Scrambling To Prevent A Financial Frost
A report from the Washington Post. “At Glen Waye Gardens Condominiums in Silver Spring, 21 owners are more than 30 days behind on their monthly condo fees. Two other owners have not paid since they bought their units, one in April 2005 and the other in September 2006. Both properties went into foreclosure.”
“The lost fees, which make up 5 percent of the association’s annual budget of $1.3 million, have pushed the condo board to dip into its reserve funds to fix the roof and replace a water heater.”
“In a sign that the turmoil in the subprime mortgage industry is affecting entire communities, condominium association officers, property managers and real estate lawyers throughout the region say they are noticing more delinquencies in monthly fees.”
“‘If someone is not paying their mortgage, they’re not paying their condo fee, and the condos need money to pay bills,’ said Jeffrey van Grack, a community association lawyer in Bethesda.”
“When mortgages become too burdensome, the bill from the condo association becomes easier to ignore.”
“Phil Ochs, a lawyer who represents about 40 condo and homeowners associations in Montgomery and Prince George’s counties, said he has seen 10 foreclosures since January. In the past 45 days, 15 people living in communities he represents have declared bankruptcy to stave off foreclosure. Most of them bought their condos in the past two years, he said.”
“Normally, Ochs said, he may see one or two foreclosures and one or two bankruptcies a month. But now, that’s changed. ‘Something’s going on,’ Ochs said. ‘This is historically out of line.’”
“‘We’re starting to see delinquencies where they’re not owner-occupied. It’s not just a matter of a subprime borrower,’ said Thomas Schild of Thomas Schild Law Group in Rockville, which represents many community associations. ‘They were counting on increased equity. That equity is not happening.’”
“Clara Perlingiero said there are two units that are close to being foreclosed on in her Silver Spring condo community. In her 30 years living there, she said, there has been only one foreclosure.”
“Her building is old, and the elevators need fixing. The condo fees, which range from $275 to $400 per month, are crucial, she said. ‘We have to maintain the building because everyone loses if you don’t,’ she said.”
“Advocates for condo boards in Maryland pushed unsuccessfully this year for a state law that would have given associations priority liens over properties. That means that the association would collect unpaid dues on a foreclosed property before the lender got what was owed on the mortgage.”
“The District has such a law, so associations can collect up to six months in unpaid dues before the bank steps in. Virginia, like Maryland, gives the lender priority.”
“The bill’s backers argued that in a down market, there usually is no money left after a foreclosure sale to pay both the lender and the association. The mortgage industry opposed the bill.”
“Craig Wilson, president of a property management company in Germantown, said, ‘99.9 percent of the time, when a mortgage is foreclosed upon, the homeowners association or condominium gets nothing.’”
“At Glen Waye Gardens, monthly fees range from $396.50 to $588.75 and cover utilities, groundskeeping, snow removal, and maintenance of the furnace and air conditioning system. ‘We’re not running a resort out here,’ said Vicki Vergagni, president of the 214-unit community’s board. ‘These are living expenses.’”
“Vergagni, who has lived in the community for 32 years, said some of the most delinquent people had low incomes and weak credit or got 100 percent financing. In one case, New Century Financial, the troubled subprime mortgage company that this week filed for bankruptcy protection, financed the sale, she said.”
“Those owners ‘really had no business in terms of their creditworthiness to buy into our community,’ she said.”
“A foreclosure usually costs the association about $3,000 in legal fees. Suing the owners would just cost more money. In the past year, the association has chosen to write off $12,000 in unpaid dues instead.”
“‘The best thing you can do is get them out of there and get a paying owner,’ she said.”
The News & Observer from North Carolina. “Each spring, thousands of Triangle homes sprout “For Sale” signs as the housing industry’s most important selling season gets under way. But this year, in one of the worst housing markets in a generation, brokers are scrambling to prevent a financial frost.”
“‘We’re being a little more competitive,’ said broker Ed Willer. ‘We have to, because there are more homes on the market.’”
“In the Triangle, spring is typically when brokers can tack a 5 percent premium onto asking prices for homes, and get it. Not this spring.”
“Willer is visiting more competing houses to make sure his listings are priced right. ‘We’re taking a closer look at prices, sharpening our pencils a little bit,’ he said.”
“Sales in the area could be 10 percent lower than in 2006, said Mark Vitner, a Wachovia economist in Charlotte. ‘This spring won’t see as big a pickup as we did in spring last year,’ Vitner said, ‘but it’s better than what we’re seeing nationwide, like in Florida, where sales are down 40 percent.’”
“Last year, Coldwell Banker Howard Perry and Walston’s 800 brokers and agents held about 50 open houses per weekend. This spring, they have ramped up to 150 and aim to hold 300 open houses every weekend by mid-spring.”
“Kathy Eaton warned the 90 agents at her Stonehenge office that sales have dipped a couple of percentage points. ‘I’m telling my brokers, ‘I want our properties to sell first,’ Eaton said. ‘It may mean more open houses, hiring professional interior decorators and stagers, doing work up front so homes truly stand head and shoulders above the competition.’”
“Any sales decline could accelerate if potential buyers delay purchases, hoping that selling prices decline, and sellers put off listing their homes to get a higher price later. ‘We’re definitely seeing lower offers than a year ago,’ said broker Linda Kolarov. ‘They think it’s a buyers’ market.’”
“Sales in the area could be 10 percent lower than in 2006, said Mark Vitner, a Wachovia economist in Charlotte. ‘This spring won’t see as big a pickup as we did in spring last year,’ Vitner said, ‘but it’s better than what we’re seeing nationwide, like in Florida, where sales are down 40 percent.’”
Bwahaha. And once again, FL is going to be the butt of jokes again for the entire country.
“Hey, look at the brightside, at least were not trying to sell a condo/McMansion in S. FL”.
And two years ago Florida was the envy of every greedy “jenius” out there. The flippers were flaunting how savvy they were. The real estate drones were spewing how it would go on forever.
Other markets should not how quickly the tide can turn. “You find out when you reach the top, you’re on the bottom”. I’m sure somebody on this blog will be able to identify that quotation.
never confuse brains with a bull market.
Even bovine brains?
I guess it has been a mad cow market
Dylan. I knew that much but I had to look up which song: Idiot Wind. Good bubble anthem. Blood on the Tracks: good bubble pop anthem.
“Idiot wind, blowing every time you move your mouth,
Blowing down the backroads headin’ south.
Idiot wind, blowing every time you move your teeth,
You’re an idiot, babe.
It’s a wonder that you still know how to breathe.”
Yep, that sure seems like a good description of the housing mania and the FBs.
Something to avoid: Buying a condo in a subprime-infested area. The possible consequence could be a decline in the common property portion of the community as condo fees go unpaid. The bagholders will be the owners who are financially solvent.
I am curious whether this issue came up in the last condo bust?
“Vergagni, who has lived in the community for 32 years, said some of the most delinquent people had low incomes and weak credit or got 100 percent financing. In one case, New Century Financial, the troubled subprime mortgage company that this week filed for bankruptcy protection, financed the sale, she said. Those owners ‘really had no business in terms of their creditworthiness to buy into our community,’ she said.”
Isn’t this why NY Co-ops have enormously stringent purchase conditions?
Maybe, but it isn’t hard to imagine condo restrictions in the future. Another nail in the coffin.
Maybe, but it isn’t hard to imagine condo restrictions in the future. Another nail in the coffin.
It seems like that would work only if there is more demand than supply. But condos are a dime a dozen most places outside of Manhattan.
I was a Coop Director in NYC. Our first criteria to examine was the financial solvency of both the prospective shareholder (owner), and the financing arrangements. After we accepted these; only then would we them examine lessor priorities like personalities, lifestyles, etc.
There are a fewCoop Boards, albeit in very wealthy buildings, which require all cash deals. These are for coops worth tens of millions of dollars; as a solvency test, or proof of the buyer’s financial worth.
gotdo what do coop boards do specifically to safeguard people’s SS numbers and other sensitive personal financial data? Do they have a shredder policy after so many weeks or months of review?
I am renting a SFH and the owner did not even want my SS number. He says there is too much liability just having this information.
Got 10% down?
tcm_guy i always wonder the same thing about the personal info when applyng to purchase a coop
who are these people examining my life with a
fine tooth comb? but compared to buying a condo
full of flippers of 106% financers it is a much safer route to take
In DC (the second largest concentration of co-ops after NYC) boards are pretty much prohibited from denying anyone the right to purchase, EXCEPT for financial reasons. And just about every board has minimum down payments, and reviews the prospective purchaser’s financing arrangements. Condos have the same legal right, but almost never do it. I always found the difference downright bizzarre.
Months ago on this board I said that there were lots of downtown condo developments with signs outside that said 100% financing. I asked the question ‘why on earth would anyone want to buy into a building knowing that your neighbors used 100% financing?” I took the lack of answers to be telling .
‘I took the lack of answers to be telling.’
“Experience keeps a dear school, but fools will learn in no other.”
-Ben Franklin-
I ALWAY THOUGH IT WAS THE JOB OF THE LENDER TO PROTECT HIMSELF FROM A FOOL WHO COULD NOT PAY! I see a parallel universe when the condo / coop board has to vet the financial ability of a newbie. What a waste of resources in a mad, mad world. Hurry up ya subprime, meltdown, before more FBs really TRASH RE for the rest of us.
Yes but it is the job of the BROKER to convince the lender and buyer that the loan is in both of their best interest.
The brokers and salesmen are in charge.
As a smug renter, I can’t wait for FBs to trash RE for “the rest of us.”
This is another thing to consider in the buy vs. rent equation. When you rent you don’t face any of the condo related problems. The condo association is just another layer of government to contend with, and frequently it is poorly led.
I sold my last condo 3 years ago for this very reason. The condo association was ignoring building up the contingency account and they were facing several big spending needs in the near future, including replacing 2 elevators. This in a 38 unit building. I got out..and just in time. They now are paying a special assessment monthly that runs to 2010 on top of the already hefty monthly charge.
There’s never been a better time to rent.
I’m pretty sure Phil Ochs is still dead.
Major talent, woulda loved the bubble lifestyle.
http://en.wikipedia.org/wiki/Phil_Ochs
alcoholic, suicide, sounds like he was unable to enjoy any kind of lifestyle
He had something to say, said it and left.
“There but for fortune, go you and I”
for Joan Baez, it was fortune…..
Died in Far rockaway back when it was white and a safe area…
Imgine a public housing complex close to the atlantic ocean….now far rockaway is the #1 crime area in nyc.
Safe for whom?
IAT
Safe for the people who live there……i wouldnt want to go out at 11pm to even get a roll of toilet paper today in that area.
Yeah, but you write as if Far Rockaway was safe for everyone in the past. I do not know. But, it is a good question to ask whether non-whites would have found it a safe place to be after dark. Or, in fact, a safe place even during the day.
Crime is crime. The color of the criminal does not alter the damage to the specific victims or to society in general.
IAT
Here is how it used to be in a lot of NYC:
http://www.youtube.com/watch?v=esjSAF6UJz8
Do you disagree that the color of the criminal is irrelevant to the cost of the crime? If so, then why even reference race when describing an area; all you need reference is the crime rate. Only for those who believe the race of the criminal matters for the cost of the same crime does it make sense to prefer to be shot or robbed or worse by someone of their own race than someone of another race. For me, the race of the (potential) perp is irrelevant, I’d just not rather be victimized by anyone, period. But hey, that’s just me.
IAT
aNYCdj how long have you lived in nyc?
born and raised? just curious
me lifelong nyc resident and btw far rock
is a major cesspool
Born I Fairfield country, hopped on the NHRR in the old days to see concerts in the city when i was 16, Grand central was open 24 hours and trains ran back to ct at 4 and 5 am.
-
Lived in the city 3 times then moved away for jobs been here since ‘95
So I’ve remember the 7 train being so dangerous they had to have police going to the mets games. ….john rocker was right 20 years ago but not today!
—-Do you disagree that the color of the criminal is irrelevant to the cost of the crime——-
Not its the MOST importan fact, if blacks commited crimes at the same rate as whites just think of how many billions and billions we could save , we could close tons of jails lay off tens of thousands of police officers….great idea right?
Do you disagree that the color of the criminal is irrelevant to the cost of the crime?
I disagree. Some areas are dangerous only if you aren’t part of the local race. Crimes against the lower classes are not equal in damage ‘to society’ as crimes against the higher classes.
“Not its the MOST importan fact, if blacks commited crimes at the same rate as whites just think of how many billions and billions we could save , we could close tons of jails lay off tens of thousands of police officers….great idea right?”
Corporate (white) crime is much more lucrative, has millions of victims, officers and employees are rarely charged criminally, and companies pay a minor fine ‘without admitting wrong doing.’
As an added plus, corporate crime rarely makes the front page of the corporate media (with the exception of Enron-type cases), leaving Joe-six-pack-dumbfu$k to spend his time believing black crime is more prevalent.
sharpening our pencils a little bit
It occurs to me that the Easter break gives Realtors an opportunity to have a heart-to-heart with recalcitrant sellers about pricing.
Uh, oh. Here we go again…
There’s an elephant wandering around the room that no one can see yet. I remember him from the last go ’round in DC. Association fees going unpaid is a pimple on the elephant’s belly.
What happened last time, as part of credit standards tightening, was that Fannie and Freddie jacked up the owner-occupancy requirements for condo loans that they were willing to buy. In other words, loans made for condominium apartments, even if for primary residences, with 20% downpayments, were “non-conforming” if owner-occupancy in the condo building fell below a certain amount. I don’t remember what the cutoff was, maybe 50 or 70%? Bottom line, banks would not make loans in these buildings because they could not sell them into the MBS market, they had to keep them on their books. Obviously, it was very difficult to buy or sell these things, even after a 40% correction, because there was little mortgage money available. Look out below…..
And HOA’s aren’t really much different.
Note to self: Never invest in condos or in homes w/HOAs while prices are falling…
Amplified note to self … Do not even THINK of buying if a Nazi / HOA is present (the job of the local gov IMHO)
“Any sales decline could accelerate if potential buyers delay purchases, hoping that selling prices decline, and sellers put off listing their homes to get a higher price later. ‘We’re definitely seeing lower offers than a year ago,’ said broker Linda Kolarov. ‘They think it’s a buyers’ market.’”
Finally a borker says something with which I agree: this is definitely not a buyer’s market…wait about 2 or 3 more years and then it will be a buyer’s market. Although that is where Linda and I part ways, methinks.
Glenwaye Garden was built in 1974 and looks like crap. Probably a conversion. And that part of town is heavily Latino. But the place is within walking distance of a subway stop — a big plus here.
I don’t have a good handle on condo fees, but upwards of $500/month seems high.
let these mutts ride these bloated dogshit condos into the bowels of hell
And how many FBs are smart enough to think the association would have enough teeth to come after them if they just quit paying fees? I think a lot of FBs view paying such fees as a courtesy, not a necessity. We are not talking about the sharpest knives in the butcher block.
we need some soulful songwriter to pen a song entitled
“Those Condo Blues”
or maybe
“Association Ass-whacking”
Just replace California with Florida, Virginia, Nevada …
To the tune of Hotel California by the Eagles.
….
Welcome to the condos California
What a big surprise
What a big demise
They sucking it up at the condos California
Bring your no-doc ARMs, bring your own subprimes
Hummers in the driveway,
Granite in the kitchen
And we said ‘You are all just prisoners here, of your own device’
And in the master’s chambers,
They gathered for the feast
They slapped it with their crazy prices
But they just can’t sell the beast
Last thing I remember,
They were running for the door
They had to find the passage back
To the place they were before
‘Relax,’ said the realtor,
We are programmed to deceive.
You can buy it any time you like,
but you can never sell!
Well done, Ken.
Five hundred bucks a month is more than half the mortgage I pay on my 3 br / 2 ba home in Worthington, OH. Condos are for morons.
Agreed…these people pay more in association fees than I pay for my mortgage before taxes yet they still live in a crappy run down place. What are they paying maintenance workers there? Or is this a giant gated community w/$100k’s spent on landscaping?
To be fair, many condo associations like to retain a sizeable cushion in case the building needs major repairs. Reroofing a building, for example, can cost $50-$100K or more. “Special assessments” for such things are even harder to collect than condo fees are. It’s the collective equivalent of a single homeowner having a certain amount of money stashed away for similar reasons.
Being on a condo board, especially as the percentage of owner-occupied units goes down, is a pain in the *ss. I expect more buildings to adopt the co-op model.
Trust me, the maintenance workers aren’t getting rich.
waiting for these condo owners to cry uncle and realize their little piece of heaven is just a steaming pile of dogsh*t!
Home Opener yesterday for the Padres featured the downtown condo hard sales pitch:
http://www.signonsandiego.com/news/metro/20070407-9999-1n7padpads.html
“TV journalist Sal Rivera said it was the balcony overlooking Petco Park’s center field that swayed him to buy his condominium. Even though he and his wife haven’t officially moved in, Rivera said he planned to watch last night’s home opener from his new vantage point.”
What a dope. Did you see that picture? He bought a condo so he could watch baseball games from 1,000 yards away with an obstructed view. I bet this idiot ends up watching the games on TV any way. Maybe he can stare out that window and daydream about all of those dollars he pi$$ed away so that he could look like a bigshot.
he’ll be foreclosed on soon and watching the games in a department store
did you guys see the other day on that hugh hefner reality show that girl kendra bought a condo in san diego! no like, I was hysterical. in a promo, she wanted to show that she spends her money wisely!
“THE MORON GENERATION” at work!
This clueless chicky-poo will get hired before i even get a chance at a second interview………..sad but true in America
When gas hits $5+/gallon, it may be worth paying a little higher association dues so that you can walk to work, store, etc. here in San Diego county. Better than a 1.5 hour commute from Temecula into downtown.
i was at petco park last september and was actually shocked at the sheer number of condo’s being built in downtown san diego
it was non-stop from the water all the way to the i-5 entrance
who the hell will buy all those expensive little boxes?
and don’t even get me started on the biggest scam in califronia.
the parking!!!!!!! at least in nyc you can occasionally get lucky and find a free spot or meter but not in california.
now i know why they need all those illegals, to park all the heloc mobiles
MG:
There is only ONE logical reason to overpay for a condo or apartment….ONE reason only
If you can walk to work and you don’t have to have a car and no commuting bills, AND you can work all the OT and odd hours needed…especially if you own the business.
A condo is a lifestyle choice, and not a perfect substitute for a SFH. If you want to live in a city, don’t want to pay for a big place, don’t want to pay through the nose for one of the few SFHs in the city, and don’t want to waste time commuting, and hate the isolation of the burbs, then the condo is the way to go.
[sarcasm]Boy I really miss owning a condominium and dealing with other owners financial problems and meddling association boards.[/sarcasm]
Testify, Left LA! Condos are the pits, IMHO. You end up in the same boat with people you don’t really know and later on wish you never did. If one condo owner takes a dump financially, you have to carry him. Not all boards are a pain in the patootie, but some are. HOAs are just as bad. And from the perspective of an owner, if times get a little tight, you are better off in a house where you can defer maintenance and no one cares, instead of being forced to paint your place just because the board has voted it would be a nice thing to do. Also if you have a criminal type owner in the complex, it can be misery for everyone.
In SF we have an unmitigated joy called a TIC or “Tenancy in Common”. It’s an arrangment where say 3 people jointly purchase an old victorian with a common loan and ownership and sign a contract specifying which parts of the building they can occupy. If one partner defaults the others are on the hook for the loan. It’s going to be interesting to see how it plays out once price declines reach SF.
Wow. This could be the premise for a movie. Somewhat like Reservoir Dogs. Each fool eyeing the others. Who bolts first!?!?! The tension builds…
Last week we drove through the Cape Coral area and picked up a News Press. I looked through the huge real estate section and was stunned to see a full page Villa Realty Group ad pretty much telling people not to buy homes, and spelling out why it’s a better deal to rent!
Here’s a link to their site:
http://finerlifeleases.com/
Funny how the website pitches the whole concept of leasing a residence as a new, fiscally-smart option.
Duh. It’s called renting and it has been going on for centuries.
Now *that* is interesting. I love the pitch: Are you a fiscally responsible/smart/savy person who enjoys the finer things in life and wants to get the most your money can buy? If that sounds like you, Then Rent!
Somebody needs to forward that ad to all those stupid “bailout” politicians.
Just got back from “Toys R Us”. They actually had a digital talking RE doll. Big blonde hair, big smile with big teeth and a smart business suit. Mercedes optional. I was sort of against the idea but my daughter grabbed the doll before I could divert her to the Teletubby section.
Luckily, my daughter quickly got bored when she repeatedly pushed the button and found the doll always said just one thing…..”Its A Great Time To Buy!”
Was the doll’s name “talking Tina”?
I used to get the major creeps about Talking Tina…and of course I had to torture my kids with the episode. YouTube’s got it!
http://www.youtube.com/watch?v=Xj1Xn3VB818
I always thought it was Telly Savalas at his best.
Got 10% down?
Hey Seattlemoose,
That wasn’t a kids DOLL Moose. I met her in the store the other day . A 27 yr old , gorgeous blond EX REALTOR divorcee with no job with 2 kids and living with relatives.
I was dressed fairly well for a business appointment and she gave me her telephone number WITHOUT me asking for it. She must have spotted the Rolex.
I smiled, said thank you and left that Barbie DOLL for the next Spring FBer to play House with !
Despite Peak Oil and the Price of Gasoline, it’s Nice to know that my car …still BURNS RUBBER !
Everyone in the REIC scam is SCRAMBLING for cover and pointing Fingers.
This isn’t a mere Elephant hiding under their living room carpet…it’s turning into a RE White Elephant STAMPEDE !!!
Watch out for your Toes…ha ha ha
It may mean more open houses, hiring professional interior decorators and stagers, doing work up front”
lowering prices…. no, wait, scratch that one
“Reports indicate the U.S. descent into Great Depression 2.0 has stabilized. Things are now plummeting uniformly so investors can relax and be assured of no nasty surprises.”
I was wondering last year about how mass foreclosures would affect condo associations’ abilities to meet their monthly nut for maintenance, water, insurance, etc. The article says that in many cases the lender has priority over the association. With prices falling now and continuing to fall over the next few years, it looks like there won’t be much forefeiture meat left on the carcus for the association. With associations possibly unable to pay for basic needs like maintenance, insurance, and water, i could see lots of buildings spiraling downhill fast. This, in turn, would cause buyers to avoid buying units there, which would then further depress prices. And so, the vicious downward cycle continues…
Good point there John.
“Those owners ‘really had no business in terms of their creditworthiness to buy into our community,’ she said.”
I can imagine the hostility and worse that is directed that condo-association deadbeats by their neighbors who have to pick up the slack. Pretty soon condo associations will be demanding that such freeloaders wear a scarlet “D” to signify their deadbeat status. Wouldn’t surprise me to see their cars getting egged every night by angry residents who have to make up the shortfall.
I would think at this point they’d be pretty mad at the lenders too.
First, they made the loans that people couldn’t pay and then they refuse to give them a piece of any $$ when the defaulting begins. Nice.
“‘They think it’s a buyers’ market.’”
They THINK it’s a buyers market ? Well, yeah. You’d have to be hiding under a rock not to KNOW it’s a buyers market. Even more precisely, it’s a qualified buyers market.
“‘They think it’s a buyers’ market.’”
No, it’s a fool’s market right now, because only a fool would buy at the unrealistic and falling prices. It will be a buyer’s market in 18 to 24 months when the market approaches the bottom. I suspect prices will drop at least another 50% by then.