Glad I Walked Away, But What Happens Now?
So here’s the story: I came inches away from signing a contract on a condo I adored when my RE attorney pointed out that the building had chaotic finances. On the advice of friends and posters, I went to the building and knocked on a couple of doors to try to get the full picture…
So here’s the story: I came inches away from signing a contract on a condo I adored when my RE attorney pointed out that the building had chaotic finances. On the advice of friends and posters, I went to the building and knocked on a couple of doors to try to get the full picture before I walked away for good. I’m very glad I did! The board association was run by a man who told me that it was illegal to ask the residents of a building about their experiences living there (my RE attorney told me it’s absolutely legal) and started to make all sorts of accusations; one of the 8 units is nearing foreclosure; the other owners have fallen consistently behind on common charges (on my way out, I overheard the board president shouting at another neighbor about who was responsible for fixing roof damage that was very clearly in the stairwell — the entire building’s responsibility, I would have thought). In short, it was a disaster, and I have no regrets about walking away from that particular property. However, I do wonder what happens to buildings in similar situations — no one can afford to pay CC’s, litigation left and right … where are they going to be in another five years? Not that I’m waiting around, but I am curious. The units were lovely, and it seems such a waste. It could just be that I’m discouraged at going back to square one (I started looking in January and am nearing despair), but I doubt this is the only building out there like that, and I’m curious as to what will become of it.
yes, but sometimes investors buy to hold onto units, rented out, for appreciation to sell at a profit later when prices are higher.
If they are paying their monthly charges, and aren’t too big a percentage of the % of units, they can help to stabilize a building. Hard to have a low enough % of investor units in a small building, though – works better in a larger one.
It is also possible that a cashed up real estate investor picks up the units one at a time and rents them out, with the ultimate expectation of getting all units, dissolving the condo corporation and having a rental building. This is a very bad situation for the remaining owners because it is difficult to get a residential mortgage for an apartment in a building where there are a lot of rented units, which also makes it difficult to sell to anyone who wants to buy it for owner occupation.
This is what happens: when people stop paying their mortgage, the banks move to get their collateral, and then sell (often at a loss.) The condo association is out of the maintenance charges, because the banks are first in line to recover, and they tack on lots of fees to their mortgage amount. The condo board has to increase the maintenance for all the other owners to cover the loss. In addition the recent rule change dictates that buildings must have reserves in order for new buyers to get a mortgage, so for a while, all buyers must be all-cash. Altogether, you are looking at a distressed property, and it could take years for the building’s finances to recover.
The way you describe the board president tells me this guy has a lrge share of responsibility for the current situation. I would definitely not buy into it unless the price reflected the issues (soon-to-increase fees, strife within the building, lack of liquidity, deferred maintenance, difficulties to resale.)
Your comments have me wondering if condo owners have a different mentality than coop owners. In a coop, in a small one anyway, you don’t have the sense you own just your apartment, but that you jointly own the builidng – because you don’t own your space, just shares in a corporation and a lease. I would think life in a small condo would feel similar to that of a small coop – maybe not.
But can’t the condo board move against those who don’t pay their common charges? There has to be some rememdy, no, even if not as great as that of coop boards? Seems like poor management, not performing duties of board, not to act. Perhaps you’d find better management in a larger building – there’s at least more people to choose from for board memebers.
Thanks for your comments. It’s not one of the new luxury monstrosities (I avoid those at all costs), but an older building. And most people in it had been there for 10+ years, so there wasn’t a lot of turnover. It just seems to me that they made a lot of short-term decisions in order to keep more cash in their pockets, and when the economic crash hit, they drained their reserves to cover lost CCs and to keep the place maintained. Poor planning, I think, which can be resolved if the community is willing. But when I was told I was trying to pull a fast one just by knocking on a couple of doors, I took that as a warning sign of how much negotiation was actually possible here. I’m really keen to invest in a condo rather than a coop for all the reasons 2:02 points out, but that doesn’t mean I’m necessarily looking to sell right away; I do actually want a place I would be happy to stay in for a good 10+ years.
If it is offered at too good a price, that’s a sign that the owner of the apartment is struggling, not necessarily that the building is.
But really, after the standards of the mortgage industry in recent years, I’d think anyone would be wary of buying a condo that had lots of turnover (or was originally sold) during the go-go mortgage years.
Much as I’d be wary of buying in a coop again (would want freedom to rent out the place as an investment; would want no restrictions on who I could sell to), the idea of being in a place where other owners can’t afford to meet their payments and have crazy mortgages (and never should have bought what they did) is even more scary.
Perhaps buying a condo in a larger, already established before recent years condo, with not heavy turnover in the crazy mortgage years, is your best bet for finding building financial stability.
Oh, it will muddle on for decades more just the same. The foreclosure will happen, a new owner (who doesn’t knock on doors to get info) will buy it, and life will go on.
The leak will eventually get fixed, likely at coop expense (unless a tenants private roof deck was found to be contributing cause to the leak), likely not properly, due to not spending enough and getting the right roofers, and be leaking again in a few years. I’ve seen buildings go throught this drama.
I would have thought that many owners (as opposed to one or two) falling behind in common charges would be rare. Perhaps people are loathe to pay due to board and building management issues. Perhaps the building is not strict enough in its financial review process of potential buyers. Oh, it’s a condo, not a coop, so that explains that. A coop will have many similar dramas, but most make sure people buying have OK finances and non-tricky mortgages.
Understand you’re not wanting to get into specifics, but could say if this building was one of the new “luxury” buildings that have sprung up all over Brooklyn but are pretty dark in the evening? We’re curious about one that’s been listed at a very good, nay too good, a price and my suspicion is it’s because the building is struggling financially, or the writing is on the wall.