Buying a new construction can be dangerous. Generally a new condo is contracted to be purchased for a set price, which can prove dangerous if the home prices plummet before the home is even completed.
Two large condo groups are currently the target of a large class action lawsuit taking place in Florida. Within the suits, the buyers allege that they were misled regarding the outrageous monthly HOA community fees, and suffered long construction delays.
Law.com references the case as follows:
They claim Related raised the condo association’s operating budget by more than 65 percent between contract signings and completion. The monthly maintenance fee for Meyerovich’s unit jumped from the initial estimate of $748 to $1,240, according to Cooper.
Under state law, buyers are allowed to cancel condo purchase contracts if “material and adverse” changes are made to condo documents filed with the state. But state regulators and developer’s attorneys disagree about whether higher maintenance fees open the door on rescission.
Did I read that right? More than $1200 a month JUST in HOA fees? That’s ridiculous, nuts, highway robbery, insanity…I lack the adjectives to describe a home owner’s community fee that exceeds my monthly mortgage.
In a hilarious message on their website, Community Lending, a lender, has announced:
It has been proven that in today’s very disruptive market, volume is equal to risk. And that risk continues to escalate through guideline tightening, aggressive collateral review and due diligence processes that border on full QA audits. ComUnity Lending has decided to mitigate the risk of the market by reducing our volume and moving to the sidelines while we wait for sanity to return to the market. We plan on a short period of rest and re-structuring, after which we will re-enter the business aggressively. We are committed to this business and look forward to seeing our way through this turbulent time.
We will be retaining two production offices in California and a core group of dedicated staff at our Central Support office in Morgan Hill. Effective September 1, 2007, ComUnity Lending, Inc. will move all loans to these two offices and we will lock only through these two offices. We will be working with friendly competitors to find homes for our Retail offices and other production units.
That about sums it up. Market is no longer sane, and lenders have decided that in order to mitigate risks blah blah blah they need to stop loaning altogether.
Don’t be Superstitious
Everyone has some degree of superstitious beliefs. That’s fine, and should be exploited to get you a better deal on that home. That home being sold 20k under asking because of an double homicide, or even that bedroom that doesn’t face east should never affect your purchasing feelings. While some states, like Utah, prevent negative stereotypes from being mentioned in a home sale, others mandate disclosure of such unsavory details. Find the haunted house that just won’t sell and you’ll have yourself a deal.
Make your Agent EARN their Commission
Most agents are desperate for clients, and will happily agree to scan the MLS and let you know when they find a deal. Be careful to explain to the agent specifically what you’re looking for, but avoid giving a price window. Saying a maximum price may tempt your agent to simply find the first home in that price range and pressure you to purchase, wasting everyone’s time.
I have personally struggled in past before I became an agent to find another real estate agent who could competently pass on the deals to me. I recall one agent who I asked to keep their eyes open over the next year or two and let me know if any deals ever came up. First thing the next morning I got a call from that same agent telling me that, surprise surprise, he had found a half million dollar home that was perfect for me as an investment. (half a million was a fortune in Utah at the time for a home). Sadly, the home was a complete waste of money, and the agent proved useless.
Finding a good real estate agent in Utah can be tough, as well as in any other part of the nation. But if you succeed, you’ll have an employee essentially scanning the MLS and bringing you the best deals in the market, which do exist.
Look for a Reasonable Fixer Upper.
Keep in mind there is a fine line between reasonable and an out of your league project. Look for a home that just needs some paint and flooring, nothing too big, and preferably just cosmetic repairs. Almost anyone can handle those. Bigger projects like roofs and add-ons can quickly spiral out of control cost wise.
If you have cash, and can pull off the repairs without putting yourself into debt, you can usually fix a home up very nicely and make a fair gain for your work and time.
An example of this would be two homes in a fast improving neighborhood. One of them, in excellent condition, sells for $250,000. Knowing this you see a home of similar size, close by, that is listed for $199,000. Assuming the home is structurally sound, much can be done to improve the appearance of the home with some simple sweat. $10,000 of paint and cosmetic repairs could reasonably see your house selling for $250,000 when all is said and done.