What if the condo complex goes under?

elle481March 29, 2009

We are looking at condos (actually they are called PUD's - attached and detached homes with common charges, etc. just like a regular condo asso.). We really liked one complex but are concerned about the developer being able to finish and/or sell off most or all of the homes. The complex is slated for 25 homes and right now only 5 are built and just three are sold (one is occupied by the developer). They started the complex in 2006. I really do love the place as the floor plan is perfect - unlike any of the other homes we have looked at and the developer is very flexible with price and upgrades. My major concern is buying the place, moving in and then the developer goes under. As with regular condos, the owners share in the taxes for the whole property. Well, if there are only a few of us, what happens? I don't want to live in a ghost town!!! I am picturing unfinished foundations, overgrown weeds and having no services!

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xamsx

Have a good real estate attorney read the condo docs to see under what circumstances the developer gives up control of the association and how taxes are divided. My crystal ball is rather fuzzy, but I am gonna guess this isn't going to be finished in the near future. You can find out how many lots have been sold and what the time frame is for building on those lots, but I wouldn't want to be holding my breath waiting for him to finish.

    Bookmark   March 29, 2009 at 7:03PM
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elle481

Hi aamsx. Thank goodness up here an attorney is a must for closings and I wouldn't do it any other way! When I heard that the builder is living in one of his homes that sent up red flags!! And his friend owns and is living in the other. The only other sold one was bought by an outsider, or so they said! The other homes (I think there were three others already built) are models and ready to be occupied but not sold. They were VERY flexible on price and what they would do for us to get us in the homes. There are several foundations poured and the rest is just open land just sitting there waiting for people to buy them. Three years seems like a long time for that little to be done.

    Bookmark   March 29, 2009 at 8:42PM
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triciae

elle481,

"...sent up red flags!!"

You've answered your own question. Yes, it's likely you'll be living in a sea of "...unfinished foundations, overgrown weeds and having no services!"

/tricia

    Bookmark   March 30, 2009 at 7:53AM
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brickeyee

One of the games some developers like to play is adding additional lots to the development.
Each lot gets them another vote in the HOA, making it take longer for any actual buyers to obtain control.

I would stay away form this one.
If he goes broke even the streets might not get finished.

    Bookmark   March 30, 2009 at 2:59PM
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logic

There are all too many people currently living in unfinished developments....roads not paved...empty foundations posing hazards for children, weeds, exposed piping, etc.

In addition, a new builder who comes in could build completely different low end models that are not in keeping with those currently built..which in turn could serve to lower the value of your unit.

This IS what happens when a not yet completed development goes under..

If the prospect of living under those circumstances for an extended period of time appeals, and one does not care about resale value...then I guess the chance might be worth taking.

Otherwise, best bet is to keep looking for a home or condo in a completed PUD.

    Bookmark   March 30, 2009 at 6:01PM
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fixizin

#1) Keep that lawyer CLOSE!

#2) Drive a bargain that actually makes them CRY... seriously, see what "comps" were selling for in 1999-2000,
*THAT* is the REAL price... all else is "froth" from our "friends" on Wall Street... GRRRrrrr...

Hi, keyed-up civilian here, checking in from Bubble-Central, i.e. Miami-Fort Lauderdale, where the 800 lb. gorilla in the room (and in the TAX BASE) is MOTHBALLED condo developments, highrise and otherwise.

The Plaza at Oceanside in Pompano Beach, FL is an excellent example. It is topped-out, exterior completed, and AFAICT, 98% finished interior, but only 19 of 186 units have sold. (No telling how many buyers walked away from their deposits, or otherwise pulled out, but only 19 are on the tax collector's property rolls.)

No one is allowed to move in, because the second the developer gets the C.O. (Certificate of Occupancy), they
are on the hook for THE PROPERTY TAXES ON ALL THE UN-SOLD UNITS--MILLIONS OF $$!!... and probably an equal portion of the maintenance fees!

And this is a legit, top-shelf developer--WCI Communities--listed on the NYSE, with investors such as THEE Bill Gates and THEE Carl Icahn. They have a long history of successful high-end highrise projects. They just couldn't get off the "RE Bubble Heroin" soon enough.

Their sales offices are still open, and they have dropped prices several times... but still not low enough to "clear" the inventory.

I do NOT know what they are doing to appease/compensate those who have plunked down their money (often at the old HIGH prices), but cannot move in... trying to find out later this week.

I do NOT know how one gets a mortgage on a property which can NOT be occupied, and is basically ILliquid... seems quite the conundrum... hmmm... bet the developer is "happy" to supply financing? Aim to find that out too... will report back if I do.

Here is a link that might be useful: Search by Subdivision 'Plaza at Oceanside'

    Bookmark   March 31, 2009 at 5:38PM
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elle481

ALL quite interesting!!! We have decided to walk away from this development and consider another one that is almost all occupied and also has the community center with pool, etc. It's more expensive (not happy about that), but more to our liking because it does have so much more to offer. We never thought about any complex in our area going under which is now something we will have our radar up for. Every other home we have ever bought were in already existing neighborhoods and fully occupied.

    Bookmark   March 31, 2009 at 6:04PM
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