Paper Money - Paper Tales

Thursday, January 04, 2007

Poor Rich Uncle...

Here's an account of a nephew who is advised to turn down an inherited Miami condo! Seems his rich uncle left him with more than just a ritzy pad... He got mounds of debt too! The story from the Star News of North Carolina.


Dear Mr. Berko: I stand to inherit from my uncle who had a condominium in Miami and passed on recently. The mortgage is a little higher than the property value, so if I sold the condominium I'd be in the hole. But my wife and I might consider moving to Miami because of the weather and because the condo is so beautiful and all the folks on the phone seem so nice. Please give me your advice.


Jonesboro, Ark.

Dear B.S.: There's a mushrooming inventory of real estate in Miami with mortgage balances that exceed the underlying property values. And there's also a slowly growing inventory of Miami real estate with mortgage balances that exceed property values by 25 percent to 45 percent. Fortunately, the mortgage on the condo you may inherit only exceeds the market value by some $25,000, or 6 percent. I think it's going to get worse.

Because you can't sell that condo and come out ahead, I suggest you tell the attorney that you wish to decline the honor of your uncle's good intentions. You are not obligated to accept the bequest. Even if the bank makes you an offer to reduce the balance of the mortgage to "assessed value," I would advise you to decline. And the bank may well do just that because the foreclosure rate in this development may go into orbit.

A lot of Florida banks holding construction loans are bleeding bullets, yet the builders keep building. Go figure!

And no, a thousand times no, do not move to Miami.

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