NYT: The Downside for Condos in a Downturn

http://www.nytimes.com/2009/02/08/realestate/08COV.html?ref=realestate DURING the recent boom, buyers who coveted condos for their sex appeal could also make the case that condos were a smarter choice than co-ops. In theory, you didn%u2019t have to prostrate yourself, financially and otherwise, before a board for approval, and you could sell or rent pretty much to whomever you chose, should the... [more]

http://www.nytimes.com/2009/02/08/realestate/08COV.html?ref=realestate DURING the recent boom, buyers who coveted condos for their sex appeal could also make the case that condos were a smarter choice than co-ops. In theory, you didn%u2019t have to prostrate yourself, financially and otherwise, before a board for approval, and you could sell or rent pretty much to whomever you chose, should the need, or whim, arise. You could also put down a lot less money than the 20, 25, or even 50 percent of the purchase price customarily demanded by co-ops. But as the city%u2019s fortunes buckle and heave, these very differences have potentially rendered some of the city%u2019s condo buildings dangerously exposed to the downturn. Then there is a distinction many condo buyers probably dismissed as a boring legality: If a condo unit is the subject of a foreclosure, the bank gets first dibs on the equity. With real estate prices way off their peak, that means some condo buildings will collect nothing but dust from residents who have also failed to pay their common charges, leaving the remaining owners to shoulder the burden of higher costs or reduced services. Defaults on common charges began to spike last fall, according to lawyers hired by increasingly jittery boards to file liens (the first step toward foreclosure) against owners in arrears. [more] [less]