Closing on Condo in REO 4 unit building

Foreclosure Investing
1

Hello

I am close to closing on a condo in a 4-unit building, which is currently REO. The other three units are on the market and are currently unoccupied. I was given the HOA bylaws but these are from 2018 and I assume the HOA is no longer active. I’m questioning whether this is a terrible decision. If the HOA is no longer functioning, and has no reserves, who pays for repairs needed for the building? All units are very newly updated and there were no major issues during inspection but I realize that isn’t a guarantee that there won’t be major repairs in the short terms. Looking for any and all advice.

2

It is definitely a tricky situation and will largely depend on who your new neighbors are. Do you know if the same party owns the other three units? If so you might reach out to them as this will likely come up during the sale of their own units and they may be willing to work with you now to get the association running and funded again.

Best case scenario - you and the other owners all come to an agreement on dues, funding reserves, and working together to maintain or even improve the common areas. Doing so will improve the value of everyone’s investment so there is a pretty good chance this happens.

Worst case scenario - one or more parties don’t get along and don’t agree to anything. Maintenance stops and the building falls into disrepair. Likely ends up with either your investment losing value or the need to take legal action to force the parties into compliance with the recorded CC&R’s and bylaws.

Bottom line you are taking a gamble. I would not pay the full market value in this situation but if you are getting a reasonable discount it may be a gamble worth taking. Best of luck.

3

Thank you @Sean_OToole! To clarify, the three other units are also REO, owned by the bank that also currently owns the unit I am looking to purchase. In this case, can I establish an HOA before these are sold?

4

You likely can not without the consent of the other owners (ie the bank), but it is definitely worth reaching out to the bank to see if they will work with you on it.