Larry Cragun has a Warning For [New Construction] Condominium Buyers:
A common practice is for condo developers to obtain a construction loan to build the project. Some then hire a contractor to deal with the construction and the subs. The contractor is dependent on the solvency of the developer to be paid. The arrangement is made for the bank loan to be reduced as each condo sells.
But what if something goes wrong? Sounds like a lien may show up on your place. Larry points out that people may be in this situation:
My guess is that there are a lot of condo projects that have this potential problem. I know of at least two. My proposal is, if you are a condo buyer – add a real estate attorney to the process. Be very interested in facts not words.
So which new construction project recently stalled out at 60% sales and now has liens?
Bonus link: A condo loan or refinancing soon will be tougher:
As a result of underwriting changes by giant investors Fannie Mae and Freddie Mac, plus severe new restrictions by private mortgage insurers, getting a loan on a condo unit — or even refinancing one you already own — could prove tougher than you imagined.