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Hi, I this is my first post on this forum. I hope that someone can help with this question/situation and shed some light/provide guidance. I'm sorry if any of this gets long and drawn out, as it's a pretty complex situation.
I am an individual owner of a condo unit in a 300 unit complex. There are a number of other people just like me who are individual owners. Some live in the unit, others rent theirs out (like me). I lived there for two years (bought in 2006), then was able to buy a house and I moved out. I have been lucky to have decent tenants ever since. Our HOA is majority owned (thus, controlled) by the original investor (one man) who had originally intended on selling all the 300 units as individual condos back between 2003 and 2006 when the condo market was still relatively healthy. A number of catalysts caused everything to spin out of control: 1) the market changed (duh) and 2) major construction issues were discovered around the complex. These construction issues (lack of flashing and house wrap in sections were discovered which resulted in major leaks inside units, including mine) led to the HOA president (and majority investor) backing out of selling individual units and he switched to renting all available units out while pumping about 15 million dollars of his own money into the repairs. He simultaneously created a lawsuit against the original builder, which is still actually in its tail end of appeals, etc.
In the beginning of all of this, I (and others) thought it would be wise to create a lawsuit against our HOA for fraud (as we were sold units that were riddled with issues). However, we decided to back out of that idea because we were advised that our lawsuits against him could hinder his ability to be successful in his own lawsuit against the builder.
Now, fast forward to the present. Life has moved on from all the craziness of the situation (and luckily I haven't really had any problems renting the unit out), but a huge problem looms: how do I (and others) get out of this situation? The HOA president has made it very clear that as soon as his legal proceedings end (and he recoups his money from the repairs/damages) that he will sell his lot and be done with everything. He has said that it would be wise for us other owners to "piggyback" on to his sale by having a lawyer draw up a contract, when that time is right. In my mind, this is the only way that individual owners, such as myself, will be able to possibly get back our initial investments. We had an appraisal done, and a "piggybacking" situation seems to be the best choice versus individually selling. I don't see how individually selling could possibly be successful for a number of reasons: 1) no individual buyer is going to want to get involved in a mess like this, given the situation, and 2) there is really no way I could recoup my original investment, and 3) the list probably goes on and on...
There is another thing to consider. If the HOA president sells his lot and ownership of the bulk moves to a new investor, and individual people like myself choose to opt out of "piggybacking," a huge issue could arise: the new investor creates a special assessment on dues and/or sends monthly dues prices through the roof, and we missed our window of opportunity to get out.
Thoughts on all this? I know it's convoluted and confusing...
I think it really boils down to what an investor might be willing to pay per unit for a package deal...as opposed to what an individual purchaser might pay for a home. (One investment option would be to buy the complex for cheap, and resell the condo units individually.) You could hold out and see what that offer may be--if and when it occurs--or you could try to market it prior to that date. What happens if the majority owner doesn't win his lawsuit? And how is that really relevant to the situation, except to him?
Frankly, I don't think anyone here can give you proper advice.
I believe that the HOA president holds just over half of the units, which has been problematic for the HOA since the beginning. It has resulted in him having all control. It's hard for the people who still live there because they are in worse situations than mine - they feel incredibly trapped.
I don't think the investor is wanting to sell one or two units at a time. In my opinion, we have been lucky to have him "at the helm" because there is more power in a possible "piggybacking" on to his sale versus us trying to sell individually. What do you think of a situation like that actually playing out? Is a potential new investor going to want to deal with such a situation, where they buy his lot and simultaneously purchase the rest of (our) lot. I have been advised that it would be no problem for a lawyer to draw up a contract that could work. The only problem would be that we, as a group, would have to (after the fact) figure out the proceeds. I should have pointed out the fact that there are multiple types of units on the property - 1, 2, and 3 bedroom units.
Is that all it is, that we are just waiting for the right investor to come along? Our HOA president seems to think that it would be in a new investor's best interest to want the whole lot and not have to deal with "stragglers" left over.
What happens if the majority owner doesn't win his lawsuit? And how is that really relevant to the situation, except to him?
Frankly, I don't think anyone here can give you proper advice.
I think there is relevancy to the idea of the majority owner not winning his lawsuit, because he would then put in place a special dues assessment which would effectively bankrupt every person in the development.
You may be right about the idea that I can't get proper advice in a forum like this, I just thought I'd try to get some perspectives.
There is another thing to consider. If the HOA president sells his lot and ownership of the bulk moves to a new investor, and individual people like myself choose to opt out of "piggybacking," a huge issue could arise: the new investor creates a special assessment on dues and/or sends monthly dues prices through the roof, and we missed our window of opportunity to get out.
If a majority owner came in and issued a massive special assessment consider that a wonderful thing. It will be the majority owner that will be paying for the majority cost of the repairs/reserve contribution as they have to pay the assessment based on their percentage of ownership. If voted for among 300 unsophisticated condo owners, you can pretty much guarantee no large assessment (even if necessary) would ever be issued and the building would continue to deteriorate and suffer from maintenance issues for years to come mostly due to having a woefully inadequate cash reserve. The assessment will likely be required to keep the project healthy and will ultimately enhance the value of your units.
You may be right about the idea that I can't get proper advice in a forum like this, I just thought I'd try to get some perspectives.
The thing is, nobody knows what the potential investor has in mind. If, in fact, there is an investor in the wings, he could be looking at renting out the condos, selling them off at a profit...or even converting the condominium complex into an apartment complex. That seems to be rare, but it's happened a couple of times in my area (it's usually the other way around). He might need to buy everyone out to accomplish that--but it wouldn't be crucial if his investment strategy were one of the other options.
In any case, most investors are looking to get good deals. They're not in the business of bailing people out of poor investment situations. More often, they work to take advantage of those situations. Sometimes they'll pay a premium to finalize an overall deal--but we have no idea how motivated he is to buy everyone out. You likely don't know that either, and the majority owner probably doesn't know that as well. That's why I don't feel that you can get reliable advice. There are simply too many unknowns.
But...if you want to sell, perhaps you should just put it on the market now and see what happens. If you wait until the uncertainty unfolds, it may not result in the outcome that you're hoping for.
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