All Posts

Condos Get Creative Amid Foreclosures

“U.S. condominium lenders, developers, and associations are turning to unconventional strategies to avert financial distress as the foreclosure epidemic continues.

For example, Jim Chew of Columbus, Ohio-based Condo Management reports that some developers have resorted to doing condo financing internally.

Lenders in Florida, meanwhile, are leasing foreclosed condos — although they soon could be subjected to new escrow requirements to ensure that associations are paid assessments in a timely fashion.

Condo auctions, offering discount prices, are another way that businesses are hoping to steer clear of financial ruin.

Source: USA Today”

How are Mortgage Lenders handling it?

Many mortgage lenders have taken a big hit with the bad loans they provided. Which in turn has them extra cautious about which loans they approve and which too decline. They know that until the job market stabilizes, having a good credit score is going to be only a part of the lending process.

In turn, condo associations, like developers and mortgage lenders, are facing significant issues due to the foreclosure crisis. Increasing foreclosures leads to less income from condo assessments as owners cannot pay their condo fees. The lower assessment income means insufficient operating funds to cover expenses such as insurance and maintenance.

What are they doing too stay out of the red?

The news isn’t all bad, however. Condos remain a good investment, as long as you pick the “right” one. Think location, good space, and no lawn to cut. If you’re in the market, here are three ways to boost your chances of financing a condo:

  • Look at older buildings, which tend to have fewer restrictions than new construction. In many markets, the upside is character. Crown molding. Cozy room configurations.
  • Make sure the condo association is in good health and people pay their assessments on time. The mortgage lenders are tracking this info and may reject the loan if too many people are falling behind. Besides, you want to know that the association has funds for necessary repairs.
  • Increase your downpayment. I know it’s difficult, but even going from 10 to 15 percent can make a difference. If you can muster 25 percent, the prospects of approval are much higher.

What options do the Condo boards have?

To stave off financial disaster, condo associations are having to get creative. For example, some condo associations are using reserves to buy foreclosed units, and then renting them out until the sale climate improves and the unit can be sold at a decent market value. This action provides 2 advantages: the unit is prevented from being sold too far below market and the association is able to recoup some additional funds.

Some courts have ordered receivers in bankruptcy to collect rents where owners have rented the unit out but weren’t paying the condo assessments and use the rental income to pay overdue condo assessments.

Some condo association that had banned owners from renting their units are relaxing those rules, or creating hardship exceptions, to allow owners to avoid foreclosures.

Hoped this helped, if you need any more answers feel free to Contact Us again

-Walter Grande

If you found this post useful or to your liking, please reward it by stumbling, digging or casting a vote on any other social media service you might like to use. Also don’t forget to subscribe to our blog, so you don’t miss out on any of our posts.

Share:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google Bookmarks
  • Technorati
  • MySpace
  • Yahoo! Buzz
  • LinkedIn
  • Live
  • Reddit
  • StumbleUpon

Leave a Reply

 

 

 

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>