The condo pictured above just came on the MLS this morning with a list price of $95,000. It is a bank-owned foreclosure, with one bedroom, approximately 685 square feet and described as “needs work.” For an owner-occupant, with a 3% down payment and an FHA loan, the payments on this could be under $1000 per month, including the mortgage, taxes and current HOA dues of $260/month. This is priced $20,000 less than the next cheapest unit in the city, which is also bank-owned in the same development. This may be another example of a lender pricing agressively to generate quick activity and multiple offers, so it may end up selling for more than the asking price.
This condo was previously purchased in August 2005 for $260,000 using 100% financing. According to the records in the tax database (not totally up-to-date, but all I have to go on), there are 392 units total in this condo association, and at this time 32 of them are in some stage of foreclosure. There are also 17 foreclosed units that have sold this year, 4 that are in escrow, and 14 others available today on the MLS.
Potential buyers need to know that when the level of foreclosure activity is this high in an association, there is a very real probability of HOA dues increasing to the maximum allowable (20%) limit, and possibly additional “special assessments” to make up for all the dues that went un-paid while the property was in the foreclosure process.
Once a lender forecloses on a property, they become responsible for paying the HOA dues and fees until it is re-sold, but the many months of dues payments that the prior owner didn’t pay, were wiped out in the foreclosure sale, and the HOA simply lost that revenue. The budget of a condo HOA usually includes all the maintenance and taxes for the common areas, trash service, as well as funding the reserves to replace roofs, resurface the streets, the insurance and maintenance of all the buildings. These costs aren’t expected to decline, and most aren’t optional that could be eliminated.
Before buying a unit in an HOA where there has been a lot of foreclosure activity, take a good look at the HOA budget along with the latest financial statements so that you know what you are taking on!