Where are the best deals in real estate? Condos.

I’ve been confronted a lot recently with people wondering where they can find the best deals in real estate, and I’ve decided I think it may be in buying a condo. Resorts and permanent-residence units are available around the country at steep discounts. We’ve sold over 5,000 units across the country for developers and even a few lenders, so I thought I’d share some advice.

With the current real estate downturn, many lenders have faced delinquent condominium loans, where the developers could not sustain sales at a pace to stay current on their loans. Lenders have handled these problem loans in one of three ways: They foreclose the note and bulk sell the development to an investor that carries out a new sales program; They implement a sales program themselves to sell the remaining units; Or they sell the note to a note buyers who chooses to either sell it or foreclose.

Each of these scenarios can include deep price reductions for the units that can be very attractive to a potential buyer, but buyers should also exercise caution and be sure to confirm the following:

  1. Obtain updated financial information for the Home Owners Association. Find out if most of the dues are current or if there are delinquent owners. These can include a budget short fall and unpaid bills on insurance, utility bills, maintenance, etc.
  2. Are there many foreclosures in the development of existing owners that may cause resale problems?
  3. What are the owner occupant vs. investor ownership ratios?
  4. How many unsold units are in the development?

These important questions can create financing issues for you and other buyers because underwriters want the answers to these same questions. They’ll use those questions and answers to determine if they will underwrite the loans for the unit buyers. If the owner occupant to investor ratio is too high, or if more than 50% of the units are unsold developer units, they may not underwrite these loans, leaving traditional financing unavailable. Great values are definitely available in today’s market, but, as always, I recommend doing all your homework in advance.

What about you? Do you think the best deals in real estate might be somewhere else? I’d love to hear your thoughts, too. 

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~ by Craig King on June 6, 2011.

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