I received news of this event from Matthew who writes ...
Hi MishUnwarranted Hope and Begging the Mayor for Help
I am good friends with an owner in the Riverwalk at Redmond condo complex and I also used to rent there, which is how I got wind of this story.
It turns out the developer sold out the complex, dissolved his LLC, and is living somewhere in the Caribbean. Meanwhile, unit owners are in the hole by as much as 50% of their purchase price, not counting needed repairs of as much as $50,000 per unit.
There are major defects that require about $4.1 million in renovation work to address underlying �envelope� issues that cause leaks and mold issues in 11 units. The consultants said the exterior on the entire complex had to be replaced.
The home owners association (HOA) discussed five alternatives.
1) Sue the developer. Since the developer left the country so there�s no one to sue.
2) Pay the $4.1 million maintenance with a loan. However, no bank will issue a loan because the HOA fund has a high delinquency rate and not everyone is paying their dues nor are they paying on time.
3) Make each home owner pay approximately $45,000. Who would be willing to do that when everyone's mortgage is seriously underwater?
4) Liquidate the entire complex, forcing everyone into foreclosure.
5) Opt for Band-Aid fixes. Go into each unit, rip it apart and fix the problem. However, the consultants have said that the damages will eventually spread to all units because the problem is structural. The HOA has gone this route in the past but the problems in 11 units keep coming back.
In a followup email Matthew writes "As of the last HOA meeting they�ve narrowed it down to option 4 and a new option� beg the local government for help. So they�re sending a letter to the Mayor of Redmond".
I read the letter but it did not disclose much more that what is shows above. My general comment on the letter is it is a useless waste of time.
Mayor Marchione would be a fool to do anything more than send his sympathies. Of course there are countless government fools, but in this case 80+ homeowners are nothing compared to the complaints the mayor would get if he helped such a small select group.
Furthermore, if the mayor were to bail out this complex, there would be 10,000 more requests. The mayor understands this without a doubt, thus there is absolutely no chance the mayor can do anything other than write a nasty letter to the developer. That would be a waste of time and money, while building unwarranted hope.
Here's the deal. Under the circumstances presented, it seems foolish to make another mortgage payment or another homeowner's association payment.
If you own a unit in that complex, your best choice of action is to consider walking away
Caution: Before Walking Away Consult An Attorney. There are a lot of potential snags to consider if you go it alone.
If you live in that complex (or any complex with similar issues), please seek legal help before you waste another cent on dues or mortgage payments.
By the way, assuming every owner walks, and assuming those loans are widely spread out among lenders, it will be impossible to sell those units. The entire building could be worthless.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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