Underwater Condos – They Have Their Own Considerations Before Deciding on a Short Sale or Other Option

Advertisement

The Business Real Estate and Transactions Practice Group of Williams Kastner recently had an article about Underwater Condos published in The National Law Review:

Advertisement

 

A client recently brought to me a situation where his nephew’s new wife had purchased a condominium unit prior to their wedding. She financed the entire price with two mortgages and now it’s under water.

When advising owners of distressed properties it’s easy to begin with a discussion of the owner’s financial situation. Is this the only problem or are they bankruptcy candidates? Will the owner need credit in the near future for a job transfer or to finance a business?

Advertisement

With condos, my first questions go to the marketability of the unit:

Advertisement
  • What’s the owner occupancy ratio? Are we looking for a landlord or someone who wants to live there? Owner occupancy rates affect the availability and cost of financing as well as the type and number of willing buyers.
  • How healthy is the homeowners association? If owners have stopped paying their assessments the HOA could be under funded. This would discourage almost all buyers.
  • How well has the HOA planned for major repairs and capital improvements? Is there a reserve study? Will there be large special assessments in the coming years for roofing, painting, deck replacement, etc.?
  • Has the owner been paying their assessments? If not, will they be able to bring the assessments current at closing?

Many owners are unable to answer these questions because they stopped reading newsletters and minutes from the Board or going to owners meetings.

There are opportunities for investors and others in distressed properties. But, to help an owner, much of the craft is in knowing the questions that will quickly tell you what you’re dealing with. When it comes to condos, I want to know about the marketability of the unit before spending much time on the owner’s financial situation.

© 2002-2012 by Williams Kastner

Advertisement

Published by

National Law Forum

A group of in-house attorneys developed the National Law Review on-line edition to create an easy to use resource to capture legal trends and news as they first start to emerge. We were looking for a better way to organize, vet and easily retrieve all the updates that were being sent to us on a daily basis.In the process, we’ve become one of the highest volume business law websites in the U.S. Today, the National Law Review’s seasoned editors screen and classify breaking news and analysis authored by recognized legal professionals and our own journalists. There is no log in to access the database and new articles are added hourly. The National Law Review revolutionized legal publication in 1888 and this cutting-edge tradition continues today.