Inquiry on selling our building

Started by JessicaM2 • 5 replies • 1512 views

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JessicaM2 (Colorado)
Posts: 2

Posted:

Hi guys ...

I missed my last HOA meeting nor have people returned my calls.

I'm pretty nervous, and that's why I am posting here for the first time.

I'd like your input.

Looks like my HOA is thinking to "possibly" sell our building who've been approached by "a few interested parties."

In fact, I have to fill out a "vote" sheet.

Our studio lofts - very small - are in the middle of a slew of hospitals/medical facilities - and next street has a slew of trendy bars and coffee houses.

I bought this place - purely on location. Plus, I love my new home.

Embarrassed to ask this question: But does this mean I have to sell my unit - that I've only lived in for 8 months?

Why would my HOA sell our building? Except for location, we do not have yards or even a club house.

I have terrible credit as it is ... and I don't think I'll profit a decent penny. Now add on that I may not be able to buy a place in the future.

Please share why would HOAs decide on something like this? Has it happened to you? Explain.

JosephW (Michigan)
Posts: 882

Posted:

Jessica

A number of associations have been sold recently. Southern Methodist University bought up a bunch of units in a condo near its campus in Texas, gained control of the association, and voted to sell the property in order to build George W. Bush's library. In Florida, a number of older condos that were severely damaged during the hurricanes two years ago, voted to sell rather than rebuild, and recently, a mobile home HOA voted to sell their property to a developer neting them about $1 million each. The key in most of the sales was that the owners would substantially profit from the sale.

You need to quickly begin to gather some information. First, read your documents (CC&R's or Master Deed) which should state somewhere the conditions on which your association could sell. Usually it requires a vote or anywhere between 2/3's and 100% of the owners voting to approve the sale in order for it to go forward.

Second, you need to see the offer. It should be in writing and clearly state all terms and conditions.

Third, you need to know if the board has tested or checked the offer by having the property appraised to see if the ofer is a good one.

If you haven't seen all of these, or if you don't understand any of them, then find someone who can help explain them to you, preferrably a knowledgeable attorney. If you can't afford one, look for a local legal aid group in your area.

If the board is considering selling the building, I would hazard a guess its because they expect that everyone will make a profit from the sale. You need to get all of the details before you vote. It may be that it actually might help your situation, but only a good analysis of all the facts will answer that.

Joe

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JoeW1 (New York)
Posts: 728

Posted:

Joseph - in Jessica's case, wouldn't her selling prior to a year mean she'll incur capital gains tax?

JosephW (Michigan)
Posts: 882

Posted:

Sorry, not a real estate attorney, but it probably won't close quickly, and it doesn't look like she would have major tax problem:

http://www.bankrate.com/brm/news/real-estate/20041018a1.asp

Joe

Joseph West
Official HOATalk.com Sponsor
Community Associations Network, LLC
www.CommunityAssociations.net
*See legal notice below (end of page) or go to www.hoatalk.com/legal

JessicaM2 (Colorado)
Posts: 2

Posted:

Thank you, guys for your quick feedback as I very nervous.

I found out per email via HOA today to clear up things up more. Here's their email to me to better explain. Also, please answer some more of my concerns based on worse-case scenerio ...

"Hi Jessica,

If the whole building were to sell:
1) there must first be a written contract that all owners review and can vote on.
2) It would take 67% "yes" votes to approve a whole building / land sale. In that case, if it were approved, you must sell at that agreed on total price (split 39 ways). Then your proceeds would be net of any loans outstanding, assessments outstanding, etc.

Having said that - a sale, if any, could be 6-9 months off. It takes awhile for the process. A valuation would be done as part of an appraisal of the building - this has not been done yet.

What the Board needs to assess upfront, is whether a majority of owners might be interested in selling given the right offer.

Let me know by responding to this email."

Now, my concerns and questions:

My fear is that I won't "profit" much as my one-room studio is $119K. I'm only paying interest and have never missed payments.

I'm in the midst of bankruptcy (my parents died, and I took over their medical bills, etc. as they had NO life insurance of provisions made).

Ironically, I had excellent credit when I bought my unit 8 months ago even on a small income.

Now, my credit will soon be "destroyed" thanks to bankruptcy.

If all I make is a whoppin' $10K profit and add taxes, it's only enough to pay rent. Nor will I be approved or have money for a condo in the future.

I know earlier you wrote that some people made a $1 million each.I just fear I won't be able to sell that well. I really hope my HOA is thinking about the "gold" here, and not wishing to sell 'cos we're having a difficult time selling our other 12 units. We have a broken elevator and there's major repairs in the building needed from our 2 Colorado blizzards.

In spite of it all, I love my little place. I know my parents would have been proud, and my condo is my baby.

Question: (Thinking of worse-case scenerio)

If I was offered an amount **less** than my Country Wide loan was given ($119K), how will that affect me?

As example, fictiously, if I was offered $80K instead, I would have to owe my Country Wide loan lender about $40K? I'm only paying interest, anyway.

I know this posting is convuluted, etc. But I am just scared. And already, I am warning my friends NOT to buy a condo as their building might be sold. Sure, it might profit well for some, but for newcomers like me?

Just scared.

PatrickH (California)
Posts: 204

Posted:

Hi Jessica,

Your comcerns and fears are all valid, so don't feel bad about posting them here.

Here's my take from the perspective of someone who's worked in commercial real estate for over 20 years. Whoever wants to buy your building knows that they are going to have to pay a premium over the market value of the units to get 67% of the owners to agree to sell.

Very few people who own a home worth X amount of dollars are just going to sell it for that price. If they like their home and aren't looking to sell it already, they won't just agree to sell it and move.

Now, if the buyer comes in with an offer of 25% more than the market value, then the owners might consider it. There has to be a strong financial incentive for the owners to go through the hassle of selling and moving.

One bright spot for you might be that according to the email you received, the sale proceeds would be split 39 ways. If you all get an equal share of the sale price,you might receive a higher premium for your studio unit than someone who owns a larger unit.

Now, he's a little insiders tip. If potential buyers are coming to your HOA looking to buy your building, then it must have an awful lot of value. The potential buyers have already done some of their homework and have identified your building as a location for some type of more valuable development.

What your HOA should do is engage the services of a commercial real estate broker to evaluate the property's potential value and market it to developers. Your building may be sitting on land that allows a large office building to be constructed there. You may be sitting on a gold mine and not realize it. You don't want to sell your building to someone who just showed up at your door, you want the entire commercial real estate community to know about it so you get the absolutly highest price.

Everyone in your HOA should just take their time and consider everything carefully. The first offer certainly won't be the best offer. With a little publicity through a broker, you may have developers lined up making competing offers against each other for your building.

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