Condo associations face tough times
July 12, 2008
The downturn in the real estate industry has been extremely tough for condo associations. Home owners who purchase a property in a community environment where funds are collected on a monthly or quarterly basis have seen their association fees increase sharply.
The main challenge facing condo associations is that they are struggling to recoup their fees when a property is foreclosed. The association fees can be placed as a lien agains the property, however their is often little or no equity in these properties when they are sold and the association is left without any financial compensation. In developments that have planned for capital improvements or renovations, in some cases these projects are being put on hold until the association has the ability to recover financially.
If you are considering purchasing a condo they you would be wise to request for a summary of the condo association delinquency rates, and present operating capital or reserve fund. Asking questions such as how old the development is, what are their future plans for improvement and how is the association managed are critical. In addition, your lender will want to find out how many of the units are owner occupied and whether or not the area is considered a market of depreciating home values.
