Risks of Purchasing Condo With Low % Sold

listen to the bank

This post from Downtowny tries to consolidate some NYT info plus recent news from a bankrupt Battery Park building relating to the % sold issue:

http://downtowny.blogspot.com/2009/05/what-happens-if-condo-cant-sell-all-of.html

In general, repercussions usually center around having to pay maintenance of defaulted owners/sponsors, unfinished amenities or the building going rental.

-DT

Another thing to consider-- New Fannie Mae rules that took effect March 1, 2009, require that 70% (increased from 50%) of the units are either SOLD or in CONTRACT to consider buying back the loan from your freindly neighborhood bank. Because this condo is NON Compliant, only "preferred" banks will be willing to loan money to purchase this condo. You will also likely be paying higher (than market) interest PLUS other fees because the building if of higher risk. The situation will not get better. Remember, you are buying into a building and not just your unit. You may have control over your unit BUT NOT THE BUILIDING.

MoMoYa, don't do it. Let the shit-storm settle. If there's some reason you have to buy something now, there's a lot of inventory out there from which to choose.

Here's a quicker link to the excellent NYT article Downtownster cites: http://www.nytimes.com/2009/02/08/realestate/08COV.html?pagewanted=1.

Thanks guys....wow....what an eye-opener! YUCK.

For informative history lessons, google 306 West 100th and you'll find litigation going back to the buildings conversion from rental to co-op in the late 80s. It took most of the following decade for the sponsor to 1. go broke 2. reneg on maintenance and promised improvements/repairs made at time of conversion and 3. have banks move in and wipe out sponsor/resolve issues with coop corp.

Lesson? Workouts take a long time to start and even longer to finish....meanwhile you don't want to be involved unless you have a LOT of patience and are getting a VERY good deal.

I would bet that there are dozens of such cautionary tales from the last good NYC bust (late 80s to mid 90s)

I've owned in 2 co-ops with the same sponsor bk type issues. You need to look at the financials very carefully before wading in. One of the co-ops ended up in a better position because of sponsor bankruptcy, they ended up owning substantial commercial space for free. The other did not.