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Condo foreclosure

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paragonrea

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Sophomore Member
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Sep 5, 2007
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Certified Residential Appraiser
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Florida
I had a very good client (really the good kind of client) ask a very interesting question. With the number of condominiums gong into foreclosure in many of the over-built areas (downtown Miami), what is going to happen to the other unit owners association fees? The scary question though, what happens to those fees when the developer still has many of the units left for sale and they go into bankruptcy? The only thing I could come up with was a drastic increase in those fees, and consequently additional foreclosures. Thoughts anyone?
 

Chris Colston

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Jul 24, 2003
Professional Status
Certified Residential Appraiser
State
Florida
"It depends"....is the developer still "in charge" of the association or have the owners been able to take over? If the owners have taken over control of the association (usually at 90% ownership) then the condo docs will dictate the fees and the assessment of the fees, which usually takes place with the annual meeting. If the developer is still in charge and the developer goes bust, then the State takes over and places the project under "receivership" protection. If there is 90% ownership and the majority are in foreclosure the State can still come in and place the project into "receivership". The banks that now own the units have to pay the monthly fees to the associations, just like any other owner.
 

paragonrea

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Sophomore Member
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Sep 5, 2007
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Certified Residential Appraiser
State
Florida
Who pays the fees if the state takes over for the developer (assuming developer still in control)? Is there a bond that the developer posted that pays this?
 

Chris Colston

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Certified Residential Appraiser
State
Florida
The "receiver" pays the fees....aka the State...aka the taxpayers...aka YOU and I!!
 

Couch Potato

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Joined
Mar 15, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
"It depends"....is the developer still "in charge" of the association or have the owners been able to take over? If the owners have taken over control of the association (usually at 90% ownership) then the condo docs will dictate the fees and the assessment of the fees, which usually takes place with the annual meeting. If the developer is still in charge and the developer goes bust, then the State takes over and places the project under "receivership" protection. If there is 90% ownership and the majority are in foreclosure the State can still come in and place the project into "receivership". The banks that now own the units have to pay the monthly fees to the associations, just like any other owner.
Basically true Chris, but banks don't have to pay past due fees that are over six months past due or in excess of 1% of the mortgage. With a large number of foreclosures, that can leave a lot of unpaid fees.
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
I've noticed some properties that had notice of foreclosure recorded, house is vacant or rented, it sits for over a year with the bank not finalizing the foreclosure and nobody pays or will be made to pay the HOA fees all that limbo time.
 
Joined
Nov 7, 2005
Professional Status
Certified Residential Appraiser
State
Florida
Per an associate of mine that is on her condo board - the other condo owners become responsible for that fee and if the foreclosure is in front of their lien, they will get nothing. Her association is trying to move as quickly as possible about past due hoa fees to beat the other liens.
 

Wendy

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Feb 23, 2004
Professional Status
Certified Residential Appraiser
State
Florida
Hummm, just how ugly can it get? sigh.....
 

paragonrea

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Sep 5, 2007
Professional Status
Certified Residential Appraiser
State
Florida
Wendy, that was my thought. It could be getting scarier.
 

Howard Klahr

Senior Member
Joined
Oct 4, 2004
Professional Status
Certified General Appraiser
State
Florida
The "receiver" pays the fees....aka the State...aka the taxpayers...aka YOU and I!!

In the event a project is truely insolvent, a temintion of condominium will be ordered and all assessts of the project will be liquidated and the proceeds distributed to creditors and unit owners in accordance with the termination plan. Not excatly, but kind of like a bankrutcy.
 
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