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Apr 12
2009
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Selling Against the Shadow Market: New Info You Need to Know!
Posted by: Lisa Trosien on Apr 12, 2009 01:00 Tagged in: Residents , Resident Retention , Property Management , Occupancy , Multifamily , Foreclosure , Apartment Residential , Apartment Leasing
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I'm constantly researching new and different ways for our industry to lease, market, retain and manage our assets. I came across this Wall Street Journal article , The New Condo Reality by June Fletcher, this weekend and the information it contained is essential to any property that fights the condo market.
If you have a prospect or resident who is considering purchasing a condo because it is a 'good deal', they need to know some facts:
If the building is not fully occupied: With fewer people in the building, those who are left wind up footing the bill for all of the building's expenses, from window washing and pool cleaning to big-ticket costs like roof repair and boiler replacement.
If the developer is still in the picture...the need for major repairs will inevitably come. And since many developers subsidize maintenance and amenity costs to keep condo dues low and attract buyers, you should expect that these fees will rise, possibly precipitously, once the developer leaves (hopefully because he has finally sold all of the units, not because he has gone bankrupt because they didn't sell).
If the building has a lot of amenities: Keep in mind that the more fancy amenities your complex has, from exercise rooms to elevators and tiki bars, the more you and your neighbors will eventually have to pay for their upkeep. Before you buy, look at the association's "reserve study"-assuming it has one-to get an idea of replacement costs for the various items in your complex. The study also shows each owner's financial responsibility at present and in the future, once the developer leaves. You should add a little more to this projection, since it's possible that a prolonged recession will lead to continued foreclosures-and when a resident stops paying condo fees, the rest of the residents have to pick up the shortfall until either the lender or a new owner repays them.
If your resident or prospect has to get a loan to pay for the condo (rather than pay cash):As of March 1, Fannie Mae will no longer be financing new condo developments where less than 70% of units have been pre-sold. Before, the cut-off was 51%. It also bans mortgages in projects where 49% of all units are owned by investors, where more than 15% of owners have fallen behind on paying association dues or where more than 10% of the units are owned by a single investor, individual or company. Freddie Mac is getting tough on condos, too: Recently, it upped the minimum down payment on condo loans to 25%.
Read the article in full here: http://bit.ly/5YaY
