Hi all. We own a condo in AZ and have received a letter from a law firm stating that a person is buying 80%+ of the condo complex and under Arizona Revised Statue 12-1228 we will be forced to sell our condo to them. I read the statute and it appears they have validity in their argument. We spoke with the buyer's representative and they want to make a deal now. He stated they will have 80% ownership of the condo complex on October 17th. They did make us an offer and increased it by $7,000 the same day without us even turning the initial offer down which is a little unusual. A few questions:
1. The buyer's realtor keeps on hounding us on if we're going to accept the offer. Why is he dong this? Wouldn't the buyer have more leverage once 10/17 passes as they can force use to sell for what their appraisal comes in at? Of course we can get our own appraisal and go to arbitration if needed. However, my wife thinks the constant hounding might have to do with the realtor would only get his commission if the deals go through without arbitration. So maybe he's looking out for himself trying to get commission that might disappear if the sell happens in arbitration? Any other suggestions on why you think the seller's realtor is trying to push so hard to close the deal before 10/17?
2. Also, what if an investor is just using this as a ploy to scoop up as many condos as possible with making current owners thinking they'll be forced to sell? But the buyer will never have 80% ownership and is using the statute language to trick us into selling? My wife says only way to really find out is to see if greater than 80% transaction happens on 10/17. I'm afraid waiting after 10/17 as I'd think we have less leverage as they could force us to sell under ARS. Comments?
3. It appears there is another investor trying to buy up as many condos in the complex as possible. Perhaps keeping the initial investor under 80% and/or having more leverage for a higher asking price? Whatever the reason is, if my wife and I tried to sell the condo to anyone other parties besides the ones mentioned, would we have an obligation of disclosing to potential buyer that someone is trying to use ARS 12-1228 to gain control of entire condo complex and that they might have to be forced to sell under the >80% ownership provision?
Sounds like a sticky situation either way. This can end 1 of 2 ways. (a) investor doesn't get 80%, and life continues until he finally finds someone to sell. (b) investor does get 80%. What that means for your condo's price is anyone's guess, but I too assume it will go down. Does the provision state you get market value when 'forced' to sell?
Suggest going into tax records and finding out exactly how much the investors do own. I think you are in a better bargaining position prior to the investor getting 80%.
Realtors always want you to sell...
With that being said,it is ultimately a game of chicken. You can sell now and take what you think is their best offer, hold out for more, or if you wait too long, they will compensate you at market value and that will be it.
The quicker they can get people out, the quicker they can move on with their plans with less obstruction.
For the investor to get 80% ownership, there are either a ton of empty units or a lot of people that were willing to sell and may have received good offers. Talk to your neighbors to see if you can get a better understanding of who already sold and what they were compensated.
Thank you for the info, Bob. And you are right it is 33-1228. My mistake. The condo is a rental. It appears there was an investor that bought about 60% of the condos when the HOA foreclosed on them back in the downturn. The newest investor will be buying the 60% share to get over 80%.
Derek, my wife confirmed the ownership amounts via tax records.
I mainly wanted to make sure we weren't being tricked into selling our condo. We have only three rentals and hate to lose one!
@Eric O. I've seen this happen to a few condo takeovers/conversions in the Phoenix area, as a result of the downturn. It seems so unfair but it is legal.
Eric, update, please. Thanks.
Buyer purchased 130+ condos in the complex on 10/23/18 for $9.49 million. I believe it averages out $70k per unit.
My wife and I received a copy of the condo termination agreement just today. It lists appraised value of the the 40+ condos that will be acquired from buyer. It also has an appraisal report for a condo that has the same floor plan as ours, but not our exact condo. The termination agreement lists that all 2 bed 2 bath, including ours, will be sold for $72k. Then it goes on to include language about how we can get our own appraisal and if buyer does not agree to the 2nd appraisal price then an arbitrator decides value that it will be sold at.
Buyer made us on offer about 6 weeks ago for $77k. We turned it down.
What's interesting, in reading the appraisal, the appraiser used the 10/23 transaction as the GREATEST WEIGHT to determine market value of the condo. This smells awfully fishy. Appraiser then lists two condos that are over 2.5 miles away as the 2nd and 3rd comp. He goes on to state that since they are so far away they are not an accurate gauge of value.
In looking at comps online myself, it show two condos in the same complex selling over the summer at 89k each.
Googling the appraisers name it shows that he had a AZ Board of Appraisal disciplinary action against him in 2013 that included 6 months probation with required mentorship and education. Language in the disciplinary hearing included one board member stating "the verbiage in the respondent's report made him think that it was biased toward investors, instead of reporting the market." Sounds like that might be the case again.
I'll look into filing a complaint against appraiser with AZ Board of Appraisal. I might be overreacting.
I hate that the other 40+ condo owners might use the value in his appraisal at the price they decide to sell at. It's as if the owners should be contacted to make sure they get their own appraisal done. I'll order and appraisal myself and let you know what happens.
So hire your own appraiser now.....maybe ask them about the summer 89k summer values verses the “bulk” purchase value as proper comps.
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The appraisal issues here are significant. I would make sure to interview any appraiser that you hire to confirm that they are experienced in condominium terminations. This is not an ordinary appraisal and most appraisers won't understand all of the issues present. Choose wisely.
I would get out once you get the right price. Since he has majority votes, you are going to be screwed either way. Get to a reasonable total and buy another one 1031 exchange it. You are in a no win situation once people control the board and have the votes. I run my board for my HOA. I have another member that is on the same page, everyone else can pretty much f themselves
Tom Makinen, I somewhat disagree. I don't think the property owner is "Screwed either way". I would suggest looking for either an appraiser or attorney who is experienced in condominium terminations. Some of us have had good results.
Hi all. Forced sale went through in January. Buyer’s appraisal was 72k. I got my own which came in at 82k. I held firm and buyer raised asking price to 82k. I didn’t have time to do 1031 exchange. I was satisfied with the results.
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