With so many condo owners going into default on their mortgages, Home Owner Associations (HOA’s) are having a real problem with fee delinquencies.
In other words if folks aren’t paying their mortgage payments you can bet they aren’t paying their HOA fees. In the past this simply meant that we agents had to review the HOA financials to make sure that it was making enough each month to pay its bills. Well, things are getting so bad that some mortgage lenders are now reviewing the HOA financials and if they don’t meet the grade then the lender won’t loan money for a buyer to buy in that community!
We recently helped a very qualified man in the purchase of a bank owned condo at The Vale. It’s a great place (needs a little TLC) and we got it at a smokin’ price. We were ready to close this week when in the 11th hour our lender, GMAC Mortgage (a big company), said that it wouldn’t do the loan. Turns out that 24% of the condo owners at The Vale are late in paying their HOA dues (meaning they ain’t gonna pay their dues at all) to the tune of almost $39,000 or 33% of the entire 2009 approved operating budget.
OK, big deal, so the HOA is behind $39,000 units; in a community of 50 condos that’s less than $1,000 per condo, it sucks but it’s shouldn’t be a deal breaker, right? Here’s the bigger problem. If 24% of the condo owners haven’t paid their HOA fees it stands to reason that most of them probably aren’t paying their mortgages. So, maybe as many as one out of every four condos is about to go into foreclosure. Sounds like a buying opportunity right? The more bank owned properties the more downward pressure on prices. BUT NO BUYER WILL BE ABLE TO GET A LOAN BECAUSE OF THE SORRY STATE OF THE HOA. If no one can buy, prices will probably continue down until a solution is found.
As much as we love the floor plans and location of The Vale we’re placing this condo community on our “watch” list.