CONDO OWNERSHIP, MANAGEMENT POSES CHALLENGES IN NEW YEAR!
STRICTER LENDING STANDARDS PRECLUDE MORE BUYERS, ASSOCIATION MANAGEMENT MAY DEFER SOME REPAIRS, IMPROVEMENTS!
How will the downturn in the U.S. Economy, and the still-slow U.S. Housing Market, impact Condominium Owners and Management Associations, both here in Chicago, and elsewhere, in 2009? Intuitively, many experts predict continued tough times, as well as deferred costly maintenance.
Here is a summary of likely developments, as summarized in an article by Pamela Dittmer McKuen in last Friday's Chicago Tribune -
1. Expect Continued-Tough Loan Underwriting Standards. According to Ken Perlmutter of Perl Mortgage in Chicago, lenders will want to see strong down payments - a minimum of 10%, perhaps 20% in some cases. Source of buyer's income will be more thoroughly vetted. The fiscal health of the condo association, including planned capital expenditures, repairs, and reserves, will be more closely scrutinized.
Low-down-payment-buyers can look to FHA Loans as a possible source of funds, but these FHA loans have additional rules involving non-owner occupancy, percentage of units under contract in new construction buildings or renovations, the overall condition of the common elements, the associations finances, and whether or not the association has a right of first refusal for resales (the later an automatic FHA rejection currently).
2. Associations with high assessment delinquencies will put off deferrable repairs, improvements. Older roofs may go unrepaired this year. Painting or carpeting replacement in common hallways put off. Landscaping projects scaled back. Emergency projects may require depletion of condo reserves, additional special assessments, or bank loans for financing.
3. Condo Owners with Delinquent Assessment Payments will be dealt with more promptly. Collection Action against owners in arrears will likely begin sooner, and be more aggressive.
4. Strapped Developers of New Projects will File for Bankruptcy Protection. Completion of units and common elements could stop dead in their tracks. Financing for unsold units, or resales, will stop dead in its tracks. City Building Code Violations, for unfinished construction, could occur with greater frequency. (This is a serious problem in many over-built Neighborhoods here in Chicago, where dozens of developments, started during the Housing Boom of a couple of years ago, are far from completion, and several larger developers have stopped work or filed for bankruptcy protection).
5. Stressed Condo Board Members, facing assessment delinquencies, foreclosures, and deferred maintenance, may become lax in enforcement of condo rules. Experienced board members could resign or move, if they can sell.
6. Policies toward non-owner occupancy and renters may be revised. Many associations desire a high percentage of owner occupancy. Over the last few years, many have severely curtailed or even banned renters in units. Some associations, faced with high foreclosure rates, may rethink this policy to stave off vacant units and unpaid assessments.
DEAN MOSS & DEAN'S TEAM CHICAGO
