WHAT HAPPENS IF THE CONDO ASSOCIATION GOES UNDER?

By
Real Estate Agent with Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate 303829;0225082372

"WHAT HAPPENS IF THE CONDO ASSOCIATION GOES UNDER?"

That was a question from a home buyer yesterday.  This is a cash buyer in the market for a condo in Prince William County to use as rental property for a few years and then live in when he sells his present home. 

THE QUESTIONS WERE PROMPTED BY THE LISTING REPORT.  There are three properties offered for sale in that community, two short sales and one regular home owner sale.  One of the short sale listings wants "Cash Only, too many distressed sales for financing.  Condo assn. in trouble" 

HOW CAN THE CONDO ASSN. PAY THEIR BILLS?  The buyer's question is well founded since, under normal circumstances, when there is a high percentage of delinquent owners, the condo fee will be raised for remaining owners to cover condo expenses.  Maintenance of condo buildings, trash removal, grounds maintenance, snow removal, insurance, etc. are critical to protect the value of the property. 

WHAT DOES "Condo assn. in trouble" mean?  Condo associations are required by law to maintain certain condo"reserves" to protect the owners under special circumstances or a dramatic increase in expenses OR a high degree of delinquencies.  As delinquencies increase, the remaining owners will have to pay higher fees or assessments to cover necessary expenses.  If there are insufficient funds to operate, condo associations may not be able to make payments for contracted services and loans.  Condo owners who refuse to approve increased fees to compensate for delinquencies are merely putting the entire community at risk if the condo association is forced into bankruptcy or receivership. 

IT GETS WORSE.  As delinquencies increase, the condominium project may also lose FHA and VA financing approval.  In all but super luxury projects, that's usually deadly for property values and purchase financing. 

OWNERS STOP PAYING FEES.  This is a trend in many condo and HOA associations.  Sadly, it simply makes matters worse, puts the home owners' credit at risk and further limits the ability of the condo associations to perform critical maintenance.

WE DON'T GIVE LEGAL ADVICE.  Since the buyer's question involved a legal matter, my suggestion to my broker partner was to speak with a real estate attorney with whom we do settlements,   This questions is clearly "above our pay grade".  That said, I suggested that they search a bit farther for a condo to buy in a building that is not "at risk". 

CAN YOU GET A "PEEK" AT THE DOCS?  I also suggested that the listing agent or owner may already have a copy of the condo docs and would permit a "peek" prior to writing an offer.  The association docs must disclose the financial condition, any liens against, etc. the association.  It's worth a phone call. 

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

Map Woodbridge

Homefinders.com offers home buyers help throughout Prince William County in:

  • Bristow * Dumfries * Gainesville * Manassas * Triangle * Woodbridge * Haymarket

Woodbridge Homes and real estate.Lenn

HOMES FOR SALE IN PRINCE WILLIAM COUNTY.
MORE ABOUT PRINCE WILLIAM COUNTY REAL ESTATE
ABOUT DALE CITY REAL ESTATE

SEARCH Homes for sale in Prince William County in Catharpin, Dumfries, Haymarket, Gainesville, Manassas, Manassas Park, Bristow, Nokesville, Dale City, Woodbridge, Quantico, Triangle.  If you have questions about real estate in Prince William County, just call Lenn at 800-711-7988.  Ask about our Home Buyers REBATE.

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

 

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Re-Bloggged 14 times:

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Comments 104 New Comment

Rainmaker
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Lanre Folayan
I don't make promises. But I do deliver results.
Keller Williams Capital Properties-Buy a home in Washington DC. Sell a home in Washington DC

Lenn I have a condo buyer that I am working with righrt now so this blog came in right on time. Thanks for sharing this great blog Lenn. Great post.

February 08, 2011 12:27 AM
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Lenn Harley
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Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate

Lanre.  Thanks.  The condo market is a real challenge today. 

February 08, 2011 05:52 AM
Rainmaker
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Wayne B. Pruner
Tigard Oregon Homes for Sale, Realtor, GRI
Oregon First

Many condo associations are in trouble or almost there. Buyer beware. You may also have to actually participate in the association to keep it viable.

February 24, 2011 09:55 PM
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Lenn Harley
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Tigard.  Buyer beware indeed.  Owners may have to actually "chip in" to save the association.  More defaults by owners simply shift the collective costs to the remaining owners until the balance is tripped and the entire thing goes under.

Not a pretty picture when the fact that financing is difficult if not impossible. 

February 25, 2011 06:23 AM
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Lenn Harley

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