Florida Governor Charlie Crist has just signed a law to reduce lis pendens and other foreclosure actions in the condo sector statewide.
The enacted legislation, titled Distressed Condominium Relief Act, aimed to assure bulk buyers of condo units they are not liable for defects in condo buildings they did not build. It will take effect on the first day of July this year.
Currently, any person who sells more than 7 units in a condo building within a 12-month period or leases for 5 years more than 7 units in the same building is considered a property developer, and hence, responsible for any flaw in the condo building.
This has discouraged plenty of bulk buyers from pursuing planned purchases as they face risks of costly repairs. Those that continue to close deals make up for the risks by demanding substantial discounts from condo owners, pushing down further property values in the state.
Local analysts said the law will do a lot in preventing more lis pendens and foreclosures because it will create a positive ripple. With bulk buyers purchasing vacant condo units, owners of distressed units will have more leverage in saving them from becoming foreclosed houses for sale. Likewise, HOAs will be able to collect dues and eliminate their budget shortfalls.
In addition, more buyers using Fannie Mae-backed loans can buy the condo units in the buildings. Fannie does not approve loans for the purchase of condo units in buildings with more than 15 percent of their units in default or not paying HOA dues.
Over the past years, condo units have been entering Miami Foreclosure Auctions because of the record numbers of units that were constructed during the boom and that were sold to buyers that did not have the finances to sustain monthly payments.
In April, over 9,200 units were purchased back by lenders through public home auctions in Florida. Of the 48,384 homes that entered foreclosure during the month, nearly 23,000 units were hit with lis pendens notices.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.
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