Article Courtesy of The Miami Herald

By MIMI WHITEFIELD

Published August 4, 2009 

During the height of the housing boom, people camped out overnight and lines snaked around the block as potential buyers vied to get a chance at a condo conversion. The attraction, of course, was price.

While many of the new condos being built carried hefty price tags -- generally $500,000 and above, rental units that were converted into condos often sold for between $150,000 and $200,000. The conversions were considered real steals at a time when the average home price in Miami-Dade and Broward counties was well above $300,000.

Such conversions were so ubiquitous that "going condo'' passed into the popular lexicon.

As Monica Hatcher writes in today's cover story, "Trapped in a condo conversion,'' condo conversions far outnumbered the number of units in the new condo towers that were transforming the skyline.

While speculators and many developers saw the conversions as a way to make a quick buck, many renters thought they represented their only opportunity to snatch a piece of the American dream of home ownership before prices soared even higher.

But behind the crisp flags drawing in buyers, the fresh paint and the newly planted flowers, there were often grimmer realties. Some of the conversions were in aging buildings with code violations, problem plumbing or a roof in need of replacement.

Eager buyers, however, sometimes saw just the new granite countertops, and many investors thought they would be long gone with a nice profit in their pockets before any problems cropped up.

Few people would buy a single-family home without having an inspector look at the electrical wiring or shimmy under the crawl space to check for structural problems.

But that's not possible when buying a condo. Instead, the state requires developers to give buyers a copy of an engineer's report outlining the condition of a converted building. Developers are also required to set aside reserves or buy warranties for a certain number of years for roofs and other major infrastructure.

Many of those who bought into the conversions were first-time home buyers who may not have known to ask about the reserves or studied the engineer's report. They just thought they were lucky to be getting in on the opportunity of a lifetime.

Now condo conversions are the most troubled sector of an already troubled housing market. Prices have plummeted.

If there's any lesson to be learned from this tragic side of the housing meltdown, it's buyer beware. Buyers need to be informed consumers and look out for themselves, because Wall Street, the developers and the lenders in many cases weren't.