We hear it on the news everyday that foreclosures are increasing. Now is the time to buy, now is the time to get a great deal through a foreclosure or a short sale. While I agree that now is a great time to buy, those looking at certain building in the Gold Coast, River North, and Loop areas need to be very careful. Sometimes there is a reason why a condo is selling at only $200/SF in the Gold Coast.
To save time I am going to come right out and tell you the problem buildings.
10 East Ontario, 345 N. LaSalle, and 440 N Wabash.
There are others, however, let us stick to these for this topic. They are American Invsco buildings. Many people who bought into these buildings could either not afford the units or decided to sell them after a couple of years. Because of both reasons we have seen a huge influx of units in these high rises, especially at 10 E. Ontario (Ontario Place). Whenever supply exceeds demand, price of supply must lower, in order to increase demand. We have seen this at Ontario place and unfortunately many units are now going “short sale” (sales price is less than the mortgage amount) or going into foreclosure. Whenever a building has large amounts of foreclosures we see a few things happen.
ASSESSMENTS: Let’s just think logically. If you cannot pay your mortgage, can you pay your assessments too? Which do you typically let go first? You let your assessments go first, they usually won’t affect your credit like several late mortgage payments would.
Currently at 10 E. Ontario there are 64 units on the market, if half have stopped paying their assessments, this means that the association is seeing less cash come in. Which means one of two things happen.
1. Maintenance on the building gets neglected or,
2. Assessments are increased or a special assessments is called
Neither of these are good for unit owners or owners trying to resell their units.
FINANCING: Especially now, banks are looking at buildings and associations very carefully. If the building has an excessive amount of foreclosures then the banks will simply not lend. This means that for the most part the only people able to buy into the building are cash buyers. This will then decrease demand substantially for the building, while supply remains the same.
I hope this was not too dry for you, however, I want to stress that it is very important you ask yourself why a condo is so cheap. Look into the building, check blogs on-line, as a realtor, do a google search; make sure that your future investment is sound and secure. There are plenty of great deals on the market in great buildings, be sure to buy one of them instead!