The Downward Plunge in the Real Estate Market

The Downward Plunge in the Real Estate Market
By Kay Senay

“In 2006, my partner and I purchased a condominium for $403,000. The 2007 tax appraisal was $237,000. Our accountants have told us to make sure we have enough money for a down payment on a new place, transfer the existing title to one person’s name so it only affects that person’s credit, walk away, and buy a new place. Accountants for several other owners have said the same thing. The developers have turned the condominium back into a rental property. The developer has not paid their mortgage in over a year.”

Many condominium owners are facing the same pain during this plunge in the real estate market. Many condominiums are being foreclosed by mortgage institutions and being sold at auction. Many owners are declaring bankruptcy. If you consider the solution given by your accountants, how will you determine which one of you takes the hit?

Making the developers pay their mortgage will not help your financial situation. Hiring an attorney to file suit against your condominium developers for not paying their mortgage can be costly and you may not win. If you do win, the developers may not be collectible. Also, if you win and can collect on the judgment, the money goes to the mortgage institution, not to you.

Your existing condominium Declaration may permit leasing of the condominium units. If it does, you might be able to lease your unit and recover some of your loss through rental income.

You may be able to benefit from the developers changing the condominium property into a rental property. As long as developers are in control of the board, they can make any changes to the Declaration or Bylaws that are to their benefit, without owner vote. You will need to keep watch on whether the developers insert a no leasing clause into the Declaration to prevent the remaining owners from renting their condominium units.

What do you gain if you walk away from your condominium? That depends on how you walk away. You can follow the advice of your accountants. You could declare bankruptcy. Your lending institution could foreclose. Maybe you could sell your unit back to the developers.

Walking away sounds simple but there may be hidden consequences that will make things more difficult for you in the future. Consult with an attorney in addition to an accountant. He or she may have other suggestions for you. You need to make sure you have thoroughly investigated all your options and their full future consequences, not just the one most suggested.

Kay Senay
http://condo-condominium.com
Kay is the author of CONDO BUYING & OWNERSHIP MADE SIMPLE: TIPS TO SAVE TIME & MONEY. This book is full of Kay’s secrets for solving difficult condominium issues. She is available to speak at conferences and to advise condominium and homeowner associations’ boards of directors. Visit her website at the link above for FREE TIP SHEETS, books, and more valuable articles.

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