We’ve all heard about the great deals to be had in the condominium market with dropping prices and increased foreclosures, but what about the dark side to these investments. Surely the high rate of foreclosures and struggling economy has had a negative effect on the condo industry.
To understand a little more about how condominium ownership works, relate it to owning one piece of a pie. Everyone who owns a piece, shares ownership of the single pie plate and responsibility for its maintenance and upkeep. The cost of maintenance is divided among all the pie owners based on the day to day costs and reserve costs, or money set aside for future repairs.
If some of the owners are unable to make their payments and their units go into default and eventually, foreclosure, attempts are made to re-sell the unit. However, when new building assessments are completed and a large percentage of units are still sitting vacant, then it’s up to the other owners to pick up the slack for maintaining the building. The result is an increase in condo fees. In some areas of South Florida, these fees are almost $1 a square foot and rising. This expense, along with a mortgage, is enough to scare away many buyers.
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