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East Palo Alto Short Sales: Watch Out For Rental Restricitions

Posted by Marcy Moyer on August 27, 2011 at 10:25am

 

East Palo Alto short sale

 

There is another conflict brewing between investors and first time home-buyers, and this time the home buyers may win. In the more affordable areas of the Silicon Valley distressed properties, ie short sales and reos have been popular with investors and first time buyers. Many would be owner occupiers lose out on great opportunities to investors who have all cash.  Since condos are the least expensive properties, have the fewest maintenance issue,  and tend to bring in more rent per dollar spent they are popular with investors. Coupled with the more restrictive lending practices on condos, many bay area developments are now in a position where the number of owner occupied units has fallen to a critical level. Owners of these properties are having trouble refinancing and buyers trying to get loans are being rejected by the lenders.  As a result, many complexes are starting to pass new HOA regulations limiting the number of rentals allowed in the condo development.

These restrictions can be a double edged sword.  If they occur in a building where the delinquency rate on the HOA dues is too high then a buyer will not be able to get a loan anyway and it will effectively cut off all sales.  In the future when the market has settled down the rental restriction could put a damper on future sales.  However, if they are not instituted it may become impossible for anyone but investors to purchase in some condo complexes, which in itself will lower values not to mention make things harder for the first time home buyer. It will also make it impossible for current homeowners to ever refinance in some of these buildings.

I do not have the answer here as to what is right or wrong here. I can only give some advise on what to do if you want to purchase or sell a condo and want to get the information about potential rental restrictions.

1. Ask your agent to find out if the HOA docs are available yet.  If it is an reo they most likely will not be and a

short sale very likely not

2. If the docs are not available before you make an offer ask your agent to ask the listing agent for the number of the HOA management company

3. Call the management company and ask about any current or contemplated rental restrictions

It is not that hard to find out and can save a lot of time and possibly money.

If you have any questions about short sales in San Mateo or Santa Clara Counties please feel free to contact me.

 

Marcy Moyer

Keller Williams Realty

www.marcymoyer.com

marcy@marcymoyer.com

650-619-9285

D.R.E.  01191194

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Condo Association Fees In Foreclosure

Posted by Jennie Blackburn on October 9, 2010 at 7:50am
When Homeowners have financial troubles, the last thing they fall behind on is the mortgage, but the first thing they stop paying is Association dues. Because of this, many Condo & Homeowner Associations in Florida are squeezed for funds and have become aggressive in pursuing every penny. They now have legal representation, have been successful in litigating similar cases, and are not as likely to back off.

What bank negotiators don’t realize is that if the property goes into foreclosure, it could end up costing radically more than just the delinquent Condo fees.

1. Special Assessments:

Unlike delinquent maintenance fees, Special Assessments are not extinguished in a foreclosure because they are part of the property’s cost basis. In other words, the assessed amount becomes real estate -- part of the property. Example: Structural improvements or repairs not covered by association reserves. Delinquent maintenance fees are part of an Association’s receivables, but assessments are part of the real estate itself. As this assessment directly affects the tax valuation of the property, it cannot be separated from it. Which means when a bank forecloses and the property becomes an REO, the entire assessment must be paid, plus the back due monthly fees and the Association’s legal fees, penalties, and the bank’s legal fees.

2. HOA or COA:

One wrinkle to check for is whether the property is governed by a Homeowner’s Association or a Condo Association. Currently, in a Florida foreclosure, the bank would only have to pay 12 months* of Condo Association dues (or 1% of the original loan amount, whichever is lower) in order to deliver clear title to the next owner. However, litigation in Florida is less certain regarding unpaid back dues owed to HOAs after a lender forecloses.

3. Attorney Fees:

Another thing the bank negotiator may not be thinking of is that, even if they only have to pay 12 months of past due monthly Condo fees after a foreclosure…what about the legal fees owed to the Condo Association’s attorney? Judges are lawyers. You think lawyers look out for other lawyers?

The bottom line is that foreclosure will cost a bank more than just a few months of fees and it is in the lender’s best interest to negotiate these costs as part of a short sale, rather than dragging its feet until foreclosure.

*only 6 months prior to new legislation in 2010
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