guest blog by Deborah Goonan
Do you have $60,000 to spare?
Imagine you own a one or two bedroom condo in Fort Lauderdale, with a balcony view toward the Intracoastal, and within walking distance to the Atlantic Ocean and beach city night life. Ah, paradise!
Until you get a letter from the Condo Association, demanding that you cough up nearly $60,000 for needed repairs in just a few weeks. You read that right: SIXTY.THOUSAND.DOLLARS.
According to a Channel 10 news report by Bob Norman, owners received notice of the special assessment on February 20, 2015. The first $20,000 was due on April 10, with the full balance due by June 10. Nearly half of owners were unable to come up with the first $20,000 installment. It’s not looking good when the Association cannot collect even one third of what it says is needed to make repairs.
Now many owners are understandably stressed out, knowing they face possible lien and foreclosure if they are unable to come up with all the money within a few weeks. The Association Board is reportedly looking into loan financing to raise the balance of the money needed for repairs, and to allow owners to pay over time. It’s looking like a loan — if they can secure one — will be for millions of dollars plus interest. Either way, assessments will increase dramatically. So much for the argument that condos provide affordable housing.
A quick check of public records for Embassy Tower II Condo reveals recent sales values of perhaps $170,000 – $300,000 per unit, depending on the size and number of upgrades inside. This special assessment amounts to perhaps 20-33% of the value of the unit at the time of sale. Even if owners are able to come up with this sizable chunk of change, will they ever see a good return on their investment?
Also according to public records, Embassy Tower II condo was built in 1973. That makes this condominium complex 42 years old. If owners had been setting aside reserves all along, there would be no need for a $60,000 special assessment. But, as readers of this blog know, it is rare for HOAs to adequately fund reserves.
Let’s do the math, 102 units times $60,000…that’s about $6.1 million shortage of reserves!
So, I’ll make a prediction. Because of its location near both the Atlantic Ocean and the Intracoastal, I’ll bet investor groups are keeping a close eye on Embassy Tower II, just waiting to snatch up units from owners desperate to sell, or facing foreclosure. Why, as soon as they can oust enough current owners, and take control of the Board, they can terminate the Association, and boot out the remaining owners. Then they can raze the 42-year-old building and put up a shiny new condo tower with twice as many units! They’ll make millions!
You see, the dirty little secret about many “affordable” condominiums is that planned obsolescence is part of the equation, virtually guaranteeing redevelopment every 30-50 years.
Tyler Berding wrote the report on it: http://www.berding-weil.net/pdf/uncertain_future.pdf
This folks are now suffering with a classic case of HOA Syndrome by Dr. Gary Solomon.
And, I’ll place a bet on who will coming running to loan them millions of dollars. The Mutual of Omaha Banc!
Another reason not to buy a condo and more reasons to run from them!
Most of these stories do not make the news. And who is accountable for this? The board, the management company? The owners are screwed. Did any owners bother to look at the financials over the last 5-10 years? Did any bother to look at the reserve study? This situation is probably not a surprise to the management, or the board. How much are their dues each month? I found some older buildings like this in Phoenix, and would never recommend buying a unit in any old high rise for this reason…some I found here have high monthly dues, 1k/month. I heard one here had a 30k special assessment. When will 20/20 or a similar show do a story on the truth about HOAs and the mostly unlicensed and even more mostly unregulated HOA management companies? When will the Association of Realtors do a disclosure and educate real estate agents and buyers on the risks of owning in an HOA? When will the legislators start listening to the public instead of the lobby groups that have created this situation?
I would love to see a news show call me, and several of you to do a story…we have enough info, and would like the truth exposed without interference.
Was the news clip removed from their website??? I watched a few seconds, and it stopped, now it says it’s gone.
I fear this is my future as well. As it is I am $60,000 underwater on the mortgage for my condo due to a 50% drop in value when the real estate bubble burst. This kind of special assessment (even less actually) would make me just walk and rent an apartment. Actually, that is what they would want . . .
Hi Angela. Take heart because the real estate market has been rapidly improving. I continue to be pessimistic about the next bubble which is approaching. But keep close track of your value on Trulia and Zillow. I’m not sure what market you’re in, but you may find your condo value has increased a lot just over the past year. I’ve noticed that the value on several properties I own in Colorado has taken an amazing jump upwards. Not surprisingly, though, is that my non-HOA properties have gone up the most in value. Knowing that, you can probably time your exit from your condo and your next purchase outside of any HOA. I truly believe that all HOA property is going to be crushed in the next bubble because mortgage companies are discovering how risky HOA property is. Good luck, and keep us posted.
I was young and stupid when I bought my condo. If I could detach it from the building and plop it down somewhere I would because I do love my space, but I got totally screwed by the market. Plus, my HOA sucks. They don’t maintain the grounds and buildings and nitpick everything owners do.
Thanks for the encouragement, and I know that I will not ever again get ANY home in an HOA.
The irony is that I thought I was getting a good deal at the time (2006). Luckily I got a fixed rate mortgage so I’m able to stay in my home. If the value of the condo were what I’d bought it for, I’d have $45,000 positive equity instead of $65,000 negative equity. What a learning experience!