Can I take the granite with me? What happens when a condo building fails

This American Life, a syndicated radio program on NPR, aired a fantastic episode a couple weeks ago called Scenes from a Recession, which you can stream for free on their website.

Act one deals with a condo development in Chicago that is in a very precarious situation. The project is half empty, full of foreclosures, and in total disrepair. The remaining owners want out, but have no options. Meanwhile the developer is nowhere to be found. I love it when they mention how people were buying condos in the height of the market, got their fancy granite countertops, but didn’t check to see if the wiring was safe or the foundation was stable. Sounds familiar!

We are beginning to see condo foreclosures, condos going rental, developer lawsuits, and many half-empty condo projects in our local market. It is a direct result of the condo housing boom of the last decade which overestimated demand coupled with the mortgage meltdown. It seems like every other project is “tax abated”, even the ones sitting half empty. If your building isn’t 100% sold, then good luck finding someone to get a loan on it. How will your building continue affording the amenities, pool, concierge, and building insurance if there are no financial reserves and they are only taking in half of their monthly dues?  Want to move out of your condo and buy a house? Well, start counting your pennies because you might just have to sell it for much less than you paid for it.

I don’t want to be all gloom and doom. Yes, there are some healthy condo projects out there so if you want to buy a condo take this advice:

• buy wisely
• ask lots of questions
• plan to own it for a minimum of five years
• be very cautious
• use a Realtor who is independent of the development (not the on-site sales person)
• research the developer

This advice holds true for new housing developments, too.