Condo Buyers Get 2nd Chance : Azusa Offers Foreclosed Units for Repurchase at Half Price

Leslie Tait paid $162,000 six years ago for a condominium that she said turned out to be overpriced, riddled with construction defects and unsalable.

Rather than continue making mortgage payments, the 72-year-old Tate walked away from her condominium in the Rainbow Angling Club complex, took a $30,000 loss, and allowed the property to go to the city Redevelopment Agency, the mortgage lender, through foreclosure.

Now, the agency is offering Tait a chance to buy the property again, but this time at about half the original price.

Tait said she has not seen the offer yet, but expects to decline.

“I would be buying into hell,” she said, recalling the burst water pipes, the gas leaks, the broken ceilings, the inability to obtain repairs from a bankrupt builder and other problems that plagued her 5-year stay at the Rainbow Angling Club.

She is one of a dozen buyers who stopped making mortgage payments and lost their condominiums through foreclosure.

Same Deal for All

The Redevelopment Agency is offering all of them the same deal: a chance to repurchase their condominiums at a cut-rate price of $100,000, minus the cost of repairs, which are expected to average about $25,000 per unit.

Mayor Eugene Moses said the deal is being offered out of fairness.

“A lot of people suffered in this,” Moses said. “It’s only the right thing to do.”

If the original buyers do not accept the offer, the city plans to sell the condominiums for the same price to Pacific Union Properties, which already owns and rents 42 units in the Rainbow complex. However, Moses said, he intends to ask the City Council, which serves as the Redevelopment Agency board, to reconsider the proposed sale to Pacific Union Properties because he thinks other buyers might be willing to pay more.

Agency Faces Loss

The Redevelopment Agency is facing a loss of about $900,000 on the project, assuming it receives $75,000 from each unit it resells, according to Robb Steel, redevelopment manager.

Steel said it is unlikely that individual buyers will want to buy back into the complex because of the difficulty of obtaining financing or reselling units. People normally will not buy condominiums in projects where most of the residents are renters, nor will financial institutions make loans on such property, he noted.

Retty Crocchi, who made a $40,000 down payment and lost it all when she allowed her condominium to go to foreclosure, said, “I can’t imagine going back up there. . . . We’re so glad to be away from all the problems. I can’t see taking them on again.”

But Marc Bielec, who bought his condominium for $152,000 and then stopped making payments when he found out that he owed more than his property was worth, said he would be interested in exploring the offer. Bielec, who now lives in Arcadia, said he does not intend to move back to Azusa, but would look at the offer to see if it makes sense as a financial investment.

Steel said the agency has sent a letter to an attorney for the former owners asking them to decide by Dec. 9 whether they are interested in re-acquiring their units. If the owners wish to return, he said, then the agency will discuss financing terms.

Crocchi said the offer comes too late. Before the foreclosures, she said, owners pleaded with the City Council for financial help, but the council refused after the city attorney said Azusa was not responsible for the problem.

The condominiums were built in 1982 on an 8-acre site that once housed a picturesque restaurant beside a man-made lake. The restaurant was destroyed by fire in the mid-1960s.

The Rainbow Angling Club Corp. restored the lake and built 56 condominiums around it. But it sold only 14, at an average price of $165,000, before entering bankruptcy. The Bank of America, which had lent the corporation more than $6 million for construction, foreclosed and acquired title to 42 units, which it then sold in 1983 to Pacific Union Properties, a partnership based in San Francisco.

Conflicting Price Figures

Pacific Union Properties said last year that it paid $122,000 per unit, but it has since told the city that the purchase price was $85,000 per unit. One document filed with the county recorder’s office shows that Pacific Union Properties paid $3.6 million, or about $85,000 for each unit, but another document shows that the property transfer tax was paid on a purchase price of $5.7 million. Officials of Pacific Union Properties could not be reached to clarify the conflicting figures.

Steel said only one of the 13 buyers who financed their condominium purchases through the city has continued to make payments. He said that buyer also will have an opportunity to obtain a reduced mortgage.

The agency sold $38 million in tax-exempt bonds in 1979 to raise money to fund low-interest loans for buyers at the Rainbow Angling Club and other housing developments.

Crocker Bank administered the Rainbow Angling Club loans for the Redevelopment Agency, offering 30-year mortgages at 9.1%.

Buyers said they were misled about the value of the condominiums because the bank was willing to lend up to 95% of the purchase price. The buyers were unaware that the bank was making the loans not only on the value of the property but also on a formula that assigned a value to the cut-rate financing, which was then well below the conventional mortgage rate.

The result was that buyers were given mortgages that were higher than the property could be resold for and were never able to build any equity.

Left Without Recourse

Meanwhile, the foreclosure on the builder left the buyers without recourse when construction defects began to appear.

In addition, the buyers found themselves making mortgage payments of up to $1,500 a month to live in units that were renting for under $1,000 a month.

Before most of the original buyers moved out last year, they complained of widespread plumbing leaks and design and construction flaws that allowed rain to pour in through roofs and decks. Earlier this year, a car belonging to one of the tenants, third baseman Jeff Hamilton of the Los Angeles Dodgers, was badly damaged when the floor of a hillside garage collapsed.

Steel said Pacific Union Properties is planning general repairs to the complex that will amount to $22,000 for each unit. In addition, he said, each of the units now owned by the city requires $3,000 to $4,000 in additional repairs.