Condo Developer Delivers Big Problems to New Owner

P.J. from Maryland writes:

Dear Mister Condo,

We bought a condo in Washington, DC, 2 years ago from a criminal developer. Thankfully, we have moved out and are now enjoying our new home with our infant son. After buying our new home and putting the condo on the market, we found out that the condo does not have a certificate of occupancy and never did. There are about $40,000 worth of repairs that the developer never did to bring the 4-unit building up to code before we closed. So now we are stuck paying two mortgages we cannot afford until we can somehow get everything fixed and the condo back on the market before we go totally broke.

We’ve reached out to an attorney and have heard of several avenues for relief including a title insurance claim, action against our (terrible) realtor, suing the developer (who is currently being sued by two other plaintiffs and being chased down for a million dollar judgment by another) and attempting to get the DC government to release a surety bond the developer put down. All of these options sound great in theory if they end up working, but they would all take time and money. Is there a way we can simply get out of the mortgage? We honestly wouldn’t mind the hit to our credit scores that come with going the foreclosure route just to be done with this, but we’re nervous about owing the bank money if it sells for too far below what we owe (we owe 290k on the mortgage, and we listed the condo for 329k before we found out about the code violations/lack of certificate of occupancy). Any tips? Help!

Mister Condo replies:

P.J., I am sorry for your woes. Unfortunately, there is very little that you can do to protect yourself from a seller with bad intentions other than to avoid the purchase altogether and I am sure had you known the deficiencies that were part of this sale, you never would have purchased. I am not an attorney and offer no legal advice in this column. That being said, you have already spoken with an attorney who is providing you with some solid advice. Your problem is going to be cash flow as these “solutions” will all take time and the clock is not working in your favor. I am sorry that experience is going to be your teacher here. Real estate closings with the type of deficits you are describing ($40K in unfinished work) are not for those of us still working to pay our mortgages paycheck to paycheck. Unless you have a friend or family member willing to pay for those repairs quickly, you will likely have great difficulty in selling the unit. Having your credit rating take the hit isn’t good idea so use that option only as a last resort. It could take years to repair your credit and poor credit ratings make other things (insurance, for instance) more expensive or even impossible to attain. My advice is to work closely with your attorney. Get your financial house in the best order you can. Borrow if you must to get through the difficult period and then be very careful moving forward so you don’t end up in this situation again. I am sure you will weather this storm. Good luck!