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We’ve all heard regarding the outstanding deals to be had in the condominium market with dropping prices and increased foreclosures, but what regarding the dark side to these investments. Surely the high rate of foreclosures and engaged in a struggle economy has had a negative effect on the condo industry. To understand a little more in regards to how condominium ownership works, relate it to owning one piece of a pie. Everyone who owns a piece, shares ownership of the single pie plate and obligation for it is maintenance and upkeep. The cost of maintenance is separated amidst all the pie owners based on the day to day costs and reserve costs, or cash set isolated for future repairs. If numerous of the owners are unable to make their payments and their units go into default and eventually, foreclosure, attempts are made to re-sell the unit. However, when new building assessments are finished and a huge share of units are still sitting vacant, then it’s up to the other owners to pick up the slack for sustaining the building. The result is an increase in condo fees. In a great deal of areas of South Florida, these fees are almost $1 a square foot and rising. This expense, along with a mortgage, is sufficient to scare away a great deal of buyers. Unlike a mortgage where you may lock into a payment for 5 years, condo fees may go up each year depending on the vacancy rate and popular state of disrepair in the building. The traditionalisti condos with long-term residents are doing much better than a heap of of the newer buildings still containing a number of developer-owned units. A condominium such as The Mark on Brickell, had units listed for $600,000 a few years ago; those same units may be purchased for with regards to $200,000. Sounds like a great deal? About 30 percent of the units in the condominium are in default which has resulted in condo fees of in regards to $1,000 or higher. It doesn’t take a huge amount of vacancies to make a difference, in a littler building in North Miami, just two foreclosures resulted in a maintenance fee of $1,500. In addition, galore banks are wary of financing mortgages for units in buildings that have a high percentages of foreclosures. Even if a buyer decides to take the plunge, financing may be a problem. Condo vacancy rates may lead to higher maintenance fees, but this is commonly the final result after months of budget strain due to overdue or delinquent payments. During this time, owners may experience a poorly kept building while the complex puts off little projects to save cash in the interim. Often the reserve funds are depleted in an effort to make up the difference, but these accounts are left with dangerously low balances in the event of major repairs. Janet O. Aronson of the Braintree law firm Marcus, Errico, Emmer & Brooks, which represents 2,700 condo associations in Massachusetts, New Hampshire, and Rhode Island, reports the firm has seen a 150 percent increase in fee arrears in the last two years. This coincides with the time frame that subprime mortgages were so popular. In 1992 a “super lien” law was adopted in favor of condo associations in the event of a foreclosure. This enabled them to gather up to six months worth of delinquent payments, and giving them “front of the line” priority over lenders. As soon as the condo sells, any outstanding fees are remunerated out to the condo association. The effect of one person’s debt weighs to a considerable degree on all the building’s owners. It is necessary that condo associations are meticulous with regards to debt collection by containing the problem before it spills over and impacts all the occupants. |
