Perhaps I should be more charitable on a Sunday morning
depends on how you spend your Sunday Morning.
Complacencies of the peignoir, and late Coffee and oranges in a sunny chair, And the green freedom of a cockatoo Upon a rug mingle to dissipate The holy hush of ancient sacrifice.
...
Death is the mother of beauty; hence from her, Alone, shall come fulfilment to our dreams And our desires.
I'm feeling the dark encroachment of an old catastrophe.
The year: 1979. The place: a cavernous, stuffy college lecture hall. The stage properties: a blue book, a ball point, and a mimeographed essay question about Wallace Stevens. The dramatic crisis: a complete, total, sudden amnesia about "Sunday Morning." I knew I had read it. I knew I had written a ton of notes. I was as innocent of recall of any of it as a babe newborn. The resolution: I made shit up. The denoument: fortunately my professor liked me and gave me extra points on the TS Eliot question.
I'll make the obvious comment. Restricting rentals lowers the value of all condos in that building by restricting purchases for investment.
A condo board can pass and enforce rules that will prevent non owners from damaging common areas or otherwise lowering property values.
Restricting rentals lowers the value of all condos in that building by restricting purchases for investment.
I'm not sure I agree. For starters, selling the units originally to flippers doesn't seem to have done them any favors, does it?
But my question this morning is how these units can have positive cash-flow to an investor. What investor would buy at 2005-era prices in order to rent the place out? What tenant would pay enough to cover that PITI? This article supplies no numbers, but I have to wonder how this math is supposed to work out.
Why does anyone think resale values would hold up if the resale purchaser pool is mostly investors?
Restricting rentals lowers the value of all condos in that building by restricting purchases for investment.
this is neither obvious nor correct.
if too many units go rental then future sales will be PROHIBITED. A lot of lenders will only lend if a certain % of the units in the building are rental.
also: many people bought into the condo unit PRECISELY because it doesn't allow renters.
those types of units come at a premium, not a discount.
why on earth buy a place if all your neighbors are going to be renters?
It isn't, in my view, really about your neighbors being renters, although I agree a lot of people buy condos rather than renting apartments because they want neighbors with some common sense about the stereo volume or whatever.
It's that a real live RE investor--not a specu-flipper--isn't going to pay a price that guarantees negative cash flow forever. The LAST party who could be talked into overpaying for a unit would be a real live experienced professional RE investor.
It would have helped if the reporter had addressed the question of what the market rent might have been compared to the owners' current mortgage payments.
I agree with your point that it is nearly impossible in any previously bubblish area to rent out a unit and cover PITI.
however, I even disagree with the basic notion that rentability increases value.
when I was looking at condo places during the bubble of 2004 in Miami all the units that excluded renters were SIGNFICANTLY more expensive than comparables.
T, I see your point and agree with you.
My point. In most cases, condo boards enact rental restrictions by amendment after unit owners worry about the effects of increasing rentals. Boards change the rules (quite legal..) after buyers incorrectly assumed that they could rent their units in times of financial distress. This just adds to the problem of falling prices.
In addition to Tanta's and YTL's reasons, getting condo boards filled with rentals to agree to do appropriate upkeep and maintain sufficient reserves is a major pain in the butt. Before the bubble most of us had heard of this kind of condo death-spiral, where the building becomes increasingly run-down while the few owner-occupants left are unable to sell because potential buyers are unable to finance. Eventually most of these buildings end up being returned to rentals.
These cycles of rental unit to condo and back to rental again would be comical if it weren't that condo owners are so often either young and trying to get a leg up with his or her first 'home' purchase-- or an older person heading into retirement.
Walt, my point is that, whether or not this restriction was there originally, what Gozen is trying to do is convince his board that they'd be better off letting him rent the place out than having him sell at a lowered price.
But he would have to convince them that having more than 20% rental units would in fact prop up rather than push down future resale prices for other unit owners. If it didn't, why would the other unit owners be harmed more by a sale today to a new owner-occupant at a lower comp price? If you're damned if you do and damned if you don't, why not have a new owner-occupant neighbor and not risk the tenant problem?
Besides that, unless the guy can show that the rent covers his payment, what's the likelihood that he won't end up in default on his mortgage anyway? He's asking his condo board for a lot of faith under the circs, it seems to me.
Finally, although none of the neighbors would enjoy that new comp, why would basically making Gozen sell now prevent any of the true owner-occupants from ever renting out their units someday, if the worst happened?
I'm trying to figure out Gozen's negotiating tactic here.
I feel the same amount of pity for condo flippers as I do for speculators wiped out in margin calls. It may be time to start a new self help organizaton, CFA - Condo Flippers Anonymous. Hello, my name is Ralph and I thought I had a free lunch.
I represent a couple of low end condo boards. Run by ferocious old ladies.
THEY think renters are baaaad. They have enacted rules that say any new renters have to be close relatives of the owner. They require extra money be put in the pot for damages the renters may do.
None of the old ladies are interested in selling; they are only interested in keeping up the buildings, and having a place to live with the least number of obnoxious people. Buyers can be obnoxious too, of course.
There were a couple of obnoxious owners that the board ladies called the burro and the burrito. I think they both died. The old ladies will leave feet first too, unless they have to go into nursing homes.
The nasty reality for a lot of people is that they borrowed a lot of money to buy into condos, co-ops, and fancy PUDs precisely because they thought empowering the HOA to be a bunch of Nazis would "protect" their property values.
So they find out that RE markets can change faster than the mindset of the HOA board. But having freely and contractually given your neighbors the right to run as much of your life as they can manage to, it becomes hard to get out of that deal. It becomes even harder to know why any prospective tenant would want to be the third in a deadly hate triangle with the broke owner and the hostile HOA. You'd have to get a discount . . . which was kind of my point.
From the view of the condo flipper, it isn't important that the rent they are getting is less than their mortgage + taxes + insurance + fees. As others point out, it almost surely is for peak-bubble-year-buyers. What's important to them that their negative cash flow is substantially less with a renter. Right now, the unit is empty and isn't selling (and they are probably ruined to sell at what the market is offering) and the negative cash flow is maxed for them.
iceman, I don't think anyone really wonders why these two speculators want to rent out their units (although without any numbers presented, I for one don't know how long they'd have to rent at what negative cash flow and therefore how much the total loss over the rental term compares to the loss taken today on a short sale).
I'm just curious about why anyone thinks the condo board would have any interest in accommodating them.
And, of course, I am once again noticing how another story gets put together based exclusively on two industry insiders. I sense an "I'm Trying Not To Be A Walkaway But The Condo Board Is Persecuting Me" meme arising.
And any tenant who pays less than the owner's carrying costs in rent risks having a foreclosure interfere with the lease.
Wallace Stevens? At least your anxiety closet isn't stuffed with forgetting the proof derivation of the homogenity property of eigenvalues.
I'm trying to figure out Gozen's negotiating tactic here. - Tanta
He doesn't even know he is negotiating. First he has learned that it is only possible to make money real estate speculating. In his world the prospect of losing money means there is something wrong that needs to be corrected. Second, every aspect of the recent bubble has proven that rules do not apply to real estate liars cheats and thieves. Privatize benefits, socialize consequences.
And any tenant who pays less than the owner's carrying costs in rent risks having a foreclosure interfere with the lease.
While this has been touched on in a few news stories, I've seen more frequently occurring it in my line of work. The possibility of an owner foreclosure is a something that renters never ask about (and probably wouldn't get a straight answer if they did).
Something I've seen happening more frequently (and more financially harmful to the 'renter' since they were paying more than rent monthly) is a foreclosure occurring on what was ostensibly a 'lease-to-own' situation.
All time stamps on the blog are Pacific. That is, when the ET co-blogger remembers to correct hers, and is sufficiently awake to be able to subtract three hours accurately.
I did indeed post this a minute before 7:00 am. But I only just managed to wait for sundown before I went to bed last night.
I think you hit the nail on the head, Rob. Despite their obvious mockery, the previous posters were giving this moron too much credit by assuming that he could clearly articulate his situation.
More like: "See condo, buy condo, me rich! No buy condo?! Me not rich?! Me ANGRY!"
These people operate at a mental plane just slightly above emotion-driven barbarism.
"We Can't Wait to Get Our Hands on Your Money -- Or Even Your Home."
"We're More Secretive Than the CIA."
"When in Doubt, We Sue."
Board members will tell you that the last thing they want is to go to court. But it happens all the time. Experts estimate that in California, 75% of the homeowners associations are embroiled in a legal tangle of some kind. Chicago attorney Mark Pearlstein, who represents associations, figures that 60% of all condo boards and homeowners associations in Illinois are involved in some kind of legal suit.
"You Won't Be Able to Sell When You Want."
"We're Poorer Than We Look."
"We Can Make Up the Rules as We Go Along."
"We Don't Want You at Our Meetings."
"We're in Over Our Heads."
"We Work for Nothing but Get Compensated in Other Ways."
"We're Incredibly Petty."
Read it folks.
Yea I never would live in a place with a HOA or other board.
The possibility of an owner foreclosure is a something that renters never ask about (and probably wouldn't get a straight answer if they did).
Sadly, that's true.
How nice, then, of the guy to inform readers of the local paper via a willing reporter that he needs a "hardship" exception from the condo board in order to rent the place. I sure hope prospective tenants read page F-1 . . .
"Despite their obvious mockery, the previous posters were giving this moron too much credit by assuming that he could clearly articulate his situation"
hey... not me! didn't you read my Sun Tsu post?
and here I thought I was being witty early in the morn.
I wish that the proposal put forth above, to have the Fed buy this property, had not surfaced. The plan will now be rolled out next week. It is a logical conclusion to all of the real estate relief ideas floating around in Congress.
I attended a real estate conference this week, and at one of the presentations the panel claimed that most project financing in recent years was senior to the individual unit purchasers and was not subordinated, so a project foreclosure can wipe out the individual unit owners. The project lender would not always choose to do this, of course, but they would do it if they were converting to some other use.
Do you know if this is really common practice? Making an individual unit mortgage loan that is behind the project financing seems even dumber than the other things mortgage lenders were doing for the last few years.
I found this to be the most interesting part of the story. It describes Fannie and MI companies tightening up on condo standards, and then we get to FHA:
Yet the Federal Housing Administration sees room to loosen restrictions. The FHA proposes lowering its requirement that 51 percent of a condo building be owner-occupied to 33 percent, part of an overhaul and streamlining of its operation that is pending before Congress. Currently about 2 percent of FHA loans are made for condos, and it can take three months for agency approval because of overlapping requirements, said Meg Burns, director of FHA single-family program development.
"We think that particularly in urban markets, that it's fairly common for large buildings to have lots of rentals," Burns said. "We feel like first-time home buyers should have access to prime rate financing for those buildings."
The only times I have seen a "sophisticated Real Estate Investor" touch an already built condo was after a Bust,and he paid pennies on the Dollar for an entire building in a good location.It was a while ago,But I recall that he paid less for the whole ball of wax than the developer had for the land.
tanta wrote: "Why is it we can't get reporters to just ask a couple of Econ 101 questions when they interview these people?"
How does Tanta know what Ms. Merle asked or didn't ask?
Why can't we get Tanta to understand the sausage-making-like process by which stories get reported?
What exactly would Tanta write about if it weren't for lazy, ignorant reporters and their original content that she uses without compensating them for it?
claimed that most project financing in recent years was senior to the individual unit purchasers and was not subordinated, so a project foreclosure can wipe out the individual unit owners.
Are we talking about purchase contracts/deposits or actual mortgaged conveyances?
I have not actually heard of any lender dumb enough to mortgage a unit that was still subject to the project's financing.
OTOH, I bet a lot of people will lose their deposits because the project never completes and the project's lender has to foreclose.
However true the comment may be on project financing having priority over purchase money on a unit (and I question if this is accurate, but that may be a local quirk), the buyer or their agent should be demanding proof that the project lender is relinquishing all rights to the property being purchased.
The project lender can still be able to foreclose on the infrastructure and unsold common elements, which is a sinificant problem by itself, but the lot/unit would be free and clear.
“Sunday Morning” is an attempt to reconcile humankind’s position in the universe as both a spiritual and earthly manifestation while at the same time casting off the tattered cloak of ecclesiastical dogma that has for so long controlled and constrained the imaginative and ephemeral side of humanity that is the soul.
Tanta, can you write stuff like this, too? Maybe you should start a service where throaty-voiced vixens in pengnoirs murmur words like hermeneutics . . .
!. Go to his bank and get a loan to buy out all the
units in the building. Non recourse. PIK
2.Tender for same
3. Convert building to rentals
4. Wait for inflation to bail him out.
I've got a condo in Alexandria, VA right out side of DC. 3bed, 2 bath. Huge unit. Paid 135k in 2002, have a mortgage of 150k on it.
(I refinanced in 2004, to eliminate PMI payments.) Nice flat rate at 6%, 30 years. Nothing special.
I've lived here since christmas 2002, and I am moving to the midwest for my job in a week. And I've got to rent my place out.
Selling isn't an option- I think a realistic value for it is 175-200k because the 330 it was once valued at was never in any circumstances a real price.
The problem? Even with a 2002 price mortgage, I'm going to be loosing money every month. Not a lot of money, but some. Figure that the rental on the unit is between $1800 & $2000 a month. My mortgage taxes & insurance=$1200, and the condo fee= $700.
I lose money, especially the minute the management fees are added.
I don't want to be in the landlording business, but the other option is to put it on the market, lose $1900 a month (something I really don't have) and watch it not sell.
So I have NO sympathy. NONE. for the people trying to flip. If I am losing money renting out a place I've lived in for 5 years, put a lot of work and improvements into, and didn't pay a crazy amount for? Than there is no way anyone is paying enough to cover a 2005 era price.
At least my condo board can't prevent my renting it out. Because if that had happened.....
We are renters ourselves right now, so nothing against tenants, but they do not have the same interests as owners.
Am I to take it that many of you live in places where tenants in condo's are not bound by statute to follow the CCR's and By-laws, or am I to take it that no one is familiar with statute governing renters in condos?
Oops- sorry- whole thing makes more sense (10:53) if I mention nothing has sold in my building for 2 years. Hence sale not an option. Like 70 of 500 units on sale.
2 years. We have have some wacky legal hijinks going on, and a whole lot of units that are hitting forclosure, and nobody is buying.
Friend of mine told me last week they're upping his condo fees because "he's the only one who lives there anymore." I guess he's got to pay the fees for the entire complex.
Only if you hand me a blue book and a ball point and tell me that years of tuition will be forfeit without a diploma unless I participate in this ritual.
But since I have that diploma, and they can't take it back, I prefer to write about the attempt to reconcile loan officerkind's position in the real estate market as both a lending and a borrowing manifestation while at the same time casting off the tattered cloak of the sanctity of contracts that has for so long controlled and constrained the impulse to liberation that is the soul of the deadbeat.
And at no charge, although it's more like the coffee-swilling slob in Garanimals that that vixen-in-a-peingoir thingy.
That's what I love about trailer parks. Any shenanigans and the tow truck is just a phone call away. Wait, vertical trailer parks, I'll need a crane though.
It will sell, at some price. It may be a price you don't like...but it will sell. Figure out how much you'll lose slowly vs. how much you'll lose right away and see which is more.
My guess is, take your losses now and move on. Who knows, you may get lucky and get out even.
If you think it will lanquish if you try to make a little, lower it to the price that gets you even. It may be low enough to get a quick sale if it's much lower than the comps. It will stand out as a "steal", something it won't do at the same price a year from now as others chase the market down.
You may even get a realtor who believes we're at bottom and can only shoot up from here. Offering a condo that breaks even or takes very little monthly loss by renting it out may look like a bargain to many believers out there.
This was supposed to be actual mortgaged conveyances. The discussion was about various ways unit owners can be left with a mortgage and no condo.
The other major situation, which has apparently already happened this cycle, is when the developer exercises a covenant right to force out the buyers if the project never hits a minimum occupancy. The buyers may receive only fair value rather than the price they paid.
The one person (Moss - real estate agent) seems to have been living in it but is now married and has a child so the 1 bdrm condo is not enough.
"Since Moss contracted to buy the unit in early 2005, she has married, had a child and outgrown the space. She is trying to sell the condo but has been hampered by the housing slump. Three months after putting it on the market, she has yet to receive an offer. "
The other is an over-extended flipper.
Do try forsome accuracy Tanta - and the following statement is NOT accurate:
"Surely, if anyone understood the risk in trying to flip units in an owner-occupied project, it'd be these two, no? "
ONE of them is a flipper - the other is an owner occupant who needs to move because of the change in family size.
fred writes:
What exactly would Tanta write about if it weren't for lazy, ignorant reporters and their original content that she uses without compensating them for it?
Umm... what she usually does? That is, stuff she knows about-- or knows how to find out. Analysis of said stuff for us lay folk. And no compensation??? Are you kidding me? Any reporter with a brain is on his knees on a regular basis giving thanks for Tanta. Where else are they going to get that analysis? Their RE advertisers?
Look, I'm probably more sympathetic to the difficulties reporters have than most-- I've been one. And maybe you can't expect much on the miserable salaries most reporters are paid-- but the kind of all out ignorant pandering that's been going on in the press-- particularly the RE press-- in the last few years is just beyond pathetic. It didn't used to be this way. And we're ALL fools if we let ourselves be bamboozled into thinking that it has to be now.
albrt writes:
This was supposed to be actual mortgaged conveyances. The discussion was about various ways unit owners can be left with a mortgage and no condo.
I can think of a number of ways that this could happen, but all of them are the result of someone not doing their job.
Average Joe wrote:
It will sell, at some price. It may be a price you don't like...but it will sell. Figure out how much you'll lose slowly vs. how much you'll lose right away and see which is more.
Ah- the easy answer for this: If I lose $200 or so per month, as I'm going to renting? I will be able to make the payments, keep it out of trouble etc. So looking at about $2000 a year.
If I try to sell, I'm looking at $24k a year.
The issue is that nothing in the building is selling, even the identical unit priced at $189. For a lot of reasons, we are a building that is notorious in my little city. Agents are steering away.
I'm happy to sell it and just get my mortgage paid off. But I can afford to cover $2k a year, and I can't in any way make the $24k. I can only make double payments for about 3 months before my employer relocation runs out. And 3 months isn't long enough for this to sell.
All of which just makes me happy I found a nice rental apartment in the midwest.
Did a little check: Currently there are 6 units identical (more or less) to min on the market. One at $280k, one at $285k. Both claim not to be a short sale or REO.
Than there are the units going form $197 to $185k, all of which are bank owned, require 3rd party approval, or the like.
And none of this is selling. Personally, I think renting it out starts to make more and more economic sense.
AC I know what you mean.
As more Condos empty or are emptying there will be tremendous pressure for the reaming residents to pay a larger portion of the association fees. These fees can add up to 30% on top of people's mortgage payments. The only option is to stop regular maintenance on the building and let it fall into disrepair deteriorating the value of the building.
Tanta writes:
I'm feeling the dark encroachment of an old catastrophe.
The year: 1979. The place: a cavernous, stuffy college lecture hall. The stage properties: a blue book, a ball point, and a mimeographed essay question about Wallace Stevens. The dramatic crisis: a complete, total, sudden amnesia about "Sunday Morning." I knew I had read it. I knew I had written a ton of notes. I was as innocent of recall of any of it as a babe newborn. The resolution: I made shit up.
Did anyone ever stop to think about why the developers wanted to sell "pre construction" anyway? They didn't want to get left holding the bag. They took less profit potential to minimize their risk.
People who bought into this apparently only thought one thing, that it "was going up".
I saw a chart in 2005 of home prices, rents, and income. Home prices looked like the Nasdaq in 1995-2000.
Rents and income were basically flat lining. No way it was going to last, and the higher prices went the uglier it was going to end.
It is also crazy that if these people never gave a thought to the increase payments, how were they going to maintain the home. All houses do is require money for maintenance and repairs. Basically something is always falling apart or breaking. How did they plan to pay for those expenses?
I guess they just thought they just thought they sell it to some other sucker for more money. That's like playing musical chairs.
It's either 2K a year in lost rent or sell it at whatever it sells for. You don't have to pay the 24K if you sell it, so get that number out of your mind.
If you list it at 145K(assuming that is about what you owe, then you are listing it well below bank-owned stuff. (hold your own auction to avoid realtor fees, craiglist...whatever)
Apparently your mindset is to list it near your percieved market price. You are making the same mistake that everyone else is making now including the banks.
reminder..you said: "Than there are the units going form $197 to $185k, all of which are bank owned, require 3rd party approval, or the like."
Think of it this way. List it at 150K, that's 40K less than what you say the banks are asking. It will probably sell quickly. Mathmatically it's the same as listing it at 174K and taking a year to sell it.
Don't chase down the market. Be the Market....beeeee the markettttttt.....
In Florida anyhow, contruction mtges must be partially released at closing and they get a huge part of the sales price until the last units sell. If they aren't released, you have a juicy title claim, which is what the baron is referring to.
Once you've bought I don't know anyway they can kick you out except if you don't pay the maintenance payments. Also, if you make yourself totally obnoxious, they can prohibit you from living there (there's a case or 2 in Florida where this happened), but they can't take your title away.
When we moved to Brevard, we had a good experience having a new house built previously, and so were looking to buy in a new development. Every single one had a massively intrusive HOA. Every one. In Miami, some do, some don't. Not having a HOA is a market niche for those who don't want one.
My hub is a ham radio operator, and wanted a tower, which we did have in our Miami development. It had a "de minimus" PUD. Meaning all it did was mow, and kinda disappeared entirely for a while, since there was hardly anything to mow. The fees were $25.00 a year. The Chilean down the street thought he was a spy, and the Puerto Rican/Cubans across the street who knew us, had fun by assuring the Chilean that he was indeed a spy.
None of the HOAs would allow a tower, naturally. So we bought acreage, which was actually a benefit.
That said, you NEED ferocious old (or young ladies) to run these things, otherwise they go downhill rapidly. You have a combination of people who feel like renters, even tho they are owners, together with people who feel like they own single family houses, and want to do anything they feel like with their units, no matter how it affects the other owners. This is a socialistic form of living, and it always amuses me when Cubans, having escaped it, move into the same circumstance willingly.
This is second hand information acquired at a conference on a subject that I am only tengentially involved with on a professional basis. The subject of this particular panel discussion was condo workouts from the point of view of all the people who can afford high-priced lawyers. The participation was heavily weighted toward the east coast, especially Florida.
The most interesting thing to me is that the lenders seem to have stopped treating these projects as real estate, and instead treated them as financial investments from which it was possible to create a highly varied and innovative "capital stack," plus all the customary derivatives. Everybody has all kinds of covenants purporting to give them all kinds of recourse without any liability.
I agree that in the ordinary course of a residential real estate transaction the homeowner would expect the title company to take care of all this. Except that the title policy is subject to the CC&Rs, declarations, plats, etc., which in a condo project means subject to just about any conceivable thing the Developer or the Association or anyone else who has special rights under the declaration might ever decide to do.
What I don't know is whether in Florida in 2006 or 2007 banks were lending on condos even though they were junior to the project financing. That seems crazy, but that's what I understood these folks to be saying.
Thank you for the welcome. I suspect I'm going to like my new mid-western home- once I learn how to drive in snow and dress like the natives.
NoraB | 05.04.08 - 11:11 am | #
Driving in snow will take time & experience - learning to dress like us natives just takes a complete lack of taste. Simple rule: if its ugly, utilitarian and is 'On Sale'... it's in style somewhere in the Midwest.
No bank I know of lent in Florida without getting the underlying unit title free and clear.
Never heard of it.
I think I'd know.
The worst I have heard is being forbidden to sell for a few years after closing, or having purchased a vacant lot having to build within a certain time or selling it back to the developer at the same price.
As far as I know, neither of these things have been litigated, and I'm sure that the first has a good chance of being shot down and an illegal restraint on alienation.
Nowadays, the developer wouldn't want the lot back in the 2nd example!!
Altho the first was to discourage flippers, reasonable, along with 30% downpayments. I guess neither worked.
Joe writes:
Did anyone ever stop to think about why the developers wanted to sell "pre construction" anyway? They didn't want to get left holding the bag. They took less profit potential to minimize their risk.
Presales are often a condition of development financing. The lender wants to know the project is viable.
Thanks, Liz, that's what I would expect to be the case, so maybe I misunderstood about the lender priority.
I'm quite sure I did not misunderstand about the covenants giving the developer the right to force out early buyers if the project did not reach a threshold of occupancy. The developer (or the lender in the developer's shoes) purportedly has the right to buy back at fair market value. Which I guess everybody assumed would be higher than the sale price. Not saying these covenants exist everywhere, but they were apparently common in the past few years.
For example, my landlord (the "owner") is paying $7,500 per month mortgaging my abode. Meanwhile, I only pay him $2,500 in rent.
CaptiousNut | Homepage | 05.04.08 - 12:03 pm | #
That's sustainable (not). You keep everything packed up ready to go? I think I would at those differentials.
Lots of condo decs say no more than 2 people per bedroom. I had somebody consult me on this within the last 2 months. They had been renting a long time, and then were more or less forced to buy. A man, wife and older son, one bedroom. They were now worried about having 3 people when only 2 were allowed. I said keep your head down and don't make waves and your son is leaving for college in a year or 2, right?
I have not read all the comments, there are too many. So, I apologize if someone had already made these points.
I agree with the blog posters point of view. For those that think the restricting investor units in condos hurts more that doing so, you don't know what you are talking about. It's much easier to control the number of renters than it is to control the renters once they are already in the project. It's a fool's opinion that thinks that loosening investor restrictions is good. From a lender's point of view, a condo purchased for investment is much more of a risk than owner occupied, so that throws out that thought in this market.
This all comes from personal experience. As a condo owner myself, living is a condo that let the investor rules fall by the wayside and is not trying to reign them in.
I do feel for the first person in the WP article though, she did occupy the unit and it's just not suited for her lifestyle anymore. For the loan officer. He took the risk, and now he's paying. Why should anyone bail him out. I think the condo will recover more from a low sales price that it will from renters running rampant with no regard for the property as a whole. Trust me, I KNOW this from experience.
Ran into a similar problem when I tried to rent a McMansion in Monument Colorado. The HOA forbid renting. The owner had the home built and in the interim had a heart attack. He lived in San Antonio Texas 300 ft and felt fine there after the heart attack. Then moved into his new home and ended up in the hospital withen a week with COPD. He couldn't handle the 7600 ft altitude. He found out he couldn't sell 5 year supply on market. So decided to rent to me and found out he couldn't rent it. Ended up in forclosure along with 4 other houses out of 36 in the neighborhood.
House is still for sale a year later with weeds everywhere. Much better than having a renter in there though.
Also, dealing with renters can be horrible. We only got renters who took lousy care of the small house we tried to rent, or didn't pay, or both. Finally, we rented with an option to buy and sold to the renter.
You are not even going to be local, so will have to pay 10% to a realtor to watch over the rental.
The $700 a month condo fee includes, heat, air, water, trash, electric. Basically everything but phone & cable.
However, it's still quite high.
This is in large part due to two things: 1. It's a 45 year old building, and as of 5 years ago, had no reserves. We are currently paying into reserves,
FOr 20 years we had the lowest condo fees in the city. Now? We have a building needing a bunch of capital maintance projects, like elevator replacement.
While I can't talk much about it, due to litigation, the building is in a very expensive set of lawsuits with the heirs of the developer, who still own 20% of the building, and are, to use the Penn & Teller term, Assholes. It's a bizarroland case, involving a bunch of fraud on the part of people not the condo board, but it's expensive.
And my civic duty on the condo board had me being sued as an individual for 2 years, despite our D&O coverage, until the individual stuff was tossed.
Whenever the lawyers suggest that one way to solve the bizarroland condo case is to petition for a change to the Virginia condominium act?
Well, after reading the story I don't think the reporter was especially sympathetic to the flipper guy. To me it sounded like the old "let him keep talking, dig himself in deeper and deeper" strategy on the reporter's part.
To me the reporter was trying to illustrate the disruptions created by the drop in condo values, and she did that rather well.
I get the impression that the condo associations aren't buying the flipper's logic that allowing a lot more rentals in the building would be good for the remaining owners. The story explains in some detail why that is not likely true.
I might as well have done so for all the good it did me.
I sure have enjoyed having a Lit major announcing the game. Besides, the quantitative majors were too busy counting their money to care that their math was bad.
Think of it this way. List it at 150K, that's 40K less than what you say the banks are asking. It will probably sell quickly. Mathmatically it's the same as listing it at 174K and taking a year to sell it.
Don't chase down the market. Be the Market....beeeee the markettttttt.....
But it's not. It's an issue of risk mitigation and cash flow. I can cover $2k a year out of my salrey. Place should be rented out in less than 3 months, before my relocation subsidy dissapears.
If I price it at $150k, I lose tripily:
What if it takes more than three months to sell? Drop the price on the empty apartment all I want, I cannot force anyone to purchase it.
To cover my cost- 145k outstanding mortgage, plus 6% realtors comission $9000, plus title etc, lets say $5000, I actually need to get more like $160,000. Otherwise, I might as well write a check for $15k. Which I can't do, as I have $323 in my savings account.
So, you know, I'm going to rent out my place here, and move to my nice $950 a month including heat unit- $300 less than I'm paying a month now.
(I have a roomate paying the $700
Which means I'll be fine, but broke rather than just broke and with an unneeded forclosure.
My first thought was, didn't the sellers read the CCRs when they bought? Didn't they know beforehand that this "no rental" clause might spell trouble? But then I realized that this "all in" mind set is completely common to all the flippers I know. Insane profits just seemed so likely, why plan for down times?
You know, having now been told about the litigation, you should try to rent until the litigation is over with. Probably nobody is buying because of it. I infer it is a cause celebre'? If it isn't you may have a legal duty to disclose to a buyer what is going on. You would here in Fla.
Probably nobody in a normal market--say of 5 years ago would want to buy into that mess. I wouldn't. I would advise any client not to.
This goes to show how a client has to be prodded to tell the whole story. Not criticizing you, NoraB, but what you left out was very very important.
Any chance that the suit will be resolved before global warming drowns the coasts?
P.S. I don't know anything about the reporter on this story, but a lot of reporters are renters. Those who ARE renters sometimes don't understand why renters in a condo would be considered undesirable, or why nearby homeowners are upset when somebody rents out a house on their block. I do see a little of that mentality in this story.
To me the reporter was trying to illustrate the disruptions created by the drop in condo values, and she did that rather well.
Yeah, but I'm still annoyed that she didn't press ahead to the math of the examples she raised. And that we still get these stories about "people" being squeezed by these market disruptions, who turn out to be people who surely should have had sufficient insider-info to list these pricey jumbo condo units a long time ago. Unless, well, they signed over one of those "anti-flipper" covenants that didn't let them list until last February.
albrt writes:
I agree that in the ordinary course of a residential real estate transaction the homeowner would expect the title company to take care of all this. Except that the title policy is subject to the CC&Rs, declarations, plats, etc., which in a condo project means subject to just about any conceivable thing the Developer or the Association or anyone else who has special rights under the declaration might ever decide to do.
I'm quite sure I did not misunderstand about the covenants giving the developer the right to force out early buyers if the project did not reach a threshold of occupancy. The developer (or the lender in the developer's shoes) purportedly has the right to buy back at fair market value. Which I guess everybody assumed would be higher than the sale price. Not saying these covenants exist everywhere, but they were apparently common in the past few years.
The first wouldnÂ’t have any bearing on the development mortgage being foreclosed. No title underwriter is going to knowingly insure against foreclosure of the development mortgage without having some serious leverage against the developer/lender. That said, we donÂ’t interpret the documents. If you are not familiar with real estate law, you should be represented by an attorney who is. It is true that the Dec will often allow for future development rights, but those are post policy events- the title policy only insures (usually) through the date of the policy. Let me repeat myself- get a lawyer to represent you.
As to the second point, you have to differentiate between a purchase contract that is signed before the project financing is completed and a right of first refusal post closing. There may be regional variations on a right of first refusal, but all of the ones that I have seen say that upon receipt of binding offer to purchase, the owner has to submit it to the developer/association who can then match the offer, or waive the right. The market value is determined by what an arms length buyer is wiling to pay.
My first thought was, didn't the sellers read the CCRs when they bought?
Well, I'm sure Ms. Moss relied on the representations of her real estate agent. Mr. Gozen probably relied on his mortgage broker.
Really, if we were talking about just plain civilians here, I'd have some sympathy. But these two were part of the kool-aid serving contingent, not just the kool-aid drinking contingent.
Hence my insufficient sympathy for Ms. Moss. She had no idea that the rental restrictions on her project had anything to do with its value? And she a bona-fide relitter?
Yeah, but I'm still annoyed that she didn't press ahead to the math of the examples she raised. And that we still get these stories about "people" being squeezed by these market disruptions, who turn out to be people who surely should have had sufficient insider-info to list these pricey jumbo condo units a long time ago.
I agree. It seems odd to me that so many of these industry professionals are the ones willing to air their stories in public, when they are the ones who should be most embarrassed. You've posted a lot of examples. Reporters are stuck, sometimes, telling the stories of the people who are willing to talk. In some cases, the reporters are just trying to pass along those stories without passing judgment, but I agree that at other times the stories seem to portray these people as victims.
This goes to show how a client has to be prodded to tell the whole story.
The phenomenon that gave mortgage underwriters--once upon a time--the reputation for "grilling" people.
Would I sign off on a loan for someone to buy NoraB's unit, knowing that the HOA is bust, maintenance was deferred, the monthly assessment is up to 77% of the P&I, there are already bank-owned units, and the project is in ugly litigation? Probably not.
So discussion of selling the unit is probably all theoretical. NoraB, it sounds to me like you're going to own it for quite a while.
I just renegotiated my lease in Alexandria. Townhouse 3 bed, 4 bath 1800+ sq ft on three levels $1550/mon.
We've been renting this place 3 years now, and are model tenants as defined by my landlord = we autopay our rent. He told us that we are the only tenants that pay on time in his properties.
Good luck. Your situation sounds like one for the grandchildren someday! ("I remember when I only had $300 dollars in my bank account and had to move to the midwest...")
Just walkaway.
On the other hand, you could just find a tenant, and go through the enormous hassle o being the thousand mile absentee owner.
Ugh. With all the attendant hassles.
On the other hand, DC is going to get a ton of newbie Dems moving into new jobs soon in DC with the changing of the administration, so crashpads will be in short supply;-}
On the other hand, DC is going to get a ton of newbie Dems moving into new jobs soon in DC with the changing of the administration, so crashpads will be in short supply
Unfortunately, with all the GOP crashpads flooding the market at the same time, it's likely to be a wash.
sarah, writing about reporters and 'the media' says: "It didn't used to be this way. And we're ALL fools if we let ourselves be bamboozled into thinking that it has to be now."
"t didn't used to be that way..." and your evidence for that is...? Newspapers are a business that responds to its customers and/or its bottom line and/or the demands of Wall Street (if public) or the vanity of its owner (if privately held). They are not a public service.
In the current environment, most publishers (i.e., owners) have decided that its customers want shorter pieces that focus more on what I would call fluff - the personalities involved (hence the come hither photo accompanying the piece). This is a business decision not a statement of principles by the publisher. The editor responds to the publisher (or loses his/her job) and the reporter responds to the editor (or loses his/her job).
This is the way it is and always has been. (You really ought to read a history of Joseph Pulitzer, a man whose reputation has been unjustifiably rehabilitated by the passage of time and the connection of his name to a prize.)
So my questions are:
Why does Tanta (and you) blame the least responsible person, the reporter, for the deficiencies you find?
Why doesn't Tanta stick to what she knows something about - RE?
Tanta, they have had eight years to get established- fewer will be leaving than you think;-}
They all think a bright future awaits on K street- the reality is that the Repubs are looking like the 1932 version- complete with a very long spell in the wilderness for their stupidity.
Here in Arizona, the Gov is sporting a 70%+ approval rating, and the repub legislature continues to act like a bunch of stupid morons sending her trash to veto.
Astounding behavior. Like cutting taxes by a vanishingly small percent is going to bring back the real estate boom. Dead. DEAD and gone, and that boom in revenue that accompanied it is gone too. We need a tax increase to maintain the current level of minimal services, and instead we get discussions of how government is huge. We have one of the smallest state govs in the fifty states, with minimal taxation, and yet the crack of tax cuts is still being pandered to the people.
Reality will leave them standing after the election in a very lonely minority with no real power. Geez, telling underpaid state employees that they will get a pay cut in the face of $4 a gallon gas and spiraling food inflation? Oh yeah, be happy you have a job, and we would like to make your drive to work faster by gifting you with toll roads!
What planet are these folks from? If local GOP folks are the future of the national party, I would say they have no future. Get ready for de facto one party rule for a while.
OT.
The US financial shenanigans provide the motives for the initiation of the "Asian Bellagio Club" as it takes its first real action. Asian countries pool resources to defend potential financial crises.
Fred, what you say about the newspaper business is 95 percent true (the five percent is your omission of the fact that a lot of us--editors, publishers and reporters--still take our jobs seriously and still do try to serve the public.)
But why do you think our work should be above anyone's criticism?
Saw this on Bloomberg. Asian nations from Japan to Vietnam are creating an currency pool of 80 billion dollars to protect them from credit risk and inflation. What will this do for the dollar? Euro?
Lawyerliz writes:
You know, having now been told about the litigation, you should try to rent until the litigation is over with. Probably nobody is buying because of it. I infer it is a cause celebre'? If it isn't you may have a legal duty to disclose to a buyer what is going on. You would here in Fla.
Yes. The Litigation isn't helping. I would certainly have a legal obligation to disclose. I'm not sure about other residents- many have no idea any of this is going on.
I will note it is never a good thing when people get to the deposition, and the guy suing you is all "So, did you see me on Oprah?".
This goes to show how a client has to be prodded to tell the whole story. Not criticizing you, NoraB, but what you left out was very very important.
Yeah- it's not an issue- I am incredibly reluctant to talk about the suit in anything but the most general terms, if at all, due to the nature of the litigation. Last thing I need is to get hauled in due to a blog post, even if it's not using my real name.
The whole thing is absurd and needs to be thrown out, but is being brought by people with some astoundingly deep pockets, and law degrees. So no, probably not anytime soon.
Good luck. Your situation sounds like one for the grandchildren someday! ("I remember when I only had $300 dollars in my bank account and had to move to the midwest...")
JP | 05.04.08 - 1:32 pm | #
Well if you have to move anywhere with only $300 - I can't think of a better place to go than the Midwest. The reverse (going to DC or NYC or Cali) with only $300 - now THAT would be a challenge!
Tim writes:
Saw this on Bloomberg. Asian nations from Japan to Vietnam are creating an currency pool of 80 billion dollars to protect them from credit risk and inflation. What will this do for the dollar? Euro?
Bloomberg.com refer=home
Tim | 05.04.08 - 2:00 pm | #
Nice find Tim...
Some interesting tidbits from the link...
May 4 (Bloomberg) -- Finance ministers from 13 Asian nations agreed to create a pool at least $80 billion in foreign- exchange reserves to be tapped by nations in case they need to protect currencies.
First question: Defend their currencies? From what? Too much appreciation? Too strong? What are they worried about?
Second question: In dollars, euros, each other's currency, gold - what? Without knowing the projected pool mix it would be impossible to know the expected effects.
A quick survey of recent postings on Setser's Blog shows nothing on this subject. He does have a lot on current CB activity and it has been as intense as ever (contrary to expectations from dollar bears predicting they will abandon the dollar).
Stuff moves slow in the bizarro world of currency exchange - that us until it all moves REAL FAST.
The kicker of the whole story? I at a point in the last decade worked for one of the major real estate trade groups. As a peon mind.
But one of the things I did as a part of my job? Take all of those classes that talked about underwriting standards, and the things required to properly do it.
I wouldn't underwrite a unit in my building if you paid me.
But the litigation was certainly not in place when I purchased- I would have run the other direction. And it is the kind of freak thing that could happen to anyone. Partially it's the result of following legal advice that the whole thing is going down.
Mostly what I've learned is this: A personal liability blanket insurance policy is the best thing ever. About $30k of personal legal bills were paid as a part of it- I wasn't forced to rely on the board (which I quit)'s existing D&O coverage.
I will probably own this place for a long time. It isn't a walk away situation- I don't actually happen to be majorly/at all upside down on what would be the saleable value sans the lawsuit. Plus, its in a supremely good location, in a town with a lot of stable government jobs.
We can't get hit with a special assesment for the same bylaws clause that is what we were advised to lobby Richmond to change.
Someday, when our Oprah visiting plaintiff is gone, and I won't have the pants sued off me, there is a book about the whole thing.
Post 8/8/8
Dryfly, I have begun to believe our crisis kicks off right after the Olympics. That should be when the stimulus shows as a bust, and the contraction continues.
The fact that you can get all of those folks in the same room on the same topic shows how big the crisis is, and how it is still uncontained.
Once again things will go both faster than expected, and slower.
Interesting times.
NoraB- I have a great idea- settle your litigation by deeding them the condo with stip they assume your mortgages- you couldn't be nicer about surrendering your poison pill;-}
The hub works for NASA. When he bitches and moans about the latest regulatory nonsense, it tell him: you think NASA exists to get spacecraft off the ground? Nope, it exists to get various congresspersons elected.
Likewise, the newspapers exist to make money, not to impart information. Likewise, builders exist to make money, not to build houses. Etc.
Trouble is, with all that money, there is nothing but junk to buy, except at the very highest levels, because everybody is doing it for the money, not to make something wonderful.
With newspapers, the stupidest probably do not read them anyhow. Each dumbing down seems to make a little more money, for little while, but after a while, it becomes obvious that there is no value there and the smart abandon the product. I spend the time I would have spent on reading newspapers on reading this blog and Irvine Housing Blog.
. . . said Moss, who also is a real estate agent. . . . said Gozen, a mortgage loan officer.
You need new tags for this:
"Couldn't happen to nicer folks"
"Sometimes, there really is justice"
"They drank their own Koolade".
"We took dancing lessons from Chuck Prince."
On a side note: T. S. Eliot has some great imagery, and great one liners, (like "I'll show you fear in a handful of dust" - spooky reading after the anthrax scares), but I once read a line by line dissection of "The Wasteland" which showed that he is often incomprehensible if you don't know all his contemporaneous history, all of english literature, all the greek and latin classics, and some writings that were in Sanskrit, for God's sake. How is anybody but another Lit. professor supposed to get this stuff?
John Stark: I did not say (or mean to say) that publishers, editors and reporters don't take their work seriously. Like me, they do have to pay their rent and put food on their tables. They bend to the market as most of us must.
I have no problem with knowledgeable, justifiable criticism. As a public service I've taken on the surprisingly difficult task of trying to educate Tanta about something that she obviously knows very little. Is there something wrong with that?
AllenM writes:
Just walkaway.
On the other hand, you could just find a tenant, and go through the enormous hassle o being the thousand mile absentee owner.
Ugh. With all the attendant hassles.
On the other hand, DC is going to get a ton of newbie Dems moving into new jobs soon in DC with the changing of the administration, so crashpads will be in short supply;-}
It's not yet at walkaway territory. Although I am certainly aware of that as an option at some point in the future where things get to be too nutty. Right now the calculations are still on the side of renting the thing out and seeing what happens for a year.
And it's a very democratic crashpad kind of space. The republicans live in the vastly nicer development next door.
Every specu-investor losing his shirt attempting to profit from people just wanting to buy their %#)&@ place to live in this world, or, even worse, buy-to-let decent housing, makes this Georgist one very very happy camper.
Landlords as a rule suck and we as a society should tax all their profits derived ground rents away. If I were king they'd be welcome to actually INVEST in improving the fixed multi-family housing stock and profit from that, but that's not normally how the game is played.
JDwrites:
"It's much easier to control the number of renters than it is to control the renters once they are already in the project".
I notice that your board has made the mistake of not carefully enforcing the rules of the association to prevent abuse by nonowners. Also the board may not have passed the necessary rules.
Since your association isn't willing to control the destructive behavior of nonowners, the board's non- actions may be contributing to the problem.
Also, many condo associations which didn't have rental restrictions in their orginal declarations now are faced with amending the declaration. This may require an affirmive vote by a super majority of unit owners. Owners of investor owned units will vote against the restriction Other owners, thinking they may want or have to rent out their units in the future, will vote against it as well. Consequently, it is difficult to get the amendment adopted.
So far, our association has strictly enforced the rules for all residents and it has worked pretty well even though we have about 18% renters.
Dryfly,
The Asians have been brainstorming about an economic zone for some time. The nickname for the group is "The Bellagio Club". This new money pool is the first concrete, coordinated action out of this group. The faltering of the US economy at the core reverberates throughout the periphery, hastening matters more urgently.
My husband takes his NASA job very seriously too. At some point his efforts will become useless as he sees it, and he will quit/retire. Luckily, he is of retirement age.
At some point, the pressures on editors and reporters are so great that their duty is to quit. When the news isn't being accurately reported, or reported so sparsely that only misinformation results, and it is hopeless, you have reached that point. We who WANT Tanta rants and extensive, accurate information frankly don't care what the pressures on you are. You are not producing something we want, so we will ignore you. You not meaning you personally, but the plural you. Youse, y'all, you guys, since you doesn't have a proper plural and could use one.
By the way, in the 60s, and also later, I was there at certain events which were reported. Not a single one was reported accurately, in my opinion. I deduce that NOTHING in the paper is accurately reported, except sports scores. Figures reported usually don't say if they are monthly or yearly. They don't say if they are adjusted for inflation or not. Etc, etc. Even NPR is guilty of that.
I read that TS Elliot was heavily edited by somebody. Pound maybe? Who made the Wasteland much shorter and perhaps less comprehensible. Does a non-edited version exist?
And ya know, people still read it, no matter how difficult.
I find that if I make a classical allusion--even the most simple minded one, such as "Even Homer Nods", nobody gets it. Nobody knows who Homer was.
I have no problem with knowledgeable, justifiable criticism. As a public service I've taken on the surprisingly difficult task of trying to educate Tanta about something that she obviously knows very little. Is there something wrong with that?
Of course not, Fred. Tanta isn't above criticism either. A lot of criticism of MSM is "unfair" because it is written by people who don't understand what we are up against. But why should our customers lower their standards because of the problems in our industry? They shouldn't and they won't.
As LawyerLiz says: With newspapers, the stupidest probably do not read them anyhow. Each dumbing down seems to make a little more money, for little while, but after a while, it becomes obvious that there is no value there and the smart abandon the product.
In my rare optimistic moments, I hope that the steady stream of online criticism--from bloggers and online commenters--will put some much-needed upward pressure on newspaper quality, even when that criticism strikes us in the business as "unfair."
Yeah, and so they don't get the joke of Homer S's name.
Sigh.
Which is not to say that Homer Simpson is not one of the great cultural contribution of our day. The Simpsons show is satire on the level of Aristophanes. Just not quite so dirty. It is probably more relevant to watch the Simpsons than read Lysastrata. Or the Birds. Especially since few know who Socrates was either.
I am a lawyer, I was at the ABA Real Property Trusts & Estates symposium, and I have never considered buying a condo. I was surprised when the panelists said individual owners were subordinated to project loans, but I didn't get to talk to the panelists afterward because they were mobbed.
I am confident that the title companies will have a long list of reasons why they are not responsible for anything, as always. I'm not worried about them. My point was that anyone relying on the schedule B from the title commitment isn't going to get any details about the project documents other than copies of the project documents (which in my experience the borrower frequently does not actually receive unless they have a lawyer who asks). I think the residential mortgage lender would expect to be able to tell whether they are in first position from the title report. Now I am not so sure.
My original question was whether Tanta thinks a residential lender would knowingly allow themselves to be primed by the senior project lender. But given that they weren't reading anything else before they approved a loan, why would we necessarily expect the unit lenders to read the project documents? OK, so maybe they've got a subordination from the first construction lender. Where do they stand with regard to the mezz lender when it takes out the developer and can exercise those rights to re-purpose part or all of the project.
This is mainly a concern with large projects where you have maybe 10-20% occupancy by early buyers, there is no prospect of selling the other 80%, the amenities may be half built, and the developer is out of money. These people are in trouble dozens of different ways, so this may be the least of their worries.
The problem with renting condos is not with the tenants, but the absentee landlords. They don't live there and don't want to put a sou into the development. Condo boards are usually divided between residents and absentee owners, as the absentee owners have no interest in upgrading the landscaping or hiring a better maintenance staff. (A friend of mine was president of a condo association and the board actually examined the possibility of admitting tenants to membership, as the tenants cared more about the development than the landlords did.)
As for owners in foreclosure renting out their properties--our local paper's real estate writer interviewed a local realtor who suggested doing just that. Then he put the recommendation in a sidebar, so no one would miss it.
We bought a condo in Portland, right by the University, for our son to live in. At the time, the CC&Rs and By-Laws hadn't yet been written, but we were assured by the developer in writing that letting our son live in the unit would not be considered a rental.
The HOA was formed a month after we closed on the condo and at their first meeting, the board decided to not only limit rentals but to count "non lease agreement" occupants (i.e., family members of the owner) as rentals. They also include the commercial rentals in the percentage, which I argued against (since they are commercial space and don't have any access to the common areas).
They then began a discussion about how to "punish" people who were already in violation of the decision, since the number of non-owner occupied units was more than 30%. I never would have made an offer on the unit if these policies had been in place at the time; when we closed escrow and our son moved in, we weren't in "violation" of anything. Fortunately, someone made them see the liability they were headed into and they grandfathered in all these units. I am at this point somewhat grateful it turned out that way because I can now rent the unit when my son leaves and I don't have to ask permission from the HOA again. We are allowed to change tenants, but an owner-occupied unit has to go on a waiting list before they can rent.
I had a single-family home in a private development that was under HOA and I swore I'd never own another. It has been a living nightmare and only recently calmed down to occasional flares of disagreement. It's extremely small but it seems there's always one homeowner who doesn't want to volunteer to be on the board but instead has to make life miserable for not only the board but every other homeowner. (I laugh somewhat hysterically at the assertion that renters are worse than owners - my experience has been the complete opposite.) However, when you buy a condo there's no alternative to an HOA. If you're absentee, you have to do whatever you can to assure the board that you care about what goes on even if you don't live there, and you have to be willing to defend the occupants who insist that ONLY renters and their friends destroy property.
In Florida, you wouldn't have been allowed to close without the condo docs being finished and recorded. And if they are changed materially, you have 15 days to get out of the contract after you are supplied with same. You are supposed to be given a copy and there is a Florida sanctioned form saying you got a copy. I have never heard of this being neglected.
The condo isn't considered to exist until the docs are recorded.
In Florida priority is a race to the courthouse. If there is a mezz lender, unless the docs made it clear that they were going to take priority, they would lose in a foreclosure.
I always skim the condo docs to see if there is anything weird in them when representing an owner or mtgee.
Umm, that is to say I USED to do that, back when there were some financed closings to do. I can't say that I did the same with loan docs that were going to be paid off anyway. All I did then, was make sure I had pay off letters from all mtgees.
So I guess that I could have let something go by me. However, if it had, I guess I would know about it by now.
Condo docs used to have rights of first refusal on behalf of the assn. Not the developer/seller. Then, it was realized that nobody was going to exercise these rights and they mostly stopped being included, but still exist in old docs.
A moderate sized condo development was built near the site of what you might call a prior significant beach cliff erosional event (that cause the physical & financial collapse of a prior condo development).
The condos were finished around a year and a half ago, I think. Last year, the developer applied to the city council to grant a rezone/conditional use permit to allow daily rentals. It's a tossup as to whether the developer made the application because he/she/it meant to all along (a tactic that's been tried before on the OR coast & has sometimes been successful) or because the condos haven't been selling well. I've heard the developer has had to reduce prices at least once so far.
In this case, the surrounding property owners & tenants made such a fuss, that the developer withdrew the application before the city ruled on the application. Thus preserving his/its ability to apply again.
I'll add that the developer didn't agree to provide an on site manager for these daily use units or to make those condo owners who chose to do daily rentals cough up enough money to pay for a competent manager.
Most of the members of the city planning commission & city council are part of the good-ole-boy & a few girls-network & seem unable to understand why residents, don't want more daily use rentals masquerading as residences & B & Bs (the latter pretty much unregulated in this small city) immediately adjacent to their homes--for many of the reasons listed above. Or aren't thrilled by what frequently seems like an almost complete disregard of the urban land use plan OR law requires cities to compile & follow (but enforcement is not great).
The city does expect residential real property owners to vote for construction of new sewage treatment plants, a new water treatment plant to support all the increased development. Also an "aquatic center" to replace the current municipal pool--the plan calls for 4 pools (one an Olympic sized lap pool--not just 4 very small pools), a water slide, maybe one of those pools a wave pool, for a town of around 11,000. The "aquatic center" is really just another tourist attraction that city residents are supposed to be happy to subsidize. Its proponents say it's a great idea but fail to explain why, if it's such a great idea, they can't find private backers to pay for construction & maintenance.
The aquatic center's "necessary" because you can't expect people to be satisfied just to walk on beautiful beaches, let their kids play on the beach during the winter, fly kites, etc., or walk on a bay front of a harbor that still (at the moment) is partly a working harbor but has lots of tourist type stuff too. Not when it can get as punishingly cold as 45 degrees out & windy.
A few geologist/marine biologists have formed a betting pool regarding how long it'll be before the condo development has stabilization "issues". I'm betting on around 7 years. Could be several years less if we get some really wet years & current rates of erosion increase. Always fun things to do at the beach--like check the area below the condo for signs of increased rates of erosion & huge cracks in the poorly consolidated sediments that form the cliff in that area.
John Stark wrote: "In my rare optimistic moments, I hope that the steady stream of online criticism--from bloggers and online commenters--will put some much-needed upward pressure on newspaper quality, even when that criticism strikes us in the business as "unfair." "
Sorry but you overvalue bloggers. It's all about that clinking clanking sound. Newspapers make money, lots of money even today. The problem is that they were wildly overvalued by Wall Street and today's managers cut, cut, cut in a suicidal attempt to make something that is nicely profitable into something obscenely profitable to satisfy Wall Street. The new breed of publishers like Sam Zell or Brian Tierney don't solve the problem. They so overpaid and so over leveraged that their banks and bondholders put them in the same bind.
Can I make one plea? The reporters are not the problem! Please stop blaming it on the little guy who can do nothing about it.
At some point a decent reporter will realize he cannot do his job properly, and will not be able to for the foreseeable future. Unless starvation is the result, anyone placed in that position for any type of job would do him/herself well to quit.
For their own sakes as well as the public. Down that road lies burnout, sadness, frustration, and even mental illness.
Same as the pricing in the derivatives market, unless people act, it is a race to the bottom. I don't want to live in that kind of a world, where everything is a race to the bottom, and yes we have money, but nothing on sale is worth anything.
We do twenty or thirty new condos or phases a year, and I have not seen anything that would suggest what you are saying is possible, and I have not had corp send out any underwiting bulletins warning us to watch out for it.
I also have several condo development projects undergoing foreclosure, and none of the project lenders are making any kind of claim to sold units.
LoawyerLiz wrote: "I don't want to live in that kind of a world"
Wow, I sure hope that's hyperbole LawyerLiz. Maybe you should take a year or two off from your perfect world, join the Peace Corps and find out what life is really all about. Then again there's always Prozac.
John Stark said: But I CAN do my job properly! I just can't do it perfectly. With some intelligent criticism, maybe I can do it a little better next time.
Yes. And if more reporters exhibited your level of professionalism I suspect we'd all find a lot less to criticize.
LL- Wasn't Socrates the other rat in the movie "Willard"? The star rat was Ben, who got stardom because he was the eponymous subject of that song by a young Michael Jackson.
BTW- in college I had to read Njal's Saga. I remember this phrase, "playing wife to a troll", it occurs to me every time I read one of Fred's comments.
Re blanking- I took Linear Ordinary Differential Equations in college. The only thing I remember is the title of the course, the rest of the experience, mercifully, has vanished.
Yes. And if more reporters exhibited your level of professionalism I suspect we'd all find a lot less to criticize.
Well, I'm not claiming to be special. On my home turf, I've never found my critics to be in short supply. Most of the reporters I've met in my 35 years in this business have been conscientious people. Imperfect, underpaid, overworked, prone to grinding out superficial stuff at times, but conscientious.
Don't judge reporters by the worst efforts of the worst among us. That wouldn't be fair to doctors, lawyers, priests, teachers or cab drivers either.
I attended a real estate conference this week, and at one of the presentations the panel claimed that most project financing in recent years was senior to the individual unit purchasers and was not subordinated, so a project foreclosure can wipe out the individual unit owners. The project lender would not always choose to do this, of course, but they would do it if they were converting to some other use.
albrt, i saw a story the other day on this topic, it is happening in FL. unfortunately, i cannot find the story to send along. in essence, it occurs in failed apartment to condo conversions. the developer wants to revert the project back to apartments. the early buyers can be forced to sell at "fair value," which could be less than the purchase price or the mortgage balance. the individual profiled was scrwed as he was going to lose $30-50k from the purchase price and there was a shortfall to cover the mortgage. apparently, all legit by FL law.
surferd--anything is possible, and if you read it you read it. But I have been doing this for a long time and have never heard of it.
There are other possibilities--say only 5% of the units sell. The developer either gets foreclosed or it tries to revert back to apts. There are detailed rules about uncondominiumizing things, which I would actually have to look up. These rules were enacted in part after hurricane Andrew to allow for the possibility of a building being destroyed and the owners not unanimously agreeing to terminate. If you find what you read, I'd really like to read it.
I did have a client who was offered her deposit back at the height of the mkt. If I recall correctly, we thought the developer just wanted to resell at a higher price. Some people just took the money they were offered, some demanded interest, and some, like my lady got a bunch of money to void her contract. That didn't work out too well for the developer did it?
If the lender forecloses, what it gets back is condo units, not apartments.
After something like 3 years, the developer has to turn the joint over to the assn. Of course, if the developer still has most of the units, it IS the assn.
I have heard of buildings which were only partly condominiumized, and naturally, you would have to allow for who pays for what upkeep expenses.
I think if a unit owner paid everything he was supposed to pay, and somebody tried to kick him out under the circumstances described, he would have a title claim. I actually was a claims atty for a couple of years. It was facinating work, because besides a goof up, there was usually also a scoundrel who took advantage of the goof up.
you could write novels about some of the claims. I had to tell myself everyday, I didn't do this. I didn't do this.
And I didn't mean I was going to kill myself because of the evilness of the world. Just that I would retire and spend my time gardening, cooking, and trying to learn Spanish, which I have neglected lately.
Some flippers threatened by foreclosure are trying to pressure the condo board who tries to keep all those renters out of their home - scum against scum, why should I care for this case? Sometimes I think that there should be law against the discrimination of renters, like there are laws for the protection of racial minorities, and a condo board should not be allowed to reject all renters out of hand. I would accept, however, if the board uses published guidelines to prescreen renters and demands some extra deposit to the board from them.
Have you ever read the bios of Arizona legislators? Manicurists, junior college dropouts, no real qualifications whatsoever except they or their parents got here 30-50 years ago(or in some E. Mesa/West side districts a 100 years.)
Bottom 10 in legislative make up(a ranking familiar to Arizonans.)
There are other possibilities--say only 5% of the units sell. The developer either gets foreclosed or it tries to revert back to apts. There are detailed rules about uncondominiumizing things, which I would actually have to look up. These rules were enacted in part after hurricane Andrew to allow for the possibility of a building being destroyed and the owners not unanimously agreeing to terminate.
Interesting.
Here in Wisconsin, the unit owners become tenants in common to the entire property if the condo ceases to exist for any reason, and the unit mortgage secures the percentage interest.
Short of eminent domain, I just can't see it happening here, and after the New London, CN, mess I don't see an ED happening either.
Many years ago whilst working for an insulation company, we went into a condo building to insulate the attics. One owner was extremely irate that we could go into his unit without his permission to access the attic. I learned then that the individual owners only owned what was inside the wall paint. Drywall and out belonged to the HOA. Ever since, I have wondered why anyone would willingly put themselves into such a situation where someone else has such complete control over something you supposedly own.
Driving on snow is easy. Just take life easy, make sure your tires have good tread, and expect to go sliding from time to time. Try not to be in the way of any big trucks when you go sliding...
Baron, I agree it wouldn't be happening in the midwest. My understanding is that the situation where the project lender might have seniority over the unit owner was only in the latest wave of highly financialized projects in the bubbliest areas. My further understanding is that no one knew of a project lender who has tried to exercise this right yet, but that their lawyers believe they can do it in a situation where the condo sales have hopelessly failed and they want to clear people out so they can repurpose the project.
Liz, I believe the business about having a right to buy out unit owners if the project does not maintain a certain level of occupancy is based on exactly the provision you are talking about that was intended for redevelopment of disaster areas. One of the issues was whether the unit owner would be able to convince a court that it would be bad policy to use this provision to bail out a developer in a purely financial disaster. The consensus was that the literal language would allow the developer to clear people out if the project was mostly empty regardless of the reason, and many of the declarations are set up to allow it.
Again, I am not claiming to know how any of this will turn out, just constantly amazed how many untested bells and whistles they hung on these deals during the bubble years.
God! I am such a Philistine. I can't get by the fact that apparently Wallace Stevens thinks that there are green cockatoos. Even with the permit of poetic license, it jars the biological senses.
(Although the echoes of Poe's Israfel is a nice touch.)
I'd say either way they lose. Sell at a loss and move on.
What is happening is a wealth transfer... Sellers who held (note past tense) wealth are now being forced to relinquish title to real estate to be transferred to those who can qualify with current income. Had the speculators not risked their wealth, future purchasers would have nothing to purchase at a reduced price. It began as speculators being motivated by greed but in the end, their wealth is about to be transferred to masses who qualify for FHA loans. We need more correction in price and for this recession to pass first but it will happen. I saw it happen in the 90's in SoCal and once it started we kept going until current bust.
The real estate cycle.... How the West was won. The railroads and towns that sprang up around them were wealth transfers as the price of land fell. The speculators who bought land in San Francisco in the 1860's lost their ass but society as a whole benefited from a nice railroad system connecting the two coasts and moving goods and people around the nation...
Speculators aren't all bad and are in fact necessary for our civilization.
Inflation and deflation are methods of wealth transfer in an economic system. For obvious reasons we can see why those who are relinquishing their wealth, real or perceived are so reluctant to do so and remain in denial for a long time. The resistance of those trying to hold on to wealth and those trying to obtain it is in full force currently. We should hit bottom around 2011 or 2012 in my opinion.
I rent; I've rented a hundred-year-old three-bedroom rowhouse (in Cambridge, England) for the last two years, for about $1600 a month, and since the house would probably go for $500,000 I think I've got a pretty good deal.
I've got a sizeable down-payment available in the event of prices becoming more sane, but $1600 a month won't at present come close to paying the mortgage on a comparable place.
I'm shocked at the anti-renter prejudice I'm seeing here; I haven't trashed the house, I've spent quite a while and several hundred pounds turning the garden from climax savannah with an underlay of broken blocks of badly-poured concrete back into something at least resembling a garden. The management company replaced the oven when it broke and replaced the roof before I moved in.
Perhaps I should be more charitable on a Sunday morning
depends on how you spend your Sunday Morning.
Complacencies of the peignoir, and late
Coffee and oranges in a sunny chair,
And the green freedom of a cockatoo
Upon a rug mingle to dissipate
The holy hush of ancient sacrifice.
...
Death is the mother of beauty; hence from her,
Alone, shall come fulfilment to our dreams
And our desires.
I'm feeling the dark encroachment of an old catastrophe.
The year: 1979. The place: a cavernous, stuffy college lecture hall. The stage properties: a blue book, a ball point, and a mimeographed essay question about Wallace Stevens. The dramatic crisis: a complete, total, sudden amnesia about "Sunday Morning." I knew I had read it. I knew I had written a ton of notes. I was as innocent of recall of any of it as a babe newborn. The resolution: I made shit up. The denoument: fortunately my professor liked me and gave me extra points on the TS Eliot question.
No wonder I'm so uncharitable.
I'll make the obvious comment. Restricting rentals lowers the value of all condos in that building by restricting purchases for investment.
A condo board can pass and enforce rules that will prevent non owners from damaging common areas or otherwise lowering property values.
Restricting rentals lowers the value of all condos in that building by restricting purchases for investment.
I'm not sure I agree. For starters, selling the units originally to flippers doesn't seem to have done them any favors, does it?
But my question this morning is how these units can have positive cash-flow to an investor. What investor would buy at 2005-era prices in order to rent the place out? What tenant would pay enough to cover that PITI? This article supplies no numbers, but I have to wonder how this math is supposed to work out.
Why does anyone think resale values would hold up if the resale purchaser pool is mostly investors?
Restricting rentals lowers the value of all condos in that building by restricting purchases for investment.
this is neither obvious nor correct.
if too many units go rental then future sales will be PROHIBITED. A lot of lenders will only lend if a certain % of the units in the building are rental.
also: many people bought into the condo unit PRECISELY because it doesn't allow renters.
those types of units come at a premium, not a discount.
why on earth buy a place if all your neighbors are going to be renters?
oops,
tanta is quick on the draw this morning.
It isn't, in my view, really about your neighbors being renters, although I agree a lot of people buy condos rather than renting apartments because they want neighbors with some common sense about the stereo volume or whatever.
It's that a real live RE investor--not a specu-flipper--isn't going to pay a price that guarantees negative cash flow forever. The LAST party who could be talked into overpaying for a unit would be a real live experienced professional RE investor.
It would have helped if the reporter had addressed the question of what the market rent might have been compared to the owners' current mortgage payments.
I agree with your point that it is nearly impossible in any previously bubblish area to rent out a unit and cover PITI.
however, I even disagree with the basic notion that rentability increases value.
when I was looking at condo places during the bubble of 2004 in Miami all the units that excluded renters were SIGNFICANTLY more expensive than comparables.
however... it also probably varies by strata.
the luxury places: more expensive if no renters allowed
the mid range places: not sure
the low end junk: here is where people likely don't care as much if they live next to renters.
T, I see your point and agree with you.
My point. In most cases, condo boards enact rental restrictions by amendment after unit owners worry about the effects of increasing rentals. Boards change the rules (quite legal..) after buyers incorrectly assumed that they could rent their units in times of financial distress. This just adds to the problem of falling prices.
In addition to Tanta's and YTL's reasons, getting condo boards filled with rentals to agree to do appropriate upkeep and maintain sufficient reserves is a major pain in the butt. Before the bubble most of us had heard of this kind of condo death-spiral, where the building becomes increasingly run-down while the few owner-occupants left are unable to sell because potential buyers are unable to finance. Eventually most of these buildings end up being returned to rentals.
These cycles of rental unit to condo and back to rental again would be comical if it weren't that condo owners are so often either young and trying to get a leg up with his or her first 'home' purchase-- or an older person heading into retirement.
Walt, my point is that, whether or not this restriction was there originally, what Gozen is trying to do is convince his board that they'd be better off letting him rent the place out than having him sell at a lowered price.
But he would have to convince them that having more than 20% rental units would in fact prop up rather than push down future resale prices for other unit owners. If it didn't, why would the other unit owners be harmed more by a sale today to a new owner-occupant at a lower comp price? If you're damned if you do and damned if you don't, why not have a new owner-occupant neighbor and not risk the tenant problem?
Besides that, unless the guy can show that the rent covers his payment, what's the likelihood that he won't end up in default on his mortgage anyway? He's asking his condo board for a lot of faith under the circs, it seems to me.
Finally, although none of the neighbors would enjoy that new comp, why would basically making Gozen sell now prevent any of the true owner-occupants from ever renting out their units someday, if the worst happened?
I'm trying to figure out Gozen's negotiating tactic here.
I feel the same amount of pity for condo flippers as I do for speculators wiped out in margin calls. It may be time to start a new self help organizaton, CFA - Condo Flippers Anonymous. Hello, my name is Ralph and I thought I had a free lunch.
Gozen may have as many delusions regarding the rental market going forward as he once had regarding flipping for profit.
As to his 'threat', would a short sale come in higher or lower in a building which continued to disallow renters?
I'm trying to figure out Gozen's negotiating tactic here.
c'mon now Tanta... it's not that early.
the negotiating tactic is "wahhh... I'm dumb and you better do what I say or I'll make you sorry!"
He wouldn't be in this position if this guy had Sun Tsu's tactics!
For those interested, Sun Tsu wrote The Art of War
T, his negotiating tactic? Buying time and hope. As you pointed out before, hope is not a game plan.
My experince on a condo board tells me that now that prices are falling, Gozen's board won't budge.
I represent a couple of low end condo boards. Run by ferocious old ladies.
THEY think renters are baaaad. They have enacted rules that say any new renters have to be close relatives of the owner. They require extra money be put in the pot for damages the renters may do.
None of the old ladies are interested in selling; they are only interested in keeping up the buildings, and having a place to live with the least number of obnoxious people. Buyers can be obnoxious too, of course.
There were a couple of obnoxious owners that the board ladies called the burro and the burrito. I think they both died. The old ladies will leave feet first too, unless they have to go into nursing homes.
Lawyerliz, I'm always amused by condo boards who think they're co-op boards.
"Amused" as in not wanting anything to do with them, of course, as owner, renter, lender, or innocent bystander. But amused nonetheless.
Why I love this blog: Wallace Stevens before I have even poured my own coffee.
The nasty reality for a lot of people is that they borrowed a lot of money to buy into condos, co-ops, and fancy PUDs precisely because they thought empowering the HOA to be a bunch of Nazis would "protect" their property values.
So they find out that RE markets can change faster than the mindset of the HOA board. But having freely and contractually given your neighbors the right to run as much of your life as they can manage to, it becomes hard to get out of that deal. It becomes even harder to know why any prospective tenant would want to be the third in a deadly hate triangle with the broke owner and the hostile HOA. You'd have to get a discount . . . which was kind of my point.
From the view of the condo flipper, it isn't important that the rent they are getting is less than their mortgage + taxes + insurance + fees. As others point out, it almost surely is for peak-bubble-year-buyers. What's important to them that their negative cash flow is substantially less with a renter. Right now, the unit is empty and isn't selling (and they are probably ruined to sell at what the market is offering) and the negative cash flow is maxed for them.
i say swap them at the fed for treasuries
Tanta's post at 9:01 am perfectly sums up my experience with condo HOA's and why I will never buy into one again.
iceman, I don't think anyone really wonders why these two speculators want to rent out their units (although without any numbers presented, I for one don't know how long they'd have to rent at what negative cash flow and therefore how much the total loss over the rental term compares to the loss taken today on a short sale).
I'm just curious about why anyone thinks the condo board would have any interest in accommodating them.
And, of course, I am once again noticing how another story gets put together based exclusively on two industry insiders. I sense an "I'm Trying Not To Be A Walkaway But The Condo Board Is Persecuting Me" meme arising.
And any tenant who pays less than the owner's carrying costs in rent risks having a foreclosure interfere with the lease.
Wallace Stevens? At least your anxiety closet isn't stuffed with forgetting the proof derivation of the homogenity property of eigenvalues.
I'm trying to figure out Gozen's negotiating tactic here. - Tanta
He doesn't even know he is negotiating. First he has learned that it is only possible to make money real estate speculating. In his world the prospect of losing money means there is something wrong that needs to be corrected. Second, every aspect of the recent bubble has proven that rules do not apply to real estate liars cheats and thieves. Privatize benefits, socialize consequences.
And any tenant who pays less than the owner's carrying costs in rent risks having a foreclosure interfere with the lease.
While this has been touched on in a few news stories, I've seen more frequently occurring it in my line of work. The possibility of an owner foreclosure is a something that renters never ask about (and probably wouldn't get a straight answer if they did).
Something I've seen happening more frequently (and more financially harmful to the 'renter' since they were paying more than rent monthly) is a foreclosure occurring on what was ostensibly a 'lease-to-own' situation.
Tanta,
Did you really post this at 3:59 Eastern? They're not even your condos.
Did you really post this at 3:59 Eastern?
All time stamps on the blog are Pacific. That is, when the ET co-blogger remembers to correct hers, and is sufficiently awake to be able to subtract three hours accurately.
I did indeed post this a minute before 7:00 am. But I only just managed to wait for sundown before I went to bed last night.
He doesn't even know he is negotiating.
I think you hit the nail on the head, Rob. Despite their obvious mockery, the previous posters were giving this moron too much credit by assuming that he could clearly articulate his situation.
More like: "See condo, buy condo, me rich! No buy condo?! Me not rich?! Me ANGRY!"
These people operate at a mental plane just slightly above emotion-driven barbarism.
10 Things a Homeowners Association Won't Tell You
Board members will tell you that the last thing they want is to go to court. But it happens all the time. Experts estimate that in California, 75% of the homeowners associations are embroiled in a legal tangle of some kind. Chicago attorney Mark Pearlstein, who represents associations, figures that 60% of all condo boards and homeowners associations in Illinois are involved in some kind of legal suit.
Read it folks.
Yea I never would live in a place with a HOA or other board.
The possibility of an owner foreclosure is a something that renters never ask about (and probably wouldn't get a straight answer if they did).
Sadly, that's true.
How nice, then, of the guy to inform readers of the local paper via a willing reporter that he needs a "hardship" exception from the condo board in order to rent the place. I sure hope prospective tenants read page F-1 . . .
A condo with a militant HOA or a rental unit with a militant landlord.
Ummmm...what's the difference?
Who wants to be a renter with equity, anyway?
cd
"Despite their obvious mockery, the previous posters were giving this moron too much credit by assuming that he could clearly articulate his situation"
hey... not me! didn't you read my Sun Tsu post?
and here I thought I was being witty early in the morn.
I wish that the proposal put forth above, to have the Fed buy this property, had not surfaced. The plan will now be rolled out next week. It is a logical conclusion to all of the real estate relief ideas floating around in Congress.
Exactly Rob, it's another case of privatizing gain and socializing loss.
Negotiating tactic: this guy is holding a gun to his own head and screaming, "Don't make me do it!"
Brings to mind a couple of "sayings" from my older relatives:
"Don't let the door hit yer a** on the way out", and
"Hate to see you go...thank God".
Naturally, the venerable, "Bless his heart" is also appropriate.
HOA law is pretty slim and generally state specific. I hope we'll finally see some standardization via court rulings in the next 5-10 years.
Tanta:
I attended a real estate conference this week, and at one of the presentations the panel claimed that most project financing in recent years was senior to the individual unit purchasers and was not subordinated, so a project foreclosure can wipe out the individual unit owners. The project lender would not always choose to do this, of course, but they would do it if they were converting to some other use.
Do you know if this is really common practice? Making an individual unit mortgage loan that is behind the project financing seems even dumber than the other things mortgage lenders were doing for the last few years.
A condo with a militant HOA or a rental unit with a militant landlord.
Ummmm...what's the difference?
It's faster and cheaper to get out of a lease.
I found this to be the most interesting part of the story. It describes Fannie and MI companies tightening up on condo standards, and then we get to FHA:
Yet the Federal Housing Administration sees room to loosen restrictions. The FHA proposes lowering its requirement that 51 percent of a condo building be owner-occupied to 33 percent, part of an overhaul and streamlining of its operation that is pending before Congress. Currently about 2 percent of FHA loans are made for condos, and it can take three months for agency approval because of overlapping requirements, said Meg Burns, director of FHA single-family program development.
"We think that particularly in urban markets, that it's fairly common for large buildings to have lots of rentals," Burns said. "We feel like first-time home buyers should have access to prime rate financing for those buildings."
The only times I have seen a "sophisticated Real Estate Investor" touch an already built condo was after a Bust,and he paid pennies on the Dollar for an entire building in a good location.It was a while ago,But I recall that he paid less for the whole ball of wax than the developer had for the land.
And the green freedom of a cockatoo
...is forbidden by the condo by-laws.
tanta wrote: "Why is it we can't get reporters to just ask a couple of Econ 101 questions when they interview these people?"
How does Tanta know what Ms. Merle asked or didn't ask?
Why can't we get Tanta to understand the sausage-making-like process by which stories get reported?
What exactly would Tanta write about if it weren't for lazy, ignorant reporters and their original content that she uses without compensating them for it?
claimed that most project financing in recent years was senior to the individual unit purchasers and was not subordinated, so a project foreclosure can wipe out the individual unit owners.
Are we talking about purchase contracts/deposits or actual mortgaged conveyances?
I have not actually heard of any lender dumb enough to mortgage a unit that was still subject to the project's financing.
OTOH, I bet a lot of people will lose their deposits because the project never completes and the project's lender has to foreclose.
Albrt,
However true the comment may be on project financing having priority over purchase money on a unit (and I question if this is accurate, but that may be a local quirk), the buyer or their agent should be demanding proof that the project lender is relinquishing all rights to the property being purchased.
The project lender can still be able to foreclose on the infrastructure and unsold common elements, which is a sinificant problem by itself, but the lot/unit would be free and clear.
Condo boards don't like allowing rentals for another reason: Absentee owners rarely approve assessments.
“Sunday Morning” is an attempt to reconcile humankind’s position in the universe as both a spiritual and earthly manifestation while at the same time casting off the tattered cloak of ecclesiastical dogma that has for so long controlled and constrained the imaginative and ephemeral side of humanity that is the soul.
Tanta, can you write stuff like this, too? Maybe you should start a service where throaty-voiced vixens in pengnoirs murmur words like hermeneutics . . .
1-900-LITCRIT
. . . oooooooooooooh . . .
"The FHA proposes lowering its requirement that 51 percent of a condo building be owner-occupied to 33 percent"
WHAT! That's insane. A complex filled with 67% renters! In the olden days, any loan >80% LTV required that the property be 75% owner occupied.
We are renters ourselves right now, so nothing against tenants, but they do not have the same interests as owners.
And, absentee owners have very different interests than owners that have to actually live in the place!
Here's what Gozen needs to do:
!. Go to his bank and get a loan to buy out all the
units in the building. Non recourse. PIK
2.Tender for same
3. Convert building to rentals
4. Wait for inflation to bail him out.
This hits close to home for me.
I've got a condo in Alexandria, VA right out side of DC. 3bed, 2 bath. Huge unit. Paid 135k in 2002, have a mortgage of 150k on it.
(I refinanced in 2004, to eliminate PMI payments.) Nice flat rate at 6%, 30 years. Nothing special.
I've lived here since christmas 2002, and I am moving to the midwest for my job in a week. And I've got to rent my place out.
Selling isn't an option- I think a realistic value for it is 175-200k because the 330 it was once valued at was never in any circumstances a real price.
The problem? Even with a 2002 price mortgage, I'm going to be loosing money every month. Not a lot of money, but some. Figure that the rental on the unit is between $1800 & $2000 a month. My mortgage taxes & insurance=$1200, and the condo fee= $700.
I lose money, especially the minute the management fees are added.
I don't want to be in the landlording business, but the other option is to put it on the market, lose $1900 a month (something I really don't have) and watch it not sell.
So I have NO sympathy. NONE. for the people trying to flip. If I am losing money renting out a place I've lived in for 5 years, put a lot of work and improvements into, and didn't pay a crazy amount for? Than there is no way anyone is paying enough to cover a 2005 era price.
At least my condo board can't prevent my renting it out. Because if that had happened.....
We are renters ourselves right now, so nothing against tenants, but they do not have the same interests as owners.
Am I to take it that many of you live in places where tenants in condo's are not bound by statute to follow the CCR's and By-laws, or am I to take it that no one is familiar with statute governing renters in condos?
Oops- sorry- whole thing makes more sense (10:53) if I mention nothing has sold in my building for 2 years. Hence sale not an option. Like 70 of 500 units on sale.
2 years. We have have some wacky legal hijinks going on, and a whole lot of units that are hitting forclosure, and nobody is buying.
Curse/blessing of a first time owners building.
Friend of mine told me last week they're upping his condo fees because "he's the only one who lives there anymore." I guess he's got to pay the fees for the entire complex.
Tanta, can you write stuff like this, too?
Only if you hand me a blue book and a ball point and tell me that years of tuition will be forfeit without a diploma unless I participate in this ritual.
But since I have that diploma, and they can't take it back, I prefer to write about the attempt to reconcile loan officerkind's position in the real estate market as both a lending and a borrowing manifestation while at the same time casting off the tattered cloak of the sanctity of contracts that has for so long controlled and constrained the impulse to liberation that is the soul of the deadbeat.
And at no charge, although it's more like the coffee-swilling slob in Garanimals that that vixen-in-a-peingoir thingy.
NoraB writes:
...I am moving to the midwest for my job in a week...
Mi casa, su casa.
Hope you like it much as we natives do.
LOL! Priceless! You made my Sunday ;>)
That's what I love about trailer parks. Any shenanigans and the tow truck is just a phone call away. Wait, vertical trailer parks, I'll need a crane though.
NoraB,
It will sell, at some price. It may be a price you don't like...but it will sell. Figure out how much you'll lose slowly vs. how much you'll lose right away and see which is more.
My guess is, take your losses now and move on. Who knows, you may get lucky and get out even.
If you think it will lanquish if you try to make a little, lower it to the price that gets you even. It may be low enough to get a quick sale if it's much lower than the comps. It will stand out as a "steal", something it won't do at the same price a year from now as others chase the market down.
You may even get a realtor who believes we're at bottom and can only shoot up from here. Offering a condo that breaks even or takes very little monthly loss by renting it out may look like a bargain to many believers out there.
This was supposed to be actual mortgaged conveyances. The discussion was about various ways unit owners can be left with a mortgage and no condo.
The other major situation, which has apparently already happened this cycle, is when the developer exercises a covenant right to force out the buyers if the project never hits a minimum occupancy. The buyers may receive only fair value rather than the price they paid.
Baron Samedi-
Thank you for the welcome. I suspect I'm going to like my new mid-western home- once I learn how to drive in snow and dress like the natives.
PUD?
Peptic ulcer - Wikipedia, the free encyclopedia
is this what you meant
The one person (Moss - real estate agent) seems to have been living in it but is now married and has a child so the 1 bdrm condo is not enough.
"Since Moss contracted to buy the unit in early 2005, she has married, had a child and outgrown the space. She is trying to sell the condo but has been hampered by the housing slump. Three months after putting it on the market, she has yet to receive an offer. "
The other is an over-extended flipper.
Do try forsome accuracy Tanta - and the following statement is NOT accurate:
"Surely, if anyone understood the risk in trying to flip units in an owner-occupied project, it'd be these two, no? "
ONE of them is a flipper - the other is an owner occupant who needs to move because of the change in family size.
fred writes:
What exactly would Tanta write about if it weren't for lazy, ignorant reporters and their original content that she uses without compensating them for it?
Umm... what she usually does? That is, stuff she knows about-- or knows how to find out. Analysis of said stuff for us lay folk. And no compensation??? Are you kidding me? Any reporter with a brain is on his knees on a regular basis giving thanks for Tanta. Where else are they going to get that analysis? Their RE advertisers?
Look, I'm probably more sympathetic to the difficulties reporters have than most-- I've been one. And maybe you can't expect much on the miserable salaries most reporters are paid-- but the kind of all out ignorant pandering that's been going on in the press-- particularly the RE press-- in the last few years is just beyond pathetic. It didn't used to be this way. And we're ALL fools if we let ourselves be bamboozled into thinking that it has to be now.
albrt writes:
This was supposed to be actual mortgaged conveyances. The discussion was about various ways unit owners can be left with a mortgage and no condo.
I can think of a number of ways that this could happen, but all of them are the result of someone not doing their job.
If you can elaborate, it would be appreciated.
Average Joe wrote:
It will sell, at some price. It may be a price you don't like...but it will sell. Figure out how much you'll lose slowly vs. how much you'll lose right away and see which is more.
Ah- the easy answer for this: If I lose $200 or so per month, as I'm going to renting? I will be able to make the payments, keep it out of trouble etc. So looking at about $2000 a year.
If I try to sell, I'm looking at $24k a year.
The issue is that nothing in the building is selling, even the identical unit priced at $189. For a lot of reasons, we are a building that is notorious in my little city. Agents are steering away.
I'm happy to sell it and just get my mortgage paid off. But I can afford to cover $2k a year, and I can't in any way make the $24k. I can only make double payments for about 3 months before my employer relocation runs out. And 3 months isn't long enough for this to sell.
All of which just makes me happy I found a nice rental apartment in the midwest.
Did a little check: Currently there are 6 units identical (more or less) to min on the market. One at $280k, one at $285k. Both claim not to be a short sale or REO.
Than there are the units going form $197 to $185k, all of which are bank owned, require 3rd party approval, or the like.
And none of this is selling. Personally, I think renting it out starts to make more and more economic sense.
...a self-described flipper who doesn't appear to have disclosed intended occupancy
poor flipper.
AC I know what you mean.
As more Condos empty or are emptying there will be tremendous pressure for the reaming residents to pay a larger portion of the association fees. These fees can add up to 30% on top of people's mortgage payments. The only option is to stop regular maintenance on the building and let it fall into disrepair deteriorating the value of the building.
That's called the school of hard knocks. Maybe during the next "boom" he'll have enough sense to not buy in a complex that doesn't allow rentals.
He should just walk away from it. Why pay several more payments and then walk away. That makes no sense.
Tanta writes:
I'm feeling the dark encroachment of an old catastrophe.
The year: 1979. The place: a cavernous, stuffy college lecture hall. The stage properties: a blue book, a ball point, and a mimeographed essay question about Wallace Stevens. The dramatic crisis: a complete, total, sudden amnesia about "Sunday Morning." I knew I had read it. I knew I had written a ton of notes. I was as innocent of recall of any of it as a babe newborn. The resolution: I made shit up.
So you took quantum chemistry too then?
Did anyone ever stop to think about why the developers wanted to sell "pre construction" anyway? They didn't want to get left holding the bag. They took less profit potential to minimize their risk.
People who bought into this apparently only thought one thing, that it "was going up".
I saw a chart in 2005 of home prices, rents, and income. Home prices looked like the Nasdaq in 1995-2000.
Rents and income were basically flat lining. No way it was going to last, and the higher prices went the uglier it was going to end.
It is also crazy that if these people never gave a thought to the increase payments, how were they going to maintain the home. All houses do is require money for maintenance and repairs. Basically something is always falling apart or breaking. How did they plan to pay for those expenses?
I guess they just thought they just thought they sell it to some other sucker for more money. That's like playing musical chairs.
NoraB,
It's either 2K a year in lost rent or sell it at whatever it sells for. You don't have to pay the 24K if you sell it, so get that number out of your mind.
If you list it at 145K(assuming that is about what you owe, then you are listing it well below bank-owned stuff. (hold your own auction to avoid realtor fees, craiglist...whatever)
Apparently your mindset is to list it near your percieved market price. You are making the same mistake that everyone else is making now including the banks.
reminder..you said: "Than there are the units going form $197 to $185k, all of which are bank owned, require 3rd party approval, or the like."
Think of it this way. List it at 150K, that's 40K less than what you say the banks are asking. It will probably sell quickly. Mathmatically it's the same as listing it at 174K and taking a year to sell it.
Don't chase down the market. Be the Market....beeeee the markettttttt.....
Wow, I had no idea condo fees could get up to $700/month. And I thought $300 was high.
In Florida anyhow, contruction mtges must be partially released at closing and they get a huge part of the sales price until the last units sell. If they aren't released, you have a juicy title claim, which is what the baron is referring to.
Once you've bought I don't know anyway they can kick you out except if you don't pay the maintenance payments. Also, if you make yourself totally obnoxious, they can prohibit you from living there (there's a case or 2 in Florida where this happened), but they can't take your title away.
When we moved to Brevard, we had a good experience having a new house built previously, and so were looking to buy in a new development. Every single one had a massively intrusive HOA. Every one. In Miami, some do, some don't. Not having a HOA is a market niche for those who don't want one.
My hub is a ham radio operator, and wanted a tower, which we did have in our Miami development. It had a "de minimus" PUD. Meaning all it did was mow, and kinda disappeared entirely for a while, since there was hardly anything to mow. The fees were $25.00 a year. The Chilean down the street thought he was a spy, and the Puerto Rican/Cubans across the street who knew us, had fun by assuring the Chilean that he was indeed a spy.
None of the HOAs would allow a tower, naturally. So we bought acreage, which was actually a benefit.
That said, you NEED ferocious old (or young ladies) to run these things, otherwise they go downhill rapidly. You have a combination of people who feel like renters, even tho they are owners, together with people who feel like they own single family houses, and want to do anything they feel like with their units, no matter how it affects the other owners. This is a socialistic form of living, and it always amuses me when Cubans, having escaped it, move into the same circumstance willingly.
Baron:
This is second hand information acquired at a conference on a subject that I am only tengentially involved with on a professional basis. The subject of this particular panel discussion was condo workouts from the point of view of all the people who can afford high-priced lawyers. The participation was heavily weighted toward the east coast, especially Florida.
The most interesting thing to me is that the lenders seem to have stopped treating these projects as real estate, and instead treated them as financial investments from which it was possible to create a highly varied and innovative "capital stack," plus all the customary derivatives. Everybody has all kinds of covenants purporting to give them all kinds of recourse without any liability.
I agree that in the ordinary course of a residential real estate transaction the homeowner would expect the title company to take care of all this. Except that the title policy is subject to the CC&Rs, declarations, plats, etc., which in a condo project means subject to just about any conceivable thing the Developer or the Association or anyone else who has special rights under the declaration might ever decide to do.
What I don't know is whether in Florida in 2006 or 2007 banks were lending on condos even though they were junior to the project financing. That seems crazy, but that's what I understood these folks to be saying.
NoraB writes:
Baron Samedi-
Thank you for the welcome. I suspect I'm going to like my new mid-western home- once I learn how to drive in snow and dress like the natives.
NoraB | 05.04.08 - 11:11 am | #
Driving in snow will take time & experience - learning to dress like us natives just takes a complete lack of taste. Simple rule: if its ugly, utilitarian and is 'On Sale'... it's in style somewhere in the Midwest.
No bank I know of lent in Florida without getting the underlying unit title free and clear.
Never heard of it.
I think I'd know.
The worst I have heard is being forbidden to sell for a few years after closing, or having purchased a vacant lot having to build within a certain time or selling it back to the developer at the same price.
As far as I know, neither of these things have been litigated, and I'm sure that the first has a good chance of being shot down and an illegal restraint on alienation.
Nowadays, the developer wouldn't want the lot back in the 2nd example!!
Altho the first was to discourage flippers, reasonable, along with 30% downpayments. I guess neither worked.
Joe writes:
Did anyone ever stop to think about why the developers wanted to sell "pre construction" anyway? They didn't want to get left holding the bag. They took less profit potential to minimize their risk.
Presales are often a condition of development financing. The lender wants to know the project is viable.
Deb wrote - ...nothing against tenants, but they do not have the same interests as owners.
Well I say, nothing against owners, but many of them don't have the same BRAINS as renters.
For example, my landlord (the "owner") is paying $7,500 per month mortgaging my abode. Meanwhile, I only pay him $2,500 in rent.
Thanks, Liz, that's what I would expect to be the case, so maybe I misunderstood about the lender priority.
I'm quite sure I did not misunderstand about the covenants giving the developer the right to force out early buyers if the project did not reach a threshold of occupancy. The developer (or the lender in the developer's shoes) purportedly has the right to buy back at fair market value. Which I guess everybody assumed would be higher than the sale price. Not saying these covenants exist everywhere, but they were apparently common in the past few years.
So you took quantum chemistry too then?
I might as well have done so for all the good it did me.
ONE of them is a flipper - the other is an owner occupant who needs to move because of the change in family size.
She wants to move, she does not need to move.
yours in Christ,
Isamu
For example, my landlord (the "owner") is paying $7,500 per month mortgaging my abode. Meanwhile, I only pay him $2,500 in rent.
CaptiousNut | Homepage | 05.04.08 - 12:03 pm | #
That's sustainable (not). You keep everything packed up ready to go? I think I would at those differentials.
Was fair mkt value defined as at least the amount of the mtg? Again, I never saw it, but that could have happened.
Or maybe it was deep in the Declaration and the title agent never noticed?
Lots of condo decs say no more than 2 people per bedroom. I had somebody consult me on this within the last 2 months. They had been renting a long time, and then were more or less forced to buy. A man, wife and older son, one bedroom. They were now worried about having 3 people when only 2 were allowed. I said keep your head down and don't make waves and your son is leaving for college in a year or 2, right?
Theoretically, this is a violation.
I have not read all the comments, there are too many. So, I apologize if someone had already made these points.
I agree with the blog posters point of view. For those that think the restricting investor units in condos hurts more that doing so, you don't know what you are talking about. It's much easier to control the number of renters than it is to control the renters once they are already in the project. It's a fool's opinion that thinks that loosening investor restrictions is good. From a lender's point of view, a condo purchased for investment is much more of a risk than owner occupied, so that throws out that thought in this market.
This all comes from personal experience. As a condo owner myself, living is a condo that let the investor rules fall by the wayside and is not trying to reign them in.
I do feel for the first person in the WP article though, she did occupy the unit and it's just not suited for her lifestyle anymore. For the loan officer. He took the risk, and now he's paying. Why should anyone bail him out. I think the condo will recover more from a low sales price that it will from renters running rampant with no regard for the property as a whole. Trust me, I KNOW this from experience.
Ran into a similar problem when I tried to rent a McMansion in Monument Colorado. The HOA forbid renting. The owner had the home built and in the interim had a heart attack. He lived in San Antonio Texas 300 ft and felt fine there after the heart attack. Then moved into his new home and ended up in the hospital withen a week with COPD. He couldn't handle the 7600 ft altitude. He found out he couldn't sell 5 year supply on market. So decided to rent to me and found out he couldn't rent it. Ended up in forclosure along with 4 other houses out of 36 in the neighborhood.
House is still for sale a year later with weeds everywhere. Much better than having a renter in there though.
Also, dealing with renters can be horrible. We only got renters who took lousy care of the small house we tried to rent, or didn't pay, or both. Finally, we rented with an option to buy and sold to the renter.
You are not even going to be local, so will have to pay 10% to a realtor to watch over the rental.
Anon @11:53-
The $700 a month condo fee includes, heat, air, water, trash, electric. Basically everything but phone & cable.
However, it's still quite high.
This is in large part due to two things: 1. It's a 45 year old building, and as of 5 years ago, had no reserves. We are currently paying into reserves,
And my civic duty on the condo board had me being sued as an individual for 2 years, despite our D&O coverage, until the individual stuff was tossed.
So, yeah, $700 a month. Was $350 when I moved in.
You are not even going to be local, so will have to pay 10% to a realtor to watch over the rental.
Lawyerliz | 05.04.08 - 12:11 pm | #
And even then watch over the realtor who is watching the property. Being an 'absentee' landlord is always a ton of hassles.
Well, after reading the story I don't think the reporter was especially sympathetic to the flipper guy. To me it sounded like the old "let him keep talking, dig himself in deeper and deeper" strategy on the reporter's part.
To me the reporter was trying to illustrate the disruptions created by the drop in condo values, and she did that rather well.
I get the impression that the condo associations aren't buying the flipper's logic that allowing a lot more rentals in the building would be good for the remaining owners. The story explains in some detail why that is not likely true.
I might as well have done so for all the good it did me.
I sure have enjoyed having a Lit major announcing the game. Besides, the quantitative majors were too busy counting their money to care that their math was bad.
Average Joe:
Think of it this way. List it at 150K, that's 40K less than what you say the banks are asking. It will probably sell quickly. Mathmatically it's the same as listing it at 174K and taking a year to sell it.
Don't chase down the market. Be the Market....beeeee the markettttttt.....
But it's not. It's an issue of risk mitigation and cash flow. I can cover $2k a year out of my salrey. Place should be rented out in less than 3 months, before my relocation subsidy dissapears.
If I price it at $150k, I lose tripily:
So, you know, I'm going to rent out my place here, and move to my nice $950 a month including heat unit- $300 less than I'm paying a month now.
(I have a roomate paying the $700
Which means I'll be fine, but broke rather than just broke and with an unneeded forclosure.
Nora B is underpricing liability, no?
My first thought was, didn't the sellers read the CCRs when they bought? Didn't they know beforehand that this "no rental" clause might spell trouble? But then I realized that this "all in" mind set is completely common to all the flippers I know. Insane profits just seemed so likely, why plan for down times?
You know, having now been told about the litigation, you should try to rent until the litigation is over with. Probably nobody is buying because of it. I infer it is a cause celebre'? If it isn't you may have a legal duty to disclose to a buyer what is going on. You would here in Fla.
Probably nobody in a normal market--say of 5 years ago would want to buy into that mess. I wouldn't. I would advise any client not to.
This goes to show how a client has to be prodded to tell the whole story. Not criticizing you, NoraB, but what you left out was very very important.
Any chance that the suit will be resolved before global warming drowns the coasts?
P.S. I don't know anything about the reporter on this story, but a lot of reporters are renters. Those who ARE renters sometimes don't understand why renters in a condo would be considered undesirable, or why nearby homeowners are upset when somebody rents out a house on their block. I do see a little of that mentality in this story.
To me the reporter was trying to illustrate the disruptions created by the drop in condo values, and she did that rather well.
Yeah, but I'm still annoyed that she didn't press ahead to the math of the examples she raised. And that we still get these stories about "people" being squeezed by these market disruptions, who turn out to be people who surely should have had sufficient insider-info to list these pricey jumbo condo units a long time ago. Unless, well, they signed over one of those "anti-flipper" covenants that didn't let them list until last February.
albrt writes:
I agree that in the ordinary course of a residential real estate transaction the homeowner would expect the title company to take care of all this. Except that the title policy is subject to the CC&Rs, declarations, plats, etc., which in a condo project means subject to just about any conceivable thing the Developer or the Association or anyone else who has special rights under the declaration might ever decide to do.
I'm quite sure I did not misunderstand about the covenants giving the developer the right to force out early buyers if the project did not reach a threshold of occupancy. The developer (or the lender in the developer's shoes) purportedly has the right to buy back at fair market value. Which I guess everybody assumed would be higher than the sale price. Not saying these covenants exist everywhere, but they were apparently common in the past few years.
The first wouldnÂ’t have any bearing on the development mortgage being foreclosed. No title underwriter is going to knowingly insure against foreclosure of the development mortgage without having some serious leverage against the developer/lender. That said, we donÂ’t interpret the documents. If you are not familiar with real estate law, you should be represented by an attorney who is. It is true that the Dec will often allow for future development rights, but those are post policy events- the title policy only insures (usually) through the date of the policy. Let me repeat myself- get a lawyer to represent you.
As to the second point, you have to differentiate between a purchase contract that is signed before the project financing is completed and a right of first refusal post closing. There may be regional variations on a right of first refusal, but all of the ones that I have seen say that upon receipt of binding offer to purchase, the owner has to submit it to the developer/association who can then match the offer, or waive the right. The market value is determined by what an arms length buyer is wiling to pay.
My first thought was, didn't the sellers read the CCRs when they bought?
Well, I'm sure Ms. Moss relied on the representations of her real estate agent. Mr. Gozen probably relied on his mortgage broker.
Really, if we were talking about just plain civilians here, I'd have some sympathy. But these two were part of the kool-aid serving contingent, not just the kool-aid drinking contingent.
Hence my insufficient sympathy for Ms. Moss. She had no idea that the rental restrictions on her project had anything to do with its value? And she a bona-fide relitter?
Flipping flipper getting flipped the finger from the association and now will have to flip burgers. Flipping perfect.
Yeah, but I'm still annoyed that she didn't press ahead to the math of the examples she raised. And that we still get these stories about "people" being squeezed by these market disruptions, who turn out to be people who surely should have had sufficient insider-info to list these pricey jumbo condo units a long time ago.
I agree. It seems odd to me that so many of these industry professionals are the ones willing to air their stories in public, when they are the ones who should be most embarrassed. You've posted a lot of examples. Reporters are stuck, sometimes, telling the stories of the people who are willing to talk. In some cases, the reporters are just trying to pass along those stories without passing judgment, but I agree that at other times the stories seem to portray these people as victims.
This goes to show how a client has to be prodded to tell the whole story.
The phenomenon that gave mortgage underwriters--once upon a time--the reputation for "grilling" people.
Would I sign off on a loan for someone to buy NoraB's unit, knowing that the HOA is bust, maintenance was deferred, the monthly assessment is up to 77% of the P&I, there are already bank-owned units, and the project is in ugly litigation? Probably not.
So discussion of selling the unit is probably all theoretical. NoraB, it sounds to me like you're going to own it for quite a while.
FYI NoraB:
I just renegotiated my lease in Alexandria. Townhouse 3 bed, 4 bath 1800+ sq ft on three levels $1550/mon.
We've been renting this place 3 years now, and are model tenants as defined by my landlord = we autopay our rent. He told us that we are the only tenants that pay on time in his properties.
Good luck. Your situation sounds like one for the grandchildren someday! ("I remember when I only had $300 dollars in my bank account and had to move to the midwest...")
Just walkaway.
On the other hand, you could just find a tenant, and go through the enormous hassle o being the thousand mile absentee owner.
Ugh. With all the attendant hassles.
On the other hand, DC is going to get a ton of newbie Dems moving into new jobs soon in DC with the changing of the administration, so crashpads will be in short supply;-}
Your call!
Someday this war's gonna end...
On the other hand, DC is going to get a ton of newbie Dems moving into new jobs soon in DC with the changing of the administration, so crashpads will be in short supply
Unfortunately, with all the GOP crashpads flooding the market at the same time, it's likely to be a wash.
I never thought I'd ever see myself say this but we may not have enough lawyers.
Tanta, you might be interested in today's Ventura County Star: Local couple starts a group to aid others in same straits» Ventura County Star
2001 Moorpark, $360k.
Re-fi 'several times to pay bills'
'Kristin and Mike Bertrand say they were not casualties of the mortgage crisis, but of a faltering economy.
sarah, writing about reporters and 'the media' says: "It didn't used to be this way. And we're ALL fools if we let ourselves be bamboozled into thinking that it has to be now."
"t didn't used to be that way..." and your evidence for that is...? Newspapers are a business that responds to its customers and/or its bottom line and/or the demands of Wall Street (if public) or the vanity of its owner (if privately held). They are not a public service.
In the current environment, most publishers (i.e., owners) have decided that its customers want shorter pieces that focus more on what I would call fluff - the personalities involved (hence the come hither photo accompanying the piece). This is a business decision not a statement of principles by the publisher. The editor responds to the publisher (or loses his/her job) and the reporter responds to the editor (or loses his/her job).
This is the way it is and always has been. (You really ought to read a history of Joseph Pulitzer, a man whose reputation has been unjustifiably rehabilitated by the passage of time and the connection of his name to a prize.)
So my questions are:
Why does Tanta (and you) blame the least responsible person, the reporter, for the deficiencies you find?
Why doesn't Tanta stick to what she knows something about - RE?
Tanta, they have had eight years to get established- fewer will be leaving than you think;-}
They all think a bright future awaits on K street- the reality is that the Repubs are looking like the 1932 version- complete with a very long spell in the wilderness for their stupidity.
Here in Arizona, the Gov is sporting a 70%+ approval rating, and the repub legislature continues to act like a bunch of stupid morons sending her trash to veto.
Astounding behavior. Like cutting taxes by a vanishingly small percent is going to bring back the real estate boom. Dead. DEAD and gone, and that boom in revenue that accompanied it is gone too. We need a tax increase to maintain the current level of minimal services, and instead we get discussions of how government is huge. We have one of the smallest state govs in the fifty states, with minimal taxation, and yet the crack of tax cuts is still being pandered to the people.
Reality will leave them standing after the election in a very lonely minority with no real power. Geez, telling underpaid state employees that they will get a pay cut in the face of $4 a gallon gas and spiraling food inflation? Oh yeah, be happy you have a job, and we would like to make your drive to work faster by gifting you with toll roads!
What planet are these folks from? If local GOP folks are the future of the national party, I would say they have no future. Get ready for de facto one party rule for a while.
Someday this war's gonna end...
OT.
The US financial shenanigans provide the motives for the initiation of the "Asian Bellagio Club" as it takes its first real action. Asian countries pool resources to defend potential financial crises.
S&P Lowers CDO Assumptions, Signaling More Downgrades (Update3) - Bloomberg.com
It's conceivable soon an economic zone and a new common regional currency will take form.
Spend now and pay later attitude must change.
Fred, what you say about the newspaper business is 95 percent true (the five percent is your omission of the fact that a lot of us--editors, publishers and reporters--still take our jobs seriously and still do try to serve the public.)
But why do you think our work should be above anyone's criticism?
Saw this on Bloomberg. Asian nations from Japan to Vietnam are creating an currency pool of 80 billion dollars to protect them from credit risk and inflation. What will this do for the dollar? Euro?
Asian Ministers Agree to Pool $80 Billion of Reserves (Update1) - Bloomberg.com
Lawyerliz writes:
You know, having now been told about the litigation, you should try to rent until the litigation is over with. Probably nobody is buying because of it. I infer it is a cause celebre'? If it isn't you may have a legal duty to disclose to a buyer what is going on. You would here in Fla.
Yes. The Litigation isn't helping. I would certainly have a legal obligation to disclose. I'm not sure about other residents- many have no idea any of this is going on.
I will note it is never a good thing when people get to the deposition, and the guy suing you is all "So, did you see me on Oprah?".
This goes to show how a client has to be prodded to tell the whole story. Not criticizing you, NoraB, but what you left out was very very important.
Yeah- it's not an issue- I am incredibly reluctant to talk about the suit in anything but the most general terms, if at all, due to the nature of the litigation. Last thing I need is to get hauled in due to a blog post, even if it's not using my real name.
The whole thing is absurd and needs to be thrown out, but is being brought by people with some astoundingly deep pockets, and law degrees. So no, probably not anytime soon.
Good luck. Your situation sounds like one for the grandchildren someday! ("I remember when I only had $300 dollars in my bank account and had to move to the midwest...")
JP | 05.04.08 - 1:32 pm | #
Well if you have to move anywhere with only $300 - I can't think of a better place to go than the Midwest. The reverse (going to DC or NYC or Cali) with only $300 - now THAT would be a challenge!
JP-
Are you in or outside the beltway? How's your transit access? I'm mostly curious.
And yeah, it is going to be a story at some point in time. Right now it's just a frustrating annoyance.
But hopefully new northwest is going to be a much less expensive place to live all round.
Tim writes:
Saw this on Bloomberg. Asian nations from Japan to Vietnam are creating an currency pool of 80 billion dollars to protect them from credit risk and inflation. What will this do for the dollar? Euro?
Bloomberg.com refer=home
Tim | 05.04.08 - 2:00 pm | #
Nice find Tim...
Some interesting tidbits from the link...
May 4 (Bloomberg) -- Finance ministers from 13 Asian nations agreed to create a pool at least $80 billion in foreign- exchange reserves to be tapped by nations in case they need to protect currencies.
First question: Defend their currencies? From what? Too much appreciation? Too strong? What are they worried about?
Second question: In dollars, euros, each other's currency, gold - what? Without knowing the projected pool mix it would be impossible to know the expected effects.
A quick survey of recent postings on Setser's Blog shows nothing on this subject. He does have a lot on current CB activity and it has been as intense as ever (contrary to expectations from dollar bears predicting they will abandon the dollar).
Stuff moves slow in the bizarro world of currency exchange - that us until it all moves REAL FAST.
Tanta-
The kicker of the whole story? I at a point in the last decade worked for one of the major real estate trade groups. As a peon mind.
But one of the things I did as a part of my job? Take all of those classes that talked about underwriting standards, and the things required to properly do it.
I wouldn't underwrite a unit in my building if you paid me.
But the litigation was certainly not in place when I purchased- I would have run the other direction. And it is the kind of freak thing that could happen to anyone. Partially it's the result of following legal advice that the whole thing is going down.
Mostly what I've learned is this: A personal liability blanket insurance policy is the best thing ever. About $30k of personal legal bills were paid as a part of it- I wasn't forced to rely on the board (which I quit)'s existing D&O coverage.
I will probably own this place for a long time. It isn't a walk away situation- I don't actually happen to be majorly/at all upside down on what would be the saleable value sans the lawsuit. Plus, its in a supremely good location, in a town with a lot of stable government jobs.
We can't get hit with a special assesment for the same bylaws clause that is what we were advised to lobby Richmond to change.
Someday, when our Oprah visiting plaintiff is gone, and I won't have the pants sued off me, there is a book about the whole thing.
Post 8/8/8
Dryfly, I have begun to believe our crisis kicks off right after the Olympics. That should be when the stimulus shows as a bust, and the contraction continues.
The fact that you can get all of those folks in the same room on the same topic shows how big the crisis is, and how it is still uncontained.
Once again things will go both faster than expected, and slower.
Interesting times.
NoraB- I have a great idea- settle your litigation by deeding them the condo with stip they assume your mortgages- you couldn't be nicer about surrendering your poison pill;-}
Someday this war's gonna end...
For we who post here, it is a labor of love.
The hub works for NASA. When he bitches and moans about the latest regulatory nonsense, it tell him: you think NASA exists to get spacecraft off the ground? Nope, it exists to get various congresspersons elected.
Likewise, the newspapers exist to make money, not to impart information. Likewise, builders exist to make money, not to build houses. Etc.
Trouble is, with all that money, there is nothing but junk to buy, except at the very highest levels, because everybody is doing it for the money, not to make something wonderful.
With newspapers, the stupidest probably do not read them anyhow. Each dumbing down seems to make a little more money, for little while, but after a while, it becomes obvious that there is no value there and the smart abandon the product. I spend the time I would have spent on reading newspapers on reading this blog and Irvine Housing Blog.
The WSJ with a sports section. Pfffstttt!!!
Negative Carrion-
I'm not underpricing liability. Trust me when I say that. A whole lot of legal/insurance calculations are in this.
I can't talk too much about it, but believe me when I say I am acutely aware of a number of potential liability issues.
Which is why I'm renting the thing out.
. . . said Moss, who also is a real estate agent. . . . said Gozen, a mortgage loan officer.
You need new tags for this:
"Couldn't happen to nicer folks"
"Sometimes, there really is justice"
"They drank their own Koolade".
"We took dancing lessons from Chuck Prince."
On a side note: T. S. Eliot has some great imagery, and great one liners, (like "I'll show you fear in a handful of dust" - spooky reading after the anthrax scares), but I once read a line by line dissection of "The Wasteland" which showed that he is often incomprehensible if you don't know all his contemporaneous history, all of english literature, all the greek and latin classics, and some writings that were in Sanskrit, for God's sake. How is anybody but another Lit. professor supposed to get this stuff?
John Stark: I did not say (or mean to say) that publishers, editors and reporters don't take their work seriously. Like me, they do have to pay their rent and put food on their tables. They bend to the market as most of us must.
I have no problem with knowledgeable, justifiable criticism. As a public service I've taken on the surprisingly difficult task of trying to educate Tanta about something that she obviously knows very little. Is there something wrong with that?
AllenM writes:
Just walkaway.
On the other hand, you could just find a tenant, and go through the enormous hassle o being the thousand mile absentee owner.
Ugh. With all the attendant hassles.
On the other hand, DC is going to get a ton of newbie Dems moving into new jobs soon in DC with the changing of the administration, so crashpads will be in short supply;-}
It's not yet at walkaway territory. Although I am certainly aware of that as an option at some point in the future where things get to be too nutty. Right now the calculations are still on the side of renting the thing out and seeing what happens for a year.
And it's a very democratic crashpad kind of space. The republicans live in the vastly nicer development next door.
Your call!
1979? You still a baby.
Mack:
Or the variant, "Don't let the door hit ya where the good Lord split ya."
AllenM:
If the crisis doesn't hit until after the Olympics, you can have a heck of a rally in three months.
Every specu-investor losing his shirt attempting to profit from people just wanting to buy their %#)&@ place to live in this world, or, even worse, buy-to-let decent housing, makes this Georgist one very very happy camper.
Landlords as a rule suck and we as a society should tax all their profits derived ground rents away. If I were king they'd be welcome to actually INVEST in improving the fixed multi-family housing stock and profit from that, but that's not normally how the game is played.
Maybe OT, but:
JDwrites:
"It's much easier to control the number of renters than it is to control the renters once they are already in the project".
I notice that your board has made the mistake of not carefully enforcing the rules of the association to prevent abuse by nonowners. Also the board may not have passed the necessary rules.
Since your association isn't willing to control the destructive behavior of nonowners, the board's non- actions may be contributing to the problem.
Also, many condo associations which didn't have rental restrictions in their orginal declarations now are faced with amending the declaration. This may require an affirmive vote by a super majority of unit owners. Owners of investor owned units will vote against the restriction Other owners, thinking they may want or have to rent out their units in the future, will vote against it as well. Consequently, it is difficult to get the amendment adopted.
So far, our association has strictly enforced the rules for all residents and it has worked pretty well even though we have about 18% renters.
Dryfly,
The Asians have been brainstorming about an economic zone for some time. The nickname for the group is "The Bellagio Club". This new money pool is the first concrete, coordinated action out of this group. The faltering of the US economy at the core reverberates throughout the periphery, hastening matters more urgently.
My husband takes his NASA job very seriously too. At some point his efforts will become useless as he sees it, and he will quit/retire. Luckily, he is of retirement age.
At some point, the pressures on editors and reporters are so great that their duty is to quit. When the news isn't being accurately reported, or reported so sparsely that only misinformation results, and it is hopeless, you have reached that point. We who WANT Tanta rants and extensive, accurate information frankly don't care what the pressures on you are. You are not producing something we want, so we will ignore you. You not meaning you personally, but the plural you. Youse, y'all, you guys, since you doesn't have a proper plural and could use one.
By the way, in the 60s, and also later, I was there at certain events which were reported. Not a single one was reported accurately, in my opinion. I deduce that NOTHING in the paper is accurately reported, except sports scores. Figures reported usually don't say if they are monthly or yearly. They don't say if they are adjusted for inflation or not. Etc, etc. Even NPR is guilty of that.
I read that TS Elliot was heavily edited by somebody. Pound maybe? Who made the Wasteland much shorter and perhaps less comprehensible. Does a non-edited version exist?
And ya know, people still read it, no matter how difficult.
I find that if I make a classical allusion--even the most simple minded one, such as "Even Homer Nods", nobody gets it. Nobody knows who Homer was.
Lawyerliz said: "Nobody knows who Homer was."
Sadly, most of our contemporaries would think it was that Simpson fellow.
ONE of them is a flipper - the other is an owner occupant who needs to move because of the change in family size.
Like the change in family size just happened?
SHE decided to buy the condo, then
SHE decided to get married, then
SHE decided (I would think) to have a baby.
She has to realize that lifestyle choices are sometimes contingent on each other.
I have no problem with knowledgeable, justifiable criticism. As a public service I've taken on the surprisingly difficult task of trying to educate Tanta about something that she obviously knows very little. Is there something wrong with that?
Of course not, Fred. Tanta isn't above criticism either. A lot of criticism of MSM is "unfair" because it is written by people who don't understand what we are up against. But why should our customers lower their standards because of the problems in our industry? They shouldn't and they won't.
As LawyerLiz says:
With newspapers, the stupidest probably do not read them anyhow. Each dumbing down seems to make a little more money, for little while, but after a while, it becomes obvious that there is no value there and the smart abandon the product.
In my rare optimistic moments, I hope that the steady stream of online criticism--from bloggers and online commenters--will put some much-needed upward pressure on newspaper quality, even when that criticism strikes us in the business as "unfair."
Yeah, and so they don't get the joke of Homer S's name.
Sigh.
Which is not to say that Homer Simpson is not one of the great cultural contribution of our day. The Simpsons show is satire on the level of Aristophanes. Just not quite so dirty. It is probably more relevant to watch the Simpsons than read Lysastrata. Or the Birds. Especially since few know who Socrates was either.
Baron:
I am a lawyer, I was at the ABA Real Property Trusts & Estates symposium, and I have never considered buying a condo. I was surprised when the panelists said individual owners were subordinated to project loans, but I didn't get to talk to the panelists afterward because they were mobbed.
I am confident that the title companies will have a long list of reasons why they are not responsible for anything, as always. I'm not worried about them. My point was that anyone relying on the schedule B from the title commitment isn't going to get any details about the project documents other than copies of the project documents (which in my experience the borrower frequently does not actually receive unless they have a lawyer who asks). I think the residential mortgage lender would expect to be able to tell whether they are in first position from the title report. Now I am not so sure.
My original question was whether Tanta thinks a residential lender would knowingly allow themselves to be primed by the senior project lender. But given that they weren't reading anything else before they approved a loan, why would we necessarily expect the unit lenders to read the project documents? OK, so maybe they've got a subordination from the first construction lender. Where do they stand with regard to the mezz lender when it takes out the developer and can exercise those rights to re-purpose part or all of the project.
This is mainly a concern with large projects where you have maybe 10-20% occupancy by early buyers, there is no prospect of selling the other 80%, the amenities may be half built, and the developer is out of money. These people are in trouble dozens of different ways, so this may be the least of their worries.
The problem with renting condos is not with the tenants, but the absentee landlords. They don't live there and don't want to put a sou into the development. Condo boards are usually divided between residents and absentee owners, as the absentee owners have no interest in upgrading the landscaping or hiring a better maintenance staff. (A friend of mine was president of a condo association and the board actually examined the possibility of admitting tenants to membership, as the tenants cared more about the development than the landlords did.)
As for owners in foreclosure renting out their properties--our local paper's real estate writer interviewed a local realtor who suggested doing just that. Then he put the recommendation in a sidebar, so no one would miss it.
Go Liz
We bought a condo in Portland, right by the University, for our son to live in. At the time, the CC&Rs and By-Laws hadn't yet been written, but we were assured by the developer in writing that letting our son live in the unit would not be considered a rental.
The HOA was formed a month after we closed on the condo and at their first meeting, the board decided to not only limit rentals but to count "non lease agreement" occupants (i.e., family members of the owner) as rentals. They also include the commercial rentals in the percentage, which I argued against (since they are commercial space and don't have any access to the common areas).
They then began a discussion about how to "punish" people who were already in violation of the decision, since the number of non-owner occupied units was more than 30%. I never would have made an offer on the unit if these policies had been in place at the time; when we closed escrow and our son moved in, we weren't in "violation" of anything. Fortunately, someone made them see the liability they were headed into and they grandfathered in all these units. I am at this point somewhat grateful it turned out that way because I can now rent the unit when my son leaves and I don't have to ask permission from the HOA again. We are allowed to change tenants, but an owner-occupied unit has to go on a waiting list before they can rent.
I had a single-family home in a private development that was under HOA and I swore I'd never own another. It has been a living nightmare and only recently calmed down to occasional flares of disagreement. It's extremely small but it seems there's always one homeowner who doesn't want to volunteer to be on the board but instead has to make life miserable for not only the board but every other homeowner. (I laugh somewhat hysterically at the assertion that renters are worse than owners - my experience has been the complete opposite.) However, when you buy a condo there's no alternative to an HOA. If you're absentee, you have to do whatever you can to assure the board that you care about what goes on even if you don't live there, and you have to be willing to defend the occupants who insist that ONLY renters and their friends destroy property.
In Florida, you wouldn't have been allowed to close without the condo docs being finished and recorded. And if they are changed materially, you have 15 days to get out of the contract after you are supplied with same. You are supposed to be given a copy and there is a Florida sanctioned form saying you got a copy. I have never heard of this being neglected.
The condo isn't considered to exist until the docs are recorded.
In Florida priority is a race to the courthouse. If there is a mezz lender, unless the docs made it clear that they were going to take priority, they would lose in a foreclosure.
I always skim the condo docs to see if there is anything weird in them when representing an owner or mtgee.
Umm, that is to say I USED to do that, back when there were some financed closings to do. I can't say that I did the same with loan docs that were going to be paid off anyway. All I did then, was make sure I had pay off letters from all mtgees.
So I guess that I could have let something go by me. However, if it had, I guess I would know about it by now.
Condo docs used to have rights of first refusal on behalf of the assn. Not the developer/seller. Then, it was realized that nobody was going to exercise these rights and they mostly stopped being included, but still exist in old docs.
Re LL
"Yeah, and so they don't get the joke of Homer S's name.
Sigh."
Homer was named after his creators father.
Sometimes it ain't all that deep.
A moderate sized condo development was built near the site of what you might call a prior significant beach cliff erosional event (that cause the physical & financial collapse of a prior condo development).
The condos were finished around a year and a half ago, I think. Last year, the developer applied to the city council to grant a rezone/conditional use permit to allow daily rentals. It's a tossup as to whether the developer made the application because he/she/it meant to all along (a tactic that's been tried before on the OR coast & has sometimes been successful) or because the condos haven't been selling well. I've heard the developer has had to reduce prices at least once so far.
In this case, the surrounding property owners & tenants made such a fuss, that the developer withdrew the application before the city ruled on the application. Thus preserving his/its ability to apply again.
I'll add that the developer didn't agree to provide an on site manager for these daily use units or to make those condo owners who chose to do daily rentals cough up enough money to pay for a competent manager.
Most of the members of the city planning commission & city council are part of the good-ole-boy & a few girls-network & seem unable to understand why residents, don't want more daily use rentals masquerading as residences & B & Bs (the latter pretty much unregulated in this small city) immediately adjacent to their homes--for many of the reasons listed above. Or aren't thrilled by what frequently seems like an almost complete disregard of the urban land use plan OR law requires cities to compile & follow (but enforcement is not great).
The city does expect residential real property owners to vote for construction of new sewage treatment plants, a new water treatment plant to support all the increased development. Also an "aquatic center" to replace the current municipal pool--the plan calls for 4 pools (one an Olympic sized lap pool--not just 4 very small pools), a water slide, maybe one of those pools a wave pool, for a town of around 11,000. The "aquatic center" is really just another tourist attraction that city residents are supposed to be happy to subsidize. Its proponents say it's a great idea but fail to explain why, if it's such a great idea, they can't find private backers to pay for construction & maintenance.
The aquatic center's "necessary" because you can't expect people to be satisfied just to walk on beautiful beaches, let their kids play on the beach during the winter, fly kites, etc., or walk on a bay front of a harbor that still (at the moment) is partly a working harbor but has lots of tourist type stuff too. Not when it can get as punishingly cold as 45 degrees out & windy.
A few geologist/marine biologists have formed a betting pool regarding how long it'll be before the condo development has stabilization "issues". I'm betting on around 7 years. Could be several years less if we get some really wet years & current rates of erosion increase. Always fun things to do at the beach--like check the area below the condo for signs of increased rates of erosion & huge cracks in the poorly consolidated sediments that form the cliff in that area.
But, it's still a joke!!
And Homer's father wouldn't have been so named, if the poet had never lived.
LL,
It was Matt Groenigs father.
I meant Matt's father of course.
Are you in or outside the beltway? How's your transit access? I'm mostly curious.
Sorry for the delayed reply. It's nice out!
Inside the Beltway, good access to 395. Easy walk to bus, metro access requires bus/drive.
John Stark wrote: "In my rare optimistic moments, I hope that the steady stream of online criticism--from bloggers and online commenters--will put some much-needed upward pressure on newspaper quality, even when that criticism strikes us in the business as "unfair." "
Sorry but you overvalue bloggers. It's all about that clinking clanking sound. Newspapers make money, lots of money even today. The problem is that they were wildly overvalued by Wall Street and today's managers cut, cut, cut in a suicidal attempt to make something that is nicely profitable into something obscenely profitable to satisfy Wall Street. The new breed of publishers like Sam Zell or Brian Tierney don't solve the problem. They so overpaid and so over leveraged that their banks and bondholders put them in the same bind.
Can I make one plea? The reporters are not the problem! Please stop blaming it on the little guy who can do nothing about it.
At some point a decent reporter will realize he cannot do his job properly, and will not be able to for the foreseeable future. Unless starvation is the result, anyone placed in that position for any type of job would do him/herself well to quit.
For their own sakes as well as the public. Down that road lies burnout, sadness, frustration, and even mental illness.
Same as the pricing in the derivatives market, unless people act, it is a race to the bottom. I don't want to live in that kind of a world, where everything is a race to the bottom, and yes we have money, but nothing on sale is worth anything.
albrt,
What lawyerliz said is pretty much spot on.
We do twenty or thirty new condos or phases a year, and I have not seen anything that would suggest what you are saying is possible, and I have not had corp send out any underwiting bulletins warning us to watch out for it.
I also have several condo development projects undergoing foreclosure, and none of the project lenders are making any kind of claim to sold units.
At some point a decent reporter will realize he cannot do his job properly, and will not be able to for the foreseeable future.
But I CAN do my job properly! I just can't do it perfectly. With some intelligent criticism, maybe I can do it a little better next time.
LoawyerLiz wrote: "I don't want to live in that kind of a world"
Wow, I sure hope that's hyperbole LawyerLiz. Maybe you should take a year or two off from your perfect world, join the Peace Corps and find out what life is really all about. Then again there's always Prozac.
John Stark said: But I CAN do my job properly! I just can't do it perfectly. With some intelligent criticism, maybe I can do it a little better next time.
Yes. And if more reporters exhibited your level of professionalism I suspect we'd all find a lot less to criticize.
LL- Wasn't Socrates the other rat in the movie "Willard"? The star rat was Ben, who got stardom because he was the eponymous subject of that song by a young Michael Jackson.
BTW- in college I had to read Njal's Saga. I remember this phrase, "playing wife to a troll", it occurs to me every time I read one of Fred's comments.
Re blanking- I took Linear Ordinary Differential Equations in college. The only thing I remember is the title of the course, the rest of the experience, mercifully, has vanished.
Yes. And if more reporters exhibited your level of professionalism I suspect we'd all find a lot less to criticize.
Well, I'm not claiming to be special. On my home turf, I've never found my critics to be in short supply. Most of the reporters I've met in my 35 years in this business have been conscientious people. Imperfect, underpaid, overworked, prone to grinding out superficial stuff at times, but conscientious.
Don't judge reporters by the worst efforts of the worst among us. That wouldn't be fair to doctors, lawyers, priests, teachers or cab drivers either.
albrt writes:
Tanta:
I attended a real estate conference this week, and at one of the presentations the panel claimed that most project financing in recent years was senior to the individual unit purchasers and was not subordinated, so a project foreclosure can wipe out the individual unit owners. The project lender would not always choose to do this, of course, but they would do it if they were converting to some other use.
albrt, i saw a story the other day on this topic, it is happening in FL. unfortunately, i cannot find the story to send along. in essence, it occurs in failed apartment to condo conversions. the developer wants to revert the project back to apartments. the early buyers can be forced to sell at "fair value," which could be less than the purchase price or the mortgage balance. the individual profiled was scrwed as he was going to lose $30-50k from the purchase price and there was a shortfall to cover the mortgage. apparently, all legit by FL law.
According to the New York Post today, the Minneapolis Star-Tribune is "on the brink of bankruptcy."
According to the New York Post today, the Minneapolis Star-Tribune is "on the brink of bankruptcy."
(Sorry--that's what happens sometimes when your broadband download speed is 56 Mbps.)
surferd--anything is possible, and if you read it you read it. But I have been doing this for a long time and have never heard of it.
There are other possibilities--say only 5% of the units sell. The developer either gets foreclosed or it tries to revert back to apts. There are detailed rules about uncondominiumizing things, which I would actually have to look up. These rules were enacted in part after hurricane Andrew to allow for the possibility of a building being destroyed and the owners not unanimously agreeing to terminate. If you find what you read, I'd really like to read it.
I did have a client who was offered her deposit back at the height of the mkt. If I recall correctly, we thought the developer just wanted to resell at a higher price. Some people just took the money they were offered, some demanded interest, and some, like my lady got a bunch of money to void her contract. That didn't work out too well for the developer did it?
If the lender forecloses, what it gets back is condo units, not apartments.
After something like 3 years, the developer has to turn the joint over to the assn. Of course, if the developer still has most of the units, it IS the assn.
I have heard of buildings which were only partly condominiumized, and naturally, you would have to allow for who pays for what upkeep expenses.
I think if a unit owner paid everything he was supposed to pay, and somebody tried to kick him out under the circumstances described, he would have a title claim. I actually was a claims atty for a couple of years. It was facinating work, because besides a goof up, there was usually also a scoundrel who took advantage of the goof up.
you could write novels about some of the claims. I had to tell myself everyday, I didn't do this. I didn't do this.
And I didn't mean I was going to kill myself because of the evilness of the world. Just that I would retire and spend my time gardening, cooking, and trying to learn Spanish, which I have neglected lately.
Some flippers threatened by foreclosure are trying to pressure the condo board who tries to keep all those renters out of their home - scum against scum, why should I care for this case? Sometimes I think that there should be law against the discrimination of renters, like there are laws for the protection of racial minorities, and a condo board should not be allowed to reject all renters out of hand. I would accept, however, if the board uses published guidelines to prescreen renters and demands some extra deposit to the board from them.
AllenM,
Have you ever read the bios of Arizona legislators? Manicurists, junior college dropouts, no real qualifications whatsoever except they or their parents got here 30-50 years ago(or in some E. Mesa/West side districts a 100 years.)
Bottom 10 in legislative make up(a ranking familiar to Arizonans.)
Lawyerliz writes:
There are other possibilities--say only 5% of the units sell. The developer either gets foreclosed or it tries to revert back to apts. There are detailed rules about uncondominiumizing things, which I would actually have to look up. These rules were enacted in part after hurricane Andrew to allow for the possibility of a building being destroyed and the owners not unanimously agreeing to terminate.
Interesting.
Here in Wisconsin, the unit owners become tenants in common to the entire property if the condo ceases to exist for any reason, and the unit mortgage secures the percentage interest.
Short of eminent domain, I just can't see it happening here, and after the New London, CN, mess I don't see an ED happening either.
Many years ago whilst working for an insulation company, we went into a condo building to insulate the attics. One owner was extremely irate that we could go into his unit without his permission to access the attic. I learned then that the individual owners only owned what was inside the wall paint. Drywall and out belonged to the HOA. Ever since, I have wondered why anyone would willingly put themselves into such a situation where someone else has such complete control over something you supposedly own.
Driving on snow is easy. Just take life easy, make sure your tires have good tread, and expect to go sliding from time to time. Try not to be in the way of any big trucks when you go sliding...
Baron, I agree it wouldn't be happening in the midwest. My understanding is that the situation where the project lender might have seniority over the unit owner was only in the latest wave of highly financialized projects in the bubbliest areas. My further understanding is that no one knew of a project lender who has tried to exercise this right yet, but that their lawyers believe they can do it in a situation where the condo sales have hopelessly failed and they want to clear people out so they can repurpose the project.
Liz, I believe the business about having a right to buy out unit owners if the project does not maintain a certain level of occupancy is based on exactly the provision you are talking about that was intended for redevelopment of disaster areas. One of the issues was whether the unit owner would be able to convince a court that it would be bad policy to use this provision to bail out a developer in a purely financial disaster. The consensus was that the literal language would allow the developer to clear people out if the project was mostly empty regardless of the reason, and many of the declarations are set up to allow it.
Again, I am not claiming to know how any of this will turn out, just constantly amazed how many untested bells and whistles they hung on these deals during the bubble years.
Driving on snow is easy.
Oh yeah,... and don't forget a snow brush for the windshield and change the wiper fluid to a below 32 blend before it freezes in the reservoir.
God! I am such a Philistine. I can't get by the fact that apparently Wallace Stevens thinks that there are green cockatoos. Even with the permit of poetic license, it jars the biological senses.
(Although the echoes of Poe's Israfel is a nice touch.)
I'd say either way they lose. Sell at a loss and move on.
What is happening is a wealth transfer... Sellers who held (note past tense) wealth are now being forced to relinquish title to real estate to be transferred to those who can qualify with current income. Had the speculators not risked their wealth, future purchasers would have nothing to purchase at a reduced price. It began as speculators being motivated by greed but in the end, their wealth is about to be transferred to masses who qualify for FHA loans. We need more correction in price and for this recession to pass first but it will happen. I saw it happen in the 90's in SoCal and once it started we kept going until current bust.
The real estate cycle.... How the West was won. The railroads and towns that sprang up around them were wealth transfers as the price of land fell. The speculators who bought land in San Francisco in the 1860's lost their ass but society as a whole benefited from a nice railroad system connecting the two coasts and moving goods and people around the nation...
Speculators aren't all bad and are in fact necessary for our civilization.
Inflation and deflation are methods of wealth transfer in an economic system. For obvious reasons we can see why those who are relinquishing their wealth, real or perceived are so reluctant to do so and remain in denial for a long time. The resistance of those trying to hold on to wealth and those trying to obtain it is in full force currently. We should hit bottom around 2011 or 2012 in my opinion.
I rent; I've rented a hundred-year-old three-bedroom rowhouse (in Cambridge, England) for the last two years, for about $1600 a month, and since the house would probably go for $500,000 I think I've got a pretty good deal.
I've got a sizeable down-payment available in the event of prices becoming more sane, but $1600 a month won't at present come close to paying the mortgage on a comparable place.
I'm shocked at the anti-renter prejudice I'm seeing here; I haven't trashed the house, I've spent quite a while and several hundred pounds turning the garden from climax savannah with an underlay of broken blocks of badly-poured concrete back into something at least resembling a garden. The management company replaced the oven when it broke and replaced the roof before I moved in.