purchase a condo in a small 6 unit complex. The unit I am interested in is bank owned and I know I can get a very good price for the unit. I have talked to the pervious owner and she has let me in on some information about the status of other units and the broke self managed HOA. 3 units have filed for bankruptcy over a year ago and the banks still have not picked them up as foreclosures, she is a realtor and has insight of the issues and status, the banks dont want to pick them up, because then they will have to pay for HOA, special assessments, and taxes etc. So that is 4 total of the 6 that are in some type of foreclosure. From this you can imagine the HOA is broke. They cant afford insurance on the building and are just doing the bare minimum to pay common water and electricity. I know they will have to insure the building before any bank will approve a loan. I am just going to propose to the bank to pay for the insurance so that I can buy. What should I do?

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There is a need to exercise some common the Titanic is sinking in the middle of the ocean, does it make sense to get in line to buy a ticket?
2 votes Thank Flag Link Sat Aug 28, 2010
RUN unless you want to buy all the unsold and run the place yourself. This has been done in South Florida where a group buys all the condos in a project.
1 vote Thank Flag Link Sat Aug 28, 2010
If you buy their the non paying units directly afect you as the units that are paying have to make up for the non paying units until the time they are sold and resposnible people begin paying. As an investment if you are getting it for a great price and have teh funds to maybe pay some extra condo fees untill all teh units are brought current, you may get a great deal, but the price has to right
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1 vote Thank Flag Link Sat Aug 28, 2010
Price is not always the answer. Cost is the answer. Check with a financial adviser and a attorney for you liabilities in a case like that.
1 vote Thank Flag Link Sat Aug 28, 2010
Hi Perry:

Real estate is typically your single largest investment. I'd be very careful of buying into a condo building if the HOA is in distress, or at least do your homework carefully. This would make it problematic to get a home loan--you'd probably have to pay cash to get into the building. The lending climate is tight, especially on condos right now. Better to pay a little more for a place and have financial stability in the complex than to try and "get a deal" and then be stuck battling your HOA or be without basic services.
1 vote Thank Flag Link Sat Aug 28, 2010
NO! I would not recommend that you buy into a development that has this type of current trouble. Remember you are in a community with shared space, shared happiness and shared woes. This one sounds as if it is weighted too heavily on the "woe" side at present. Know that when delinquency rates are too high, banks will not lend, that spells trouble to your ability to sell anytime soon.

Sometimes a bargain is anything but - with a condo purchase, one of the things you must evalute is the financial health of the condo development overall. It doesn't sound to me as though this one passes that test.

There are so many good deals out there, my suggestion it so keep looking and find a good value in a strong community.

No point going down with the ship...

Jeanne Feenick
Unwavering Commtiment to Serivce
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0 votes Thank Flag Link Sun Aug 29, 2010
Hi Perry_b,
You can do much better than this--there are some fantastic buys out there, but this isn't one of them. Also, the banks are waffling a little on whether or not they will finance condos--some they will--a realtor can check for you and find out if a particular complex can get funding.

I have sold some foreclosure properties, and always put into the contract that all assessments and fees outstanding are to be paid by the seller--one more way to protect yourself. And, remember, you can't get funding unless you can provide information regarding the insurance and if these condos don't have a current insurance policy you wouldn't get a loan anyway.

Remember, you as the buyer don't pay the realtor, so use a realtor to protect yourself--we can write things into contracts to protect you that you might not think of on your own. Why would you pass up on a free service?

Myke Triebold, GRI, LMC
Certified Military Market Specialist
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0 votes Thank Flag Link Sat Aug 28, 2010
I would not recommend to buy in a commmunity with such a high percentage of foreclosures. It must be a new community and had many investors who liked to flip the properties a few years ago, and are know upside down . But if you like the community and the condomium and make it your primary home , and you do very carefull your due dilligence on the balance sheet and outstanding delinquencies, and check how much procent of this community is exactly for sale, and you can purchase it for a very low price, you can calculate your extra assesments you have to pay in the near future. When there is no money in that community and no Developer takes it over, chances are that the HOA or condo Association can go in bankruptcy. Anyway to collect the outstanding morning from 75% of the owners cost a lot of money on attorney cost. By law if the property foreclose the bank has to pay up to 12 months of association dues to the Condo association and or HOA. This was 6 months but is recently changed to 12 months. The 75% should not all be foreclosures, it could be a Short Sale, in that event the Association can negociate with the Realtor, Bank or negotiator to receive as much out of the transaction. Again be very careful.
0 votes Thank Flag Link Sat Aug 28, 2010

As a follow up to my earlier post, banks aren't always logical and you can't "push" them to make a decision, you can make an offer and wait for their response. The property isn't personal to the person handling the paperwork so even though you are thinking logically, you can't count on anything when trying to buy bank-owned property. These deals are best for people with lots of money, plenty of time and patience, and who don't really need the property as their primary residence.
0 votes Thank Flag Link Sat Aug 28, 2010
You are making a lot of assumptions. Banks are not all doing the smart thing or in a timely manner. You can be working a short sale on a property and they can be foreclosing at the same time and not even know it.

BE CAREFUL. Do your do diligence. call the bank. They could be thinking of putting it in to receivership.
0 votes Thank Flag Link Sat Aug 28, 2010
From an investor's perspective, you'd be making a huge mistake. Be prepared to put down a huge sum of cash (if not buy the property all-cash), to receive several special assessments (on top of your normal HOA dues), to possibly be held responsible for any back HOA dues (that the previous owner and/or this bank failed to pay), and the list goes on.
0 votes Thank Flag Link Sat Aug 28, 2010
Thank you for all of your opinions. I knew that it would not be easy getting a loan and that I could face further troubles with the HOA. I also was looking at it as the bank have to pick up the other units sooner than later, therefore responsible for the back HOA, and special assessment fees. I am assuming I should wait until that happens to even consider this condo. But couldnt you use all of this as leverage to somehow get the bank to fix these issues so they can sell the property? Since they have a vested interest in the property I am sure they would try and do something so they can sell. They dont want to continue paying for a unit if they have a buyer interested.
0 votes Thank Flag Link Sat Aug 28, 2010
I think you question says it for itself. Run! It's 6 unit building and 4 units in foreclosure? Why would you want to buy into it. There're plenty other condo complexes i am sure you can buy that don't have that kind of problems.

Elena Ollick
Amerivest Realty
Faith Home Loans
skype: napleshomes
0 votes Thank Flag Link Sat Aug 28, 2010
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