Dear Mr. Berko: Four years ago, we paid $2.4 million for a beautiful winter condo and, like most other units here, it has fallen drastically in value.
Ours is now worth about $1.5 million — if we could sell it. Our principal and interest costs us about $11,000 per month, and club dues, amenities and taxes cost us about $5,700 per month.
Most units have lost at least 40 percent in value, and while we can afford all the monthly costs, many folks have stopped paying their monthly amenities, maintenance costs, taxes and mortgage payments, and they still use the facilities. And now the gardens and clubhouse are just beginning to show wear and tear due to lack of funds.
I’m on the association board, and some of us are so fed up that we could scream. The delinquent owners will not pay their fair share of the costs, and the lawyer on the board tells us that the only cure is through the courts. But that can take two years and, by that time, the deterioration will become so bad that our unit and others will continue to lose value.
My wife and I are furious, especially at the defaulters who continue to use all the club facilities.
In 2008, when you spoke to a private investment group here, you discussed two amazingly simple ideas, one that easily solved the suicide bomber problem and another that would solve the nation’s obesity problem. I remember you said there are always “simple solutions to every problem if one is bold enough to take the initiative.”
So this is a last-gasp effort. In your zany way of thinking, do you have a solution to our problem of declining association revenues and eventual deterioration of our physical plant? I understand if you don’t respond to this letter. -- C.S., Naples, Fla.
Dear C.S.: You don’t have a problem. You have a catastrophe of biblical proportions.
And, yes, there’s a simple solution, but it won’t sit well with you or your spouse. But first, in my zany way of thinking, anyone who spends $18,000 per month to keep a roof over their head ought to have that head surgically examined then replaced. Even though you can afford those costs, your profligacy is offensive to me.
You’ve lost $900,000 on the value of your condo, but if you’re a Wall Street banker, a union official or a member of Congress, you can walk away from your home and tell the bank to suck it up. And you won’t have to worry about any difficult legal actions because you have what is called “courtesy immunity.”
And walk away you should because many of your current condo owners should never have qualified for a mortgage. And walk away you should because it will be a dozen years or more till (if) that condo returns to your original cost price. This is called cutting your losses and makes solid business sense.
So as certain as the extra hour of sunlight from daylight savings time has contributed to global warming, the value of your condo may continue to plumb new lows this year. And because you can afford the monthly expenses of a winter home, you need not worry about the effect a default could have on your credit rating. Just pay your lawyers to deal with the greedy banksters who made your mortgage loan plus tens and tens of thousands of risky loans that contributed to the real estate debacle. You can walk away like nothing ever happened.
Find a real estate agent who will show you similar or better properties at half the price you paid in 2007 and be merrily on your way. But before you buy, be certain that the folks in the new complex are financially stable.
And it’s worth paying a private investigator a fee for financial profiles of people in the new complex you might consider. Some folks may think this is an invasion of privacy, but I consider it as safeguarding the largest investment most folks will make.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at email@example.com.