Detroit Free Press: Condo owners finding a cash crunch

[marmar]

Condo owners finding a cash crunch
Homeowner associations get creative to keep up services
BY MARGARITA BAUZA • FREE PRESS BUSINESS WRITER • July 6, 2008




As more condo owners who need to move are stuck with properties they can't sell and foreclosure rates rise, many homeowner associations are hurting for the cash needed to maintain monthly services.

The vacancies have forced condo associations to more aggressively pursue back fees from owners who have turned properties over to banks, and to get creative about providing maintenance and services.

According to the Dallas-based Associa, which represents 7,000 community associations in 26 states, including Michigan, delinquency rates on dues are estimated to reach 5%, up from an average of 2%.

Local property managers say their numbers are similar.

Jon Sabo, who manages Highland Lakes Condos in Northville, says delinquencies are at 5% at the 700-unit complex.

This has forced some changes in the way Highland Lakes does business.

"We've been trying to find efficiencies, cutting our own grass and doing our own snow removal to minimize the impact," he said.

"Because of oversupply, prices have been devastated," said Sabo, who is also chapter executive director of the Community Associations Institute, the trade association for all Michigan homeowner, condo and property owner associations.

The Highland Lakes property has 16 foreclosed properties, and while sales continue, they have done so at lower prices.

At the peak of the real estate market, in August 2005, a lakefront 2-bedroom, 2-bath 1,400-square-foot condo at Highland Lakes sold for $220,000. The same unit now sells for $140,000. ......(more)

The complete piece is at: http://www.freep.com/apps/pbcs.dll/article?AID=2008807060478

[rox63]

1. My condo has also lost value since I bought it

When I bought my condo over 3 years ago, lots of folks told me I got a good deal. The price was well below the assessed value. The sellers were in a big hurry, because they would lose the house they wanted to buy if they didn't sell the condo by a certain date.

The most recent sales of similar units in my complex went for about 12% less than I paid for mine in 2005. The condo association had hoped to re-side the building this year, but had to opt for repairing and repainting the old siding, because of rising costs. I'm not in the same part of the country as the article, but my area has also been overbuilt with condos. If I'm lucky, my condo might be worth what I currently owe on it. So much for building equity. :(

[gratuitous]

2. Oversupply?

Finally admitting that we've overbuilt, thanks CAI.

The real impact of these delinquencies is that that people who bought their condos to actually live in (strange concept, nu?) get stuck with a condominium that can't meet its upkeep obligations, while the speculators and flippers skip out, daring the beleaguered association to pursue them for unpaid assessments. And when the collections people finally run them to ground, the deadbeats are so overextended that any recovery is extremely unlikely.

[rox63]

3. I always intended to live in my condo

Being a simple peon, I can't afford to buy income properties.