Should I buy a foreclosed Condo?

-- NJ Townhouse --

There seems to be discussion of buying condos in this market because of the lower entry price. First of all let me say, I have nothing against condos; I have owned and lived in 3 myself. As an owner occupant, the appeal is lower price and someone else handling all outside maintenance. Realize you are paying someone to do this and pay the bills. You have little control over whether or when they change the fence, roof it, or pave the driveways, or who the vendors are. As a rental, the same appeal is there for maintenance but you have now added another layer of confusion. Your tenant is dealing with the vendor (seeing the work) but they are hired and paid by the management company (using your money). Answers take a long time to get; here is just one example.

-- NJ Townhouse -- This 3/2.5 was in a large well-maintained complex with pool and tennis courts. Benefits: shared walls lower heating costs and no noise from above or below. No basement or garage made these cheaper than other complexes. In 1993, the owner lost $30,000 when I bought. By 1998, no appreciation yet. In 2005 I sold for 3X my purchase price.

Fence vendor puts up all new fences without replacing gates that were in the previous fence. He said it was not in the contract. Who wrote the contract? The Management company. He took off siding to connect a new fence to an outside wall but did not replace the siding. Said it was that way before the work began. Again his defense was it was not in he contract. These are things that you might put in a contract when walking the job on your own property, but get overlooked when someone is hired for a large job with many variables. Was it ever resolved. No, the condo owner ends up paying for the gate and replacing the siding. Vendor has been paid and gone. These hassles apply in any market.

HOWEVER in this foreclosure market there are other things to worry about with condos. Owners in foreclosure and some banks who become the new owners are not paying the HOA fees so the coffers are low. Grounds fall into disrepair, reserves are depleted and some associations are charging special assessments to the other owners to make up the difference. When the ratio of owner occupied units to total units is below a certain number, some banks will not lend to new buyers or they raise the interest rate they will charge on the new loan. Some insurance companies raise the rate to insure the units. These facts make it harder to sell your unit. This may not be the case when you buy but can become the case later and rest assured the owners (now you) will pay to replenish the coffers.