As we all know the economy is in the tank. The housing industry is suffering from never before seen loses. The pain is not spread evenly throughout the nations real estate markets. Some cities with more subprime loans have taken more of a hit in pricing than your more traditional cities. This real estate crisis has presented many opportunities for buyers who never thought they could afford to own a home.
If you’re a cash buyer, meaning you can buy a home or condo with out having to get a mortgage there are some special situations that ONLY you can take advantage of and get a bigger discount than a buyer who needs a mortgage. Let me explain in detail how to purchase one of these condos either as an investment or your own actual home.
Many
condos in downtown San Diego and other cities were built in the past six year real estate boom. Many of these condos were purchased by investors, often before construction was completed. A significant number of these investors were purchasing these condos with either 100% financing, meaning no down payment, or they were using the option ARM mortgage which have recently reset to much higher interest rates. A lot of these condos sold in the past six years are now worth less than what the original owners paid, sometimes as much as 50% less.
As you may have heard on the news, a lot of these investors are walking away from their condos and giving them back to the bank. When this happens the bank ends up owning the condo. There is a critical period between the time an owner/investors decides to give up the condo and stop paying the mortgage AND the HOA fees. Several months go by with the HOA not collecting this owners monthly HOA payment. In a lot of these newer condo buildings, several investors stopped paying their HOA fees. Over time, these non-payments have resulted an overall high percentage of HOA delinquencies that lenders will no longer loan on the building. The maximum default rate that most lenders will allow is 15%, when the delinquency rate is over that no one can get a mortgage on a condo in the building.
This creates an exceptional opportunity for the cash buyer because you have very little competition from other buyers. Because few buyers can buy in the building prices drop even further, increasing the opportunity for the cash buyer. If you’re a cash buyer ask your Realtor to focus on condo buildings built in the past few years that had a high percentage of investors as original buyers. These will have the best values for those cash buyers that can actually close a deal in the building.
Another factor that may double your chances of not competing against buyers getting a mortgage is if the building also has a low owner occupancy percentage. Most banks wont lend on building with less than 50% owner occupancy. If a lot of units in the building are still owned by investors this may be keeping buyers away because of financing issues.
Today’s condo cash buyers have unprecedented opportunities now in the market place. These opportunities will not last too long, once banks foreclose on the owners/investors the bank is responsible for paying the HOA and they usually pay it. So buyers looking to invest in condos get moving for one in a lifetime opportunities that only you can take advantage of.
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