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KimberlyLaw, Attorney and Real Estate Broker
Category: Real Estate Law
Satisfied Customers: 4219
Experience:  13 years of experience in real estate law: Foreclosures, Landlord-Tenant, Condo/Coop, Property Law, Deeds, Purchases/Sales, Estates.
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I own a condo where the developer was forced to go into foreclosure.

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I own a condo where the developer was forced to go into foreclosure. Only the clubhouse and 8 units of a 92 unit have been completed, and are all owner occupied. Our HOA fees are covering outside maintainance. The developer occupies one of the units and still manages complex. I'm told that all complex bills are paid and that there are no oustanding depts for assoiciation.
Complex got halted because the bank started making it to demanding for new owners to buy, and they just walked away. So the developer had to stop building because of lack of cash flow.
So now the bank has the complex as a foreclosure, and when any extra maintainance is needed the live in developer puts in a request for funds to the bank for property upkeep.
I cant sell the condo because no bank will give a loan for a complex that is not at least 80% completed or is in foreclosure. And I cannot even refienance for myself for the same reasons.
What can I do if anything?

What are possible ourtcomes from the holding bank?

What could happen with complex?

Thank you for your time

Hi Gary, I am happy to assist you today.

Well, I am very sorry to hear about your situation.

I would first take a look at your title insurance policy and see if there is a possible claim for you here. You now have title that is not marketable, so that might be covered. They also might be able to bring a court action on your behalf and pay for the lawyer. Worth investigating.

Next, I would file a claim in the bankruptcy hearing. See if you can get in as a creditor and claim that the developer should purchase back your property due to the financial situation. Again, because your property has become unmarketable.

Next, I would file my own separate law suit on this matter. This is not likely to resolve itself and just work out. This complex is not likely to ever get finished its current status unless and until someone purchases it from the developer. That is a possibility but we are looking at a lot of time that will pass before that happens. In the meantime, you do not have all the amenities you pay for, you are living in a complex that is mostly unfinished, and you have no ability to rent out or sell your unit. You definitely have a law suit stating that the developer is not living up to their part of the bargain.

I have seen this happen many times before, and the outcomes that I have seen include having an investor with money come in and purchase the problem from the developer. However, more often, I have seen the unit owners trickle away and simply walk away from the situation with a loss. The banks can't even foreclose on the condo owners because the units have pretty much no value in the current situation. So your best bet is to try to get your sales transaction reversed, or get the developer to buy back your unit, and just get out of the situation. That's the best you can do here.

Let me know if you have any questions.

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Customer: replied 4 years ago.

To KimberlyLaw,


I have been renting out the condo, would this effect my ability to have developer buy back unit?



No, it doesn't matter if you are renting it out. You don't have the ability to sell, so you are definitely damaged in this situation.
Customer: replied 4 years ago.

To KimberlyLaw,

I have 2 last questions,

If the Bank cant even foreclose on the property because of no value in current situation, would this hurt my credit rating?

And secondly, If I tried to have sales transaction reversed. Is that thru original bank I got loan thru, or current bank that has mortgage now , or developer?


Thank you for your help, you have been very informative...



What I mean is that the bank can technically go through a foreclosure procedure, but they would have difficulty making a sale at the auction and would end up having to purchase it back themselves. This does not impact you at all, and no it does not impact your credit (unless you stop making payments). This is the risk that the bank took on when they loaned you money for a new complex that was not completed.

So in reality, if you did want to walk away, the bank still could foreclose. In that situation you WOULD have an impact to your credit because you would be in arrears on your mortgage payments.

You would reverse the existing mortgage, not the original one, and you would be suing the developer. You need to find out what his insurance policy is and file a claim with them. That would be the first step. Then when they try to reject your claim, that is when you sue. Or you could go ahead and just file the claim immediately and his insurance company will join the case automatically. They will likely supply him with a lawyer.

Let me know if this makes sense.
Customer: replied 4 years ago.

To KimberlyLaw,


I'm a little confused about how the bank could technically go thru a foreclosure and be forced to buy back the condo themselves because of failed auction. How is that possible if I keep up payments? Is it a result if I put in a claim?



No, sorry for the confusion.

A foreclosure could ONLY happen if you don't make your payments. The auction is not "failed" if the bank buys back the property. That happens all the time.

If you keep up with your payments, and file a law suit, nothing bad will happen with your mortgage as a result.

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