continental condominiums


May 31, 2010

Condo Foreclosures Stalk the Land

Filed under: Condominium Articles — Tags: , , , , — admin @ 3:00 pm

“Foreclosures are the top subject in the economic news today. Will it affect my condominium association too? What can be done?”

 

Foreclosures stalk condo owners like a predator looking for his prey. They are at an all time high in over 20 years, especially in the big cities.  They are evenly split between builders going out of business and buyers that bite off more than they can chew. With owners’ financial houses in complete disarray due to general economic conditions or loss of income, condo foreclosures are becoming a fact of life. This is more common than most would have you believe.

 

Foreclosures on condominiums occur when the current homeowner fails to make his mortgage payment, and the unit is being sold by the bank or lending institution at below market value. It is a devastating situation if you are in the position of having a condo repossessed or foreclosed upon. There is no choice for the bank or mortgage lender to get some money back through foreclosure because of the lack of payment by the owner. In some situations, the bank or lender will allow someone else to make the payments, which gives that person the right to move into the condominium. 

 

When too many condominium owners lose their units to foreclosure, condo associations feel the financial pain. That is bad news for homeowners who depend on them to take care of building maintenance, property insurance, utilities, landscaping, and other amenities that are shared in common.

 

Condominium associations do have options, but most of them are not that palatable to the owners. Boards of Directors can borrow money from a bank, borrow money from the association’s reserve, reduce contributions to reserves, cut back on amenities, reassess costs, renegotiate service contracts, delay capital expenditures, increase monthly assessments, and levy special assessments. They can offer payment plans or loans to the owners. They can waive late fees or penalties to help owners catch up on delinquencies. Some condominium associations are assessing anywhere from $10,000 to $30,000 per unit to make up for the shortfall.

 

There are some actions an association cannot take. They cannot abandon their fiduciary responsibility just because the funds are inadequate, and they cannot abandon the effort to collect delinquencies.

 

Once the condominium association forecloses, the owner typically will stop paying the mortgage and the bank or lender may be willing to accept a deed to the property from the association in lieu of a bank foreclosure. That could result in a faster sale of the unit to a new owner. Obviously, the number one priority is to get someone in the unit who has the money to pay the assessments.

Times have changed. Foreclosure stalkers (politely called investors) are not showing up in bunches at foreclosure auctions to snap up great bargains. We always used to hear about the great times when condominium properties were sold with profit to interested buyers and the associations recovered all their money, plus making a profit that financed the new landscaping at the front gate. Those times are gone!

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May 26, 2010

5 Things to Know Before Buying a Condo

Filed under: Condominium Articles — Tags: , , — admin @ 3:00 pm

A lot of prospective home owners across the country are today choosing condominiums over private homes for a variety of reasons, foremost among which being the fact that generally, they are a whole lot cheaper to buy and maintain than private homes. That said, there are a number of factors that you should keep in mind, before finalizing the deal on the condo you have laid your eyes on.

Reputation Of The Developer:

This is very important, and you must put in requisite effort to find out about the reputation of the developer in question. Has the individual or the company developed other properties as well, in and around the area? What do owners of those properties have to say about the developer? Further, what is the general market opinion about the developer? This should really not be too difficult for you to ascertain; usually, a few phone calls or visits to brokers in and around the area should give you a good idea.

Condition Of The Condo:

The livability as well as the resale value (if you are looking to buy the condo essentially as an investment) of the property would depend to a great extent on the condition of the condo itself. Remember that a very cheap property may not necessarily make a good buy or a good investment, especially if it is in relatively dilapidated condition. This aspect gets exemplified if the entire building itself is in poor shape and in desperate need of repair. The perceived value of your condo will come down that much more, even if the condition of the condo from inside is supreme. Therefore, make sure you do a thorough inspection not only of the condo itself, but also of the building as a whole, before you finalize your purchase deal.

Percentage Of Rented And Owned Condos

This factor is immensely important, as it will have a major say in the market value of your condo; usually, higher the percentage of owned condos in the complex, higher is the market value. So, assuming that out of 40 condos in a complex, if 30 are owned and 9 are rented, the 40th condo that you purchase will invariably have a better market value than the same in another complex, with the reverse, i.e. 30 rented and 9 owned – even with all other factors remaining constant.

Past Performance Of The Condominium Complex:

This is yet another factor that you must try and do some research on; if condos in the complex have been bought and sold in the past, what have the going prices been like? Also, how do those prices fare, with that of other similar complexes in the area? This will give you a very good idea of the feasibility of investing in the condo complex that you have laid your eyes on.

On a similar vein, you would also like to find out about the time frame that each condo on an average, takes to sell, in the complex. If the general consensus is that condos take a lot of time to sell, you might again want to have a rethink on the purchase.

Maintenance Fees:

As a prospective condo owner and dweller, it is quite likely that you would already be aware of the maintenance fees that are required to be paid by the dwellers of the complex in question. However, a lot of such individuals often make the mistake of not cross-checking beforehand, what exactly do those maintenance fees include – and what do they exclude? You don’t do that!

Broadly, these factors should give you an excellent idea of the aspects to keep in mind, while contemplating the purchase of a condo; together, they remind us that the decision to purchase a house should not just be driven by emotions, but more so by practicality. Unfortunately, a lot of us simply get swayed by irrelevant, extraneous factors that, in the long run, often end up proving to be costly mistakes.

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May 23, 2010

Condominium Ownership Can be a Financial Money Pit – What You Don’t Know Can Hurt You!

Filed under: Condominium Articles — Tags: , , , , — admin @ 6:00 am

Whether you are a Realtor or a home buyer, it pays to investigate the financial condition of condominium home owners associations before taking a listing or making a purchase bid. Failure to do so can lead to a rude awaking with jolting financial consequences.

Most people buy condominiums without a real understanding of the financial burden to which they are committing themselves. They have a vision of “care free condo living,” not realizing that active participation in the homeowners association (HOA) is necessary to protect their investment. Worse yet, many are not aware of pre-existing financial conditions which may require them to write big checks shortly after moving in.

In today’s market many condominium complexes have several units in foreclosure. Plus, there may be more units that are behind in dues and are likely to tumble into foreclosure in the near future. What this means to a potential buyer is that HOA monthly dues are likely to increase because fewer paying units will have to cover fixed operating expenses.

Perhaps the scariest situation for a potential condominium buyer is inadequate financial reserves to cover required maintenance. Many HOAs have adopted an attitude of avoiding special assessments or increase in monthly dues because owners would not approve these. Consequently, many (and maybe the majority) of condominium complexes have a reserve account balance way below where it should be. This is a big red flag for buyers because they are likely to get hit with a hefty special assessment in the future. Deferring maintenance to keep monthly dues low and avoid special assessments is a self-defeating strategy that always boomerangs on condo owners.

Many States now require a full disclosure of HOA reserve funds status as part of the purchase process. This involves a formal reserve study which determines the life cycle of major complex components (roofs, pool, etc.) and then determines how much reserve monies should be set aside each year to ensure adequate funds are available when repairs or replacements are due. California, for example, requires unit owner access to their reserve study and full disclosure of reserve fund status on an annual basis. Obviously, these documents are an important part of the escrow process.

Most condominium complexes are waking up to the fact that their units are not marketable if reserve funds are grossly inadequate, and special assessments are beginning to happen to make up the difference between existing reserve balances and recommended funds. For example, I live in a condominium, and my HOA has levied specials assessments totaling almost $20,000 per unit over the last two years. It hurts, but it is necessary. And there are strong rumors that California will soon require that reserve funds comply with levels recommended by a formal reserve study. What California does, the rest of the nation often follows.

When reserve funds are inadequate, the financial impact on condominium owners can be severe. In fact, it often leads to double “wammy” because special assessments can force some condominium owners into foreclosure which means fewer units are paying monthly HOA dues. So, not only does foreclosure ultimately mean forfeiting a portion of anticipated reserve funds (to senior liens), it also means less revenue coming in to the HOA for six-to-nine months during the foreclosure period. And there is only one solution for an HOA to stay afloat – a monthly dues increase to cover ongoing operating expenses.

What are the most dangerous situations? Small, older condominium complexes are ripe suspects that require close financial scrutiny. Next, any complex that had a number of sales backed by subprime loans should raise eyebrows. A lot of these have 100 percent financing, no equity and are tumbling into foreclosure.

Hence, it behooves Realtors and buyers alike to carefully review condominium reserve fund studies and balances, as well as the number of units in foreclosure and additional condos that are behind in their dues. For Realtors, this is essential to ensure compliance with full disclosure laws and avoid legal ramifications, and buyers can circumvent situations that come with a hidden price tag. In other words, it is time to start doing your homework to avoid stepping in condo “do-do!”

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May 19, 2010

Life Experiences Can Act As a Catalyst For Success

Filed under: Condominium Articles — Tags: , , — admin @ 3:38 pm

Why do I feel so strange this morning is the question I asked myself after waking up feeling listless. After an intense practice session with my two colleagues in preparation for a team triathlon competition in Saint Thomas, United States Virgin Islands.

As a military officer I participated in a lot of athletic competitions over the course of my 20 year military career in the United States Air Force and the team triathlon competition was an international event with over 25 countries represented. Our team arrived in St Thomas and we registered at a condominium in center city in this beautiful island nation.

On day one of practice we visited the competition site to gauge our strategy for the competition, we got the lay of the land in terms of the course and what we needed to do to win. Later that day, my teammates and I scheduled a practice session and returned to the site for an intense workout.

It was hot and humid in St Thomas but being around the ocean made it all worth while. I was going to run the 6.2. mile race, one of my teammates were going to swim a mile and the other was going to ride his bike 25 miles and our total time would measure our overall success in this team triathlon competition.

On day two of practice we scheduled another practice session with each of us running our event as though it was the competition itself. We did remarkably well considering we did not know the course like some of our competitors on the island.

After the practice session our team and others decided to go to dinner to rest up for the following day’s practice. After dinner our team went back to the condo to rest and prepared to win the competition. We locked all of the doors, sliding glass door leading to the balcony and went to sleep.

During the course of the night someone and or a couple of people broke into our condo, put us under because neither of the three of us were awake during the robbery. I woke up the next morning and felt different, as if something had happened. I woke up my two team mates and fellow officers and said, I checked my wallet and all of my money was gone and my watch as well.

Both of my teammates had been robbed as well. We called the police and sure enough, someone had removed the stone security pillar, opened the sliding glass door and robbed us. The bottom line is we could have all been killed, were it not for the mercy and grace of God was our life spared.

I took this life lesson and vowed never to take life for granted again. I encourage each of you to do the same, do not take life for granted and when you are given a second chance in life, make the very best of it.

Life in and of itself is about second chances, when its life altering like my Saint Thomas experience it will either destroy you or make you stronger. Identify your experiences and you will be able to readily identify your second chances in life and live your best life possible.

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May 16, 2010

The Party Wall Agreement Isn’t All Fun and Games

Filed under: Condominium Articles — Tags: — admin @ 1:06 am

Before jumping into the purchase of a duplex, there are some legal issues that you’ll want to consider. Many are unaware that duplex living is akin to living in a condo, and there are certain agreements that should jointly agreed upon, and on paper, before you sign the dotted line.

Duplexes have become more and more popular as they are a great way to afford the luxuries of home ownership without becoming totally housebroke. Generally much more affordable than the average single family home of equivalent square footage, the duplex appeals especially to young families and to couples looking to get into the market. But like any “great deal” there’s a flip side that should not be overlooked.

To begin with, you’re entering into ownership beside a neighbor, a very close neighbor in fact. So close, is your neighbor that you’ll share a wall that divides your respective homes. The part of duplex living and ownership that is similar to that of a condo, is the legally binding agreement called, “The Party Wall Agreement”. No, this is not only there so you can mutually decide on who’s having parties, and when. Although, it may delineate acceptable noise levels for your prospective parties. But, what it really is, is a sort of home association for a party of two.

The Party Wall agreement, will cover how the two sides of ownership will deal with shared expenses such as insurance, structural issues, including roof upkeep and replacement, foundation and shared utility service lines. It may also include routine maintenance and address stylistic and architectural issues such as the exterior look of the home, and the construction of other improvements such as fences and sheds.

Consider that before purchasing a duplex you are entitled to peruse the already existing party agreement and to enter into negotiations to make amendments, if necessary. If this is the duplex owner’s first time selling one half of the duplex, you might want to have, “negotiating a party-wall agreement” as one of your offer’s subjects. Note that down the line, should one duplex owner break the rules, the other owner is technically protected by the agreement and can put a lien on the other’s properties in order to collect funds, if need be.

Of course, you can have the world’s best legal documents, but if your uber close neighbor is a “not- so-nice” person, well then you’re likely to have problems. This being said, just as in a condo development, if you can meet with you’re fellow neighbor, and get a sense of who they are, and what kind of life they lead, it may give you more insight into whether or not you’ll want to live close to them, and enter into a legal agreement with them. The flip side, is of course nothing but the agreement can really protect you. Seemingly great people, can turn out to be terrible neighbors. Not to be a kill joy here, but if you’re considering purchasing a duplex, keep in mind the true dual nature of ownership you’re entering into. It can be a wonderful investment so long as you collectively set the appropriate rules to make it so.

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May 12, 2010

"Decorator Ready" Condominiums

Filed under: Condominium Articles — Tags: , , — admin @ 5:21 pm

Buyers in the market for luxury high-rises maybe surprised to learn that they are usually sold as basic shells described as “decorator ready”. Typically the condos are nothing more than blank slates without flooring, cabinetry or appliances. Condo owners are allowed to completely customize the unit to their personal style. The buyer of a “decorator ready” condo would be required to contract an interior designer or construction firm to complete the unit.

The term “decorator ready” can actually refer to two types of units, white box and grey box. White box units typically have drywall and some moldings and doors. A grey box unit is “bare bones” with no drywall or fixtures. Both require a licensed general contractor and some local permits.

With most “decorator ready” units being sold pre-construction, the final build out will add at least another three months to the completion of the condo. Buyers would be advised to begin searching for a builder or interior designer immediately after purchasing the unit. A local builder or design firm is recommended, because they are more familiar with local ordinances, building codes, and labor policies.

Most buyers decide to use an experienced design firm to complete the build out of the condo. A good design firm should provide detailed conceptual drawings to explain the project’s objective and scope. Conceptual drawing should include both artist renderings and CAD drawings. No detail should be left out of the plans. The designer should coordinate every aspect of the project; from architecture and lighting to flooring and furniture.

The design firm typically will advise and work with the general contractor to complete structural and permitted work. The general contractor will hire sub contractors and supervise the installation of framing, plumbing, drywall, and electrical. A good general contractor will ensure that the project stays on time and meets the local building codes.

The finished product should be a unique space that reflects the tastes of the residents. With the help of talented designers and qualified contractors, the tower residence can be a Shangri-La in the sky. In order to achieve the ultimate in comfort and style, condo buyers should make certain they choose a reputable and experienced builder.

Sovereign Homes will work closely with interior designers and architects to ensure that the interior finishing of your home exceeds your expectations! We are fully cognizant of the nuances that pertain to work schedules and construction protocol in these new buildings, and can offer expedient, cost-efficient and professional service, with the same level of quality control that is provided in our custom-home program.

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