Technology TransactionsHow to Prepare Buyers to Buy a Condo
Condominiums are gaining in popularity in many markets. An estimated 42 million
Americans now reside in housing that is part of a community association,
whether they are townhomes, industrial lofts, or high-rises buildings. If you
have tried to market a condominium in a single-family market, you may know that
there are some subtle differences to marketing a shared-wall home to a buyer,
especially a buyer who has never lived in a condominium before. So how do the
pros do it? Chicago REALTORS who specialize in condominiums provide the answers on what to tell your buyers.
Buyers Must Understand Their Priorities
A lot of things change when buyers purchase a condominium. They may have
limited and assigned parking. They may have restrictions with regard to guests,
pets, children, or personal employees. Pool or lawn parties may be subject to
association approval and scheduling. Shared walls mean less privacy, even in
the most expensive units.
Chicago REALTOR® Bruce Hackel of RE/MAX South Suburban, Flossmoor, says "When
someone is buying a condo, understanding their priorities can be more important
than with other types of home purchases because when you purchase a condo,
you"re often buying a share of a very large, complex community."
Low maintenance is a trade-off for shared responsibility
The amenities that a condominium lifestyle can offer are irresistible. Where
else can a buyer get a security guard, swimming pool, or an exercise gym only
steps from their front door. The price for those conveniences and more is
sharing. A condominium means shared walls, shared amenities. So the first thing
you need to ask your buyer is, "Do you like to share?"
A neonate condo buyer needs to know that low maintenance obligations and
security are offset by monthly assessment fees and adherence to the
association"s regulations. While a single family home would have to be
maintained by the home owner at his/her own expense, there is a corresponding
freedom from regulations, unless the home is situated in a planned or gated
community governed by a homeowner"s association.
Look at the demographics in the community.
Tom Jakuvik, a Chicago agent, says condos have tendency to segregate
themselves. Due to price, location and other factors, a condominium community
can quickly be dominated by young people, or older people, or other groups. He
suggests that you tell your buyers to look at the makeup of the building. Have
them knock on doors and meet the people who will be their new neighbors , or if
the security is restrictive, tell them to speak with the association office.
Then they can decide for themselves if the community is right for them.
Help your buyer look for a condominium where the association works at creating
social interaction, rather than one that leaves the residents to their own
devices. Buyers are the most satisfied with their home purchase when they
understand their own priorities and then make sure the condominium community
they select is a good match.
Look at the comps
Remember to tell your buyers that comparables of other units don"t tell the
whole story. They typically don"t offer much information about condition, an
important factor when deciding what to pay for a home. Remind the buyer that
sellers use comps to price their units, so the value should be in alignment
with other similar units that have sold or are being offered for sale.
Review the Rules
"Many of my buyers are new to condo ownership, so I devote quite a bit of
time to outlining the differences between life in a single-family home and life
in a condo. Condo owners are required to follow the rules of the association,
even those they do not like, and the rules are not easily changed," reports
Ethan Lewis, broker/manager of RE/MAX Alliance, Skokie.
He urges buyers, once they"ve found a condo that piques their interest, to
promptly look over the rules, regulations and by-laws of the condo
association. For example, rules governing pets or decor often are a
make-or-break issue for buyers considering a condo.
Look at resale
Every home that is bought must one day eventually be sold. When your buyer
is thinking condo, you need to point out the drawbacks to some association
rules.
Some condo associations have regulations that require that units can only be
sold to owner/occupants. That may sound wonderful on the surface, but it could
seriously restrict the buyer when it comes to resale. Currently the market tide
has raised all boats, including that of the condominium, but should the market
take a turn, condominiums with such restrictions will have a limited number of
buyers, and limited buyers always cause housing prices to drop.
Renters constitute about 50 percent of the population. Thirty percent of
condominiums are bought by investors. Why would anyone want this large segment
of the market to be restricted from purchasing one"s property?
Get to know the association
Some associations simply spend too much money or not wisely. Excessive
association fees will restrict the resale price of your buyer"s unit. As an
agent you can find out the average fees in your area, and get hold of the
association"s accounts to show your buyer.
"When writing the sales contract, a condo buyer should always specify that
the contract is subject to receiving the condominium declaration, by-laws and
budget," advises Andee Hausman of RE/MAX Experts in Buffalo Grove. "I always
want to make sure that the buyer and the buyer"s attorney have ample
opportunity to review the condominium documents during the attorney"s approval
period."
Another important topic that deserves buyer attention is the condominium"s
management structure, including the board of directors and the day-to-day
manager.
"It is important to investigate the health of the condo association prior to
buying," says Hackel. "I recommend that my clients call the association
president and ask a lot of questions. Request a history of assessment charges
for the last five years. If the condominium is professionally managed, call
the management company and ask questions about its role and objectives."
It"s also important to understand what your monthly assessment paid to the
association will cover because that can vary widely, notes Diana Ivas of RE/MAX
Elite, Hinsdale.
"Assessments typically cover maintenance costs, water and sewer charges, i
nsurance, garbage pickup and specifics such as snow removal, but while some
associations also include heating and air conditioning costs in the
assessments, others don"t, and knowing that distinction can be important in the
buyer"s decision making process," says Ivas.
Perhaps even more vital is getting a clear picture of the association"s
financial situation. Have your buyer look at the reserves for major
improvements and repairs. Are the assessments charged sufficient to cover the
annual operating overhead? The association should not operating at a deficit
regularly although there are times when you must make allowances for unplanned
but essential expenditures. Also, the association should be adding to its
reserves every year. Look at an association"s actual reserves and compare them
to its plans for future improvements. Consider the age and condition of the
building.