The Washington Post: Condo owners who can't stay, sell, or rent:
"Susannah Moss's trendy one-bedroom Adams Morgan condo, in a converted warehouse, has become a potential money drain.
Since Moss contracted to buy the unit in early 2005, she has married, had a child and outgrown the space. She is trying to sell the condo but has been hampered by the housing slump. Three months after putting it on the market, she has yet to receive an offer.
Now Moss, 33, wants to find a tenant for her condo while she waits out the economy. But the condominium association allows only 20 percent of the units to be leased at once, so Moss is on a waiting list. If she tries to rent the unit without permission, she could face a $500-a-month fine.
. .
In 2005, George Gozen jumped into the condo craze, buying several units that he planned to sell quickly. When the market turned sluggish, he decided to rent out his two remaining Washington area condos. He is looking for tenants but is facing a 20 percent cap on rentals in both buildings.
At one of them, a luxury building near the Walter E. Washington Convention Center, the condo board has said it could evict unapproved renters, said Gozen, a mortgage loan officer. "My idea was not to be a landlord. My idea was to flip them, but here I am. I am stuck with them," he said.
Gozen is applying for hardship exemptions from both condo boards, arguing that without a renter he will not be able to keep the properties and will be forced into foreclosure or will have to sell at a particularly low price -- either of which would drag down values for the entire building".
12 comments:
Hahahaha! Poor mortgage broker's investments gone poof!
Here's a news flash: if the condo's won't sell at the old price, then the value has already been dragged down.
"My idea was to flip them, but here I am. I am stuck with them"
Quote of the month.
I hope all flippers get what they deserve.
"Here's a news flash: if the condo's won't sell at the old price, then the value has already been dragged down."
Yep...
Seems there are a lot of would-be sellers who don't understand that.
Being stubborn doesn't mean the value hasn't dropped. It just means you won't admit it.
I don't like the fact either that the flippers seemed to be raising prices without adding value, but still I wouldn't wish them harm. I learned a long time ago that it's not a zero sum game and that one doesn't benefit from their neighbor doing badly ... usually it's the direct opposite. When one's neighbor does bad, so do they.
these restrictions on renting are an issue. When buildings convert the original owners may be exempted from rental restrictions but post conversion buyers are not. So new owners are more than likely to be in a terrible bind if lfe changes force them to relocate. In a soft market that may last for years i can see these restrictions acting like a poison pill and actually hurt resales as more attention is focused on this.
kob said:
"In a soft market that may last for years i can see these restrictions acting like a poison pill and actually hurt resales as more attention is focused on this."
And what is driving the enforcement of these restrictions are "a return to normal lending standards" as the BHs like to call it. Banks traditionally wouldn't lend in buildings where more than 20% of the units were rented out. In recent years they had relaxed that rule. Now they are enforcing it again. And consequently the condo boards will be forced to enforce it again too if they want their units to be marketable. So, the BHs may not get the "cheaper rentals" they want, but people in distress who don't have a rental option are more likely to sell at a big a discount. A "return to normal lending standards" will help bring about more distress sales.
Speculation is risky...
You can't blame the banks for protecting themselves and ruining your get-rich-quick scheme.
>You can't blame the banks for protecting themselves and ruining your get-rich-quick scheme<
Leroy, to your point. Yeah. But this has nothing to do with it. Rental restrictions are a real mess. One, they don't apply to owners at the time of the conversion so a property can easily have 50% rental or better. 2. Condo boards enforce these rules against new owners. So you can own a place for four, five years and need to sell or rent because, thinking out loud, you lost your job and health insurance, your sick and can't work, your company just tanked and you got a job offer in NYC, etc. Or you now have three kids in a one bedroom, etc. and to sell means cleaning out your bank account to cover the loss ... I don't think so.
The question people should be asking is why is there is need for rental restrictions?
I lived in condo that had about 50% rental. The building didn't suffer. Improvements were ongoing, new elevators, boiler, etc., over the years. Owners, even absentee owners aren't stupid; and the tenants, believe it or not, were often professionals, quiet, great people.
The big problem here are the condo boards that put in poison pills that hurts everyone but themselves (usually condo board members are preexisting and exempt from the rule), and will increasingly hurt resale in a soft market.
A more realistic mesaure by mortgage lenders would be to assessment of whether the building is making its needed capital invesments.
Lance, to your point: This has nothing to do with "normal lending standards." You could have bought your condo at a good price, with a 20% down, with a conventional mortgage, and still be on the short end if the price is falling. Most people would like to leave one condo with at least a downpayment for the next one and not surrender in a distressed market. The vast majority of owners, I suspect, will suffer the market and live on but these rules are going to kill some of them through no damn fault of are own. I've been there.
kob:
You could have bought your condo at a good price, with a 20% down, with a conventional mortgage, and still be on the short end if the price is falling.
At least you COULD SELL and take a loss and not have to turn the keys over to the bank for foreclosure.
We have George Gozen, from the Wash Post article, on our video blog today. He talks about his experience with Delancy Lofts in Adams Morgan.
http://blog.developersagent.com/2008/05/one-condo-investors-experience-at.html
Lets try that link again:
http://tinyurl.com/4oa6xs
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