Managing Distressed Properties Back From The Brink: The Challenges of Troubled Properties

 In today’s difficult economy, more and more homeowner associations are facing the  prospect of dealing with some form of distress. Whether it’s physical distress from lack of funding for repairs or financial distress from  foreclosures and declining property values, these problems affect not just  individual homeowners, but the entire condo community. There is simply no such  thing as a distressed unit owner who does not impact those around him.  

 For boards, managers and residents, dealing with distress can become  all-consuming, but it is important to remember that there are solutions. With  the proper approach, troubled properties can be turned around and put back on  track.  

 Defining the situation

 The term “distressed properties” can entail a variety of situations, says Mark Kelly, CPM, of Maloney Properties in Wellesley, Massachusetts. “Some properties are in good shape physicallybut don’t work financially. Other properties are suffering security or neighborhood  issues. And some encompass all of that.”  

 These days, “financially distressed properties are more common,” says Alex Charfen, chairman of the Distressed Property Institute, a national organization  founded to train real estate professionals – through its Certified Distressed Property Expert (CDPE) designation training – to assist homeowners facing hardships. “Something like one out of every eight homeownersis delinquent or in foreclosure,” says Charfen.

 Issues such as foreclosure can affect condo communities in two important ways,  Charfen says. “The first is financial. It means they’re not collecting sufficient dues to pay all (of the community’s) bills, to keep the reserve funds where they should be, to fill the pools, things like that.” He has even seen gated communities become un-gated because of financial  shortfalls brought on by troubled homeowners. “For management, vacancies are also a problem. You might have 200 units with 120  sitting vacant. When a property sits vacant, it doesn’t attract good things.”  


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  • How can cooperative housing deal with foreclosure without it costing a great deal of money in legal fees? Is it better for the shareholders to buy the distressed property or try to sell it in a down real estate market? (The current shareholder has had the property on the market for a year with no viable buyer in sight.)