Before you buy a condo in a smaller building, you may want to read an article entitled "Condo Collapse" in the current edition of Skyline, a neighborhood newspaper. Written by Lauren Hansen, of Medill News Service, it describes the effects of foreclosures on those who live in condos with ten or fewer units. Some excerpts:
Brian Murphy is the go-to guy for apartment issues. Got a leaky pipe, squeaky door or a rodent ruining your day? Murphy's your man.
Every day he faces a barrage of complaints from fellow residents. Murphy has grown weary of the constant phone calls and knocks at the door.
Murphy is not the manager of an apartment building, nor is he a landlord. He is simply a condo owner doing whatever he can to keep his 10-unit Rogers Park building afloat.
In the past two years, Murphy's building has suffered two unit foreclosures. This means, among other things, a loss of $10,000 in assessment fees that help pay to maintain the building. To keep money flowing, Murphy brought renters into the newly vacant units.
With only 10 units, the building's small size complicates matters because fewer owners are available to cover costs. With expensive maintenance repairs coming up and the need to rehab foreclosed apartments for new renters, Murphy said they were just breaking even.
"We are in such a fragile state," he said. "Now, having two foreclosures - it's devastating."
Unfortunately, Murphy's experience is not unique.
Filings for condo foreclosures throughout Chicago more than doubled in the past two years, according to numbers released by the Woodstock Institute, a company that tracks community development. They rose from 1,670 in 2007 to 3,991 in 2008.
The increases in North Side neighborhoods are staggering: Lincoln Square had a 400-percent increase while Rogers Park and West Ridge had a more than 250-percent increase in foreclosured condo units.
Traditionally, many condo buildings in Chicago have prohibited renters, but at this point, they may prefer renters to vacant units. To prevent a foreclosure, a developer will try to find anyone to occupy vacant units, often renting units to anyone who wants to live in them.
So what's a condo-owner to do?
"Unit owners need to get training as landlords," said Brian White, executive director of the Lakeside Community Development Corporation. A comprehensive housing organization, Lakeside is funded by the city to provide condo-specific services, such as landlord and management training.
More condo units will be turned into rentals to prevent foreclosure, said White. Whether they like it or not, owners who are left in the building will find themselves operating as landlords of vacant units.
"Owners need to get training as landlords and become good landlords," he said. "The end result is to create a whole new stock of rental housing. There is a huge inventory going into foreclosure.
"For at least another year or two, condos will make up a disproportionate share of the foreclosures. The associations need to be more proactive."
Thursday, March 12, 2009
Foreclosures Hard on Owners in Small Buildings
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1 comment:
Although in some cases disaster is unavoidable in many of these condo conversions due to unqualified buyers, hardship and the economy (unless you avoided buying into one), there are other cases where shear naive and laziness causes a condo association to go down the tubes.
I counsel my clients to the ins and outs of living in a condo building. Ask them. During the boom, my clients wanted new, new, new. That meant a lot of first time buyers moving into a fresh condo conversion. I sometimes tried to get clients to buy in an established condo building even though it had older finishes etc...
I pleaded that they be involved on the Board, made management company recommendations, or if self- managed, gave them same "must dos" when developer turn-over was approaching. Many of my first time buyer clients became Board members.
I lived in 12 unit building where I pleaded with owners that we be self- managed and people pick up some slack so we could save money.
When I sold my unit (and later revisited the building) they had some major costs involved due to neglect of maintenance.
As for that 400% increase in foreclosures in Lincoln Square...the Chicago Tribune and the story above do not mention the actual number of foreclosures...was it 1 increased to 4?? That's 400%. How about some perspective?
I live and work in the Lincoln Square/ Ravenswood neighborhood and know that the majority of "Lincoln Square" foreclosure increase was concentrated in a couple new construction buildings in the far northwest corner of the neighborhood that were over-priced in 2005 and had lots of investor owners.
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