Yes indeed. Your neighbors’ actions can have a direct impact on you, especially if you live in a condominium complex.

With the recent financial crisis, some condo owners are finding out the hard way that being in bed with others (owning in the same complex) isn’t always a bed of roses.

As an example, a very large complex in the San Francisco Bay Area is having issues because of the following:


Many owners are unable or unwilling to continue to pay their HOA dues because their investment is “under water.”

• There are many foreclosures and short sales in the building where no HOA dues are being collected.
• There is litigation on the building by some owners and some outside parties with an interest in the property.

As a result, the HOA is having to scale back on its amenities and is quickly depleting its reserve account.

With the litigation, banks will not touch loans that require creative financing (read: all cash transactions or seller financing). So, even if people not having financial hardship wanted to sell their unit, it would be practically impossible and the value of the units are declining every day.

How did this all happen and how can you protect yourself from a similar situation?

The financial crisis precipitated the situation, but it was a marginal project from the start:

• There were warning signs, like a very high percentage of investors bought here and subsequently rented the units out.
• The HOA became embroiled in negotiations on topics over their abilities with a more financially astute organization.
• The financials were marginal, even in the boom days of 2005-6. And on and on.

How can you protect your interests? Well, to be a bit self serving for a second, you should always work with a knowledgeable Realtor who knows the ins-and-outs of the condo market you are looking to buy in. Beyond that, look at who owns and lives in the property, look closely at the financials (or have someone else do it on your behalf), ask questions and don’t accept “that’s just the way it is” for an answer. Listen to what is being said about the property, and more importantly, what is not being said.

This may be one of the largest financial transactions of your life. Treat it that way and get professionals on your side to look out for your interests.