buying a REO condo - bank does not know about special assessment as far as I know

Started by HaskinsN • 4 replies • 2083 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

HaskinsN (California)
Posts: 4

Posted:

I'll know more on Tuesday about this but here is the situation:

I'm interested in buying a REO 1BR/1B condo but I found out there is a special assessment of 20-25k going on, and that in theory, the bank does not know about it. I had only found out about this recently, and my bid had not factored this in. My bid has not been officially accepted but I expect it sometime this week.

Bank says the had a recent appraisal at $250k, but I see a recently sold unit in the same complex for $210k. They listed this one at $215k and we should agree at $205k.

The other twist to this is that the special assessment is only something talked about for several years, but will have to be done during the time I'm there, if I buy in.

So my questions are:

- How could the bank not know about this? It was foreclosed in the summer last year and has been listed a couple times but with different agents.

- Assuming the bank had not known about the special assessment -- how likely can we get the bank to take care of the $30k assessment, in full or partial? I had no idea about this until a few days ago, so the purchase price we agree up is without that knowledge. That said, given the location, I'm willing to pay up to 20% of the special assessment otherwise I'll move on.

- If the bank knew this all along, is it possible they are willing to drop the purchase price by 25k? Sort of as a deal sweetener?

The other possibility, which I suspect is likely is -- the bank did not know, and once they find out they will not pay any of it, but rather relist it to make it know that there is a special assessment.

Any thoughts or advice?

MaryA1 (Arizona)
Posts: 7,043

Posted:

Haskins,

IMO, a special assessment would be subject to disclosure if it has been passed and the members are liable for payment. However, from what you say, I'm of the opinion that it has only been talked about. Until the members vote to pass it they are not liable for paying it. Bottom line, the bank cannot be made liable to pay a special assessment that has not yet been passed by the members.

Since you have gotten wind of this it would be in your best interests to ask a few more questions. Because the HOA is resp for a lot more maint items on a condo (i.e., ext. painting, roofs, plumbing, etc) not to mention the private strets,they should have an adequate reserve fund to pay for these large maint projects. Because there is talk of a special assessment, and a quite high one at that, I'm of the impression the reserve fund is grossly inadequate. Frankly, you may want to reconsider bidding on this unit. Condo assn's are notorious for having under-funded reserves which results in special assessments and increased assessments.

HaskinsN (California)
Posts: 4

Posted:

That reminds me of something else worth mentioning. This complex has about 100 units where 90 are under the city's BMR program. The one I'm considering is not a BMR.

I too suspect bad reserves -- I wonder if the BMR program has created an atmosphere where the HOA's board has avoided raising monthly dues properly over the years.

It should not be a big secret once I see the HOA docs and the stats on the their reserves. The complex was built in the late 80's so the roofing has to be done by all reasonable estimates. I'm just hoping the bank/seller will want to negociate on this -- though I'm doubtful.

On the flip side, because the BMR program is there, I believe they require that the owner occupies the property. Therefore, the % of owner occupancy should be very high. Should that factor into my decision on whether to still pursue this property? In theory, the more owners that live there the more they will commit long term -- and the more it is in their interest to deal with the special assessment. At least, that is my understanding from reading up on this topic so far.

Any help or worthwhile advice would be appreciated.

HaskinsN (California)
Posts: 4

Posted:

Also, even with the 20k to 25k special assessment, I'm still considering it because:

1) it's so close to work and walkable to a lot of places -- location is very good. It's a good commute to a lot of big companies with well paying jobs, so seems to be very good for resale after I've lived there 7-10 years.

2) it might be a stretch - but one angle to look at it is if I close at $205k and pay the $20-25k, I'm still under what it's $250k appraised value.

Problem is, going into the bid, I've been comparing it only with a recent unit that sold for $210k. $250k makes sense if I go with comps (of the past 6 months) of other condos in the area.

A friend made a good point to me -- that the $25k is money I can use against the purchase price of another place. But I counter argue, that it won't necessarily be true for the range of condos available on the market in the range I'm looking for.

Of course, I'm all for the scenario where the seller/bank is willing to lower the purchase price but maybe I watch too many movies.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

How could the bank not know about this? It was foreclosed in the summer last year and has been listed a couple times but with different agents.

Its possible they do not know. They dont know anything about any of their properties. Neither do the agents. Its not a traditional real estate deal.

Quote:

Assuming the bank had not known about the special assessment -- how likely can we get the bank to take care of the $30k assessment, in full or partial?

1% chance. Bank ownerd properties are as-is. Rarely do they ever want to put any money into them.

Quote:

If the bank knew this all along, is it possible they are willing to drop the purchase price by 25k? Sort of as a deal sweetener?

Yes, if they knew, and I doubt they did, they would be willing to take 25k less. Re-submit your bid at 25k less but let them know the reason.

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here