Tag Archives: condo

The “starter price” condo market

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Many years ago, I did a study of the “starter price” condo market and received some very surprising results. Based on Dustin’s post, I re-did the research and obtained the exact same results as I did back in Bucks County, PA some 13-16 years ago! Interesting…

The two highest months for people making decisions to buy a condo in what we might call a “starter” price range are March and July. March because first time buyers are often urged by their accountants, or simply by their tax return on their own, to own instead of rent. July due to downsizing of empty nesters or now single, divorced persons selling their single family homes in June and July and moving to a condo. Of course, every month has a mix of reasons to buy, but I find these two reasons account for the fact that these two months tend to be the highest in a yearly cycle.

Sales in June and August are not too far behind and on a quarterly basis, sales are more fairly consistent year round for condos than single family homes, with a slight drop in the last quarter. Again we are not talking about million dollar condos, we are talking about the lowest rung of the price chain.

Actual statistics of 2 bedroom condos under $300,000 (most about $250,000) within a short distance of Sundance in Klahanie.

2005 – Jan. – 10, Feb. – 14, March – Twenty eight – Sold in the 1st quarter – 52

April – 18, May – 19, June – 24 – Sold in the 2nd quarter – 61

July – Thirty, Aug. – 24, Sept. – 13 – Sold in the 3rd quarter – 67

Oct. – 13, Nov. – 9, Dec. – 15 – Sold in the 4th quarter – 37

Inventory in 2006 is way down with only 39 sold in the first quarter compared to 52 in 2005. This does not appear to be because there are fewer buyers, but because fewer people are putting their properties up for sale. However this low inventory in the resale market should not necessarily lead you to believe that demand will be high as supply is low. There is a lot of pressure on the resale markets from New construction and Condo Conversion Projects, generally. Even if the new construction or condo conversion is not in your back yard, people will drive an extra mile or two for brand new.

I have to admit that I almost fell off my chair to find the results almost identical in this scenario, to the study I did some 3,000 miles away back in the early to mid nineties.

Condos: Conversion versus New Construction

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(Editor’s Note: Please welcome Wendy Leung as the newest contributor to Rain City Guide. She is a real estate professional specializing in the Seattle Condo market. She has been running a very interesting condo blog for a few months now, and I thought we could all benefit from her knowledge on the condo market in Downtown Seattle. if you haven’t read her blog, definitely check out her post on Cars and Condos where she gives insight into the local condos by describing the type of car that they would be. Great stuff! You can always learn more about her at her website or by contacting her directly at 206-321-2493)

With an increasing number of apartment buildings converting into condos as well as a parade of new construction projects being unveiled every day, home buyers may be wondering how to think about these two property types.

At the end of the day, your Realtor should help you evaluate the options based on your goals, budget, needs, and circumstances. Furthermore, every property is unique and generalizing about conversions and new condos is a bit like saying one genre of restaurant will always offer better service than another. That said, there are some fairly consistent differences between the two property types. Here are some of the advantages for each.

Advantages of new condos

  • Newer, nicer interiors and exteriors, often come with better amenities and more imaginative architectural designs.
  • Better quality construction (at least as far as we know). Gone are the days when builders used leaky Synthetic stucco for every new project. The quality of construction has advanced these days and more and more builders are using hardy plank, a combination of brick veneer, vinyl, metal, concrete, steel and cement.
  • Flexibility to customize the interior. Usually, the builder will offer you a variety of upgrades and style options to make the place match your personal style.

Advantages of conversions

  • There are fewer surprises. What you see is what you get. The building has been around for a while so generally, if there are any issues with the building, it should already have happened. If the building has issues, you can usually get hold of the information about any issues much easier than a new condo to make a better informed decision.
  • There is actual market data available for that building and even that unit to support the rental value for the building if you are purchasing it as an investment. There will also be more insight into peoples’ opinions of the building as opposed to speculation from the new condo sales center.
  • Most of the time, conversions are cheaper than buying new construction. When you’re looking at ROI, this can be the biggest factor of all since 3 years from now, a new condo and an apartment conversion will both be older condos in the eyes of most buyers.

If you are not paying a really large premium for new construction (this is getting harder to do these days), it will probably resell for more than a conversion. However, a pricey new construction unit may have a higher absolute price appreciation but may not have a higher return on investment (than a value-priced conversion unit). At the end of the day from an investment point of view, it’s the rate of return on investment and not the absolute resale price growth that maximizes your profits.

The ROOF – Things you should know

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Whether you are buying or selling real estate, or just trying to decide about your own roof replacement, there are a few things you should know about a roof. As I look out of my window, 95% of the neighbors have a composite shingle roof. So let’s talk about those.

When you are buying or selling a house with a composite shingle, do the math. The house next door to me has a 20 year shingle. The house next door to that one has a 30 year shingle. It is easy to tell a 20 year shingle, because the shingles lay flat, with almost no “definition”. As the shingles get thicker on a 25 year, 30 year, 35 year and up shingle, there is definition and a “layered” look. Even some of the best home inspectors can’t tell a 30 year from a 35 year shingle, so if you are a seller, and know you have a 35 year shingle, it would be good to tell your agent to highlight that feature, and you should also put it on your Seller Disclosure Form.

Sellers: Don’t forget to put GOOD things on the Seller Disclosure form, so it is not merely a highlighting of “bad” things. Add a list of good things, as an attachment if needed, and have the buyers initial the attachment too.

It took me about a week in the real estate business to learn the simple lessons of “roof math”. When I was selling my own home in Cherry Hill NJ, the home inspector went up the ladder to the roof. He came down and told the buyer that the roof was about 18 year’s old and may need to be replaced in 2 years, because it was a 20 year shingle. I said, “The house was built 8 year’s ago. Are you saying they found some 10 year old shingles to put on the roof of a new house?” I really wasn’t trying to be “flip” or nasty, it just popped out of my mouth like that in true “Philly” style.

Everyone should know how to do the simple math of a roof without relying on the inspector. Not because the inspector will be wrong, but because a roof can be just fine and still be “due” for replacement soon. I’m not going to go into second shingles and third shingles, because something tells me these will be obsolete in the future, given most roofs are no longer flat enough to go that way. I will mention roof color briefly. Mr. Cherry Hill Home Inspector was somewhat correct, in that it was a black shingle. Often black shingles will not make it to 20 years, while gray or tan ones can go to 23 or 25. Heat absorption issues. You see very few black roofs in year round sunny climates, like Florida and CA.

Buying a condo? Think you don’t need to look at the roof? Not so. A few weeks ago I attended a home inspection of a condo built in 1986. I walked across the street and climbed up on something to see the roof. The inspector and buyer said “What the heck are you doing over there?” I said I’m checking out the roof. The inspector said “Why? That is the condo association’s problem.” By then both the buyer and inspector joined me under my “perch”. I said look, it’s flat, it’s a 20 year shingle, right?” Inspector said yes. I said “This place was built in 1986. 1986 plus 20 equals 2006. When I get the resale certificate, I need to check to see if they have enough money in reserves to replace the roof, or warn the buyer about a possible special assessment. I need to check the Reserve Study for cost of replacement. I need to check the dollar amount currently in reserve for all replacement items. If there is not enough money there for all things, I need to divide the shortfall by the number of units, or prorate per total square footage of complex by unit size, and give a range of possible special assessment amount.

Buyers note: The condo association is YOU. There is no Fairy Godmother, named HOA, with a magic wand.

I’ll end with this “red flag” for both buyers and sellers. I ask the owner or listing agent, “How old is the roof, especially when I can’t do the math well on a 1917 built home…too many roof changes to do simple math. Owner responds: “I just had the roof checked and it’s fine.” Big red flag! That is not the correct answer to “How old is the roof” 🙂

Cancelling the purchase contract of a condo based on the resale certificate

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When you purchase a condo (which can be a townhome) in the re-sale market (as opposed to new construction), there is a very important event that takes place during escrow. Line 19 of our “Condominium Purchase and Sale Agreement” Form 29 provides that the seller will deliver the “resale certificate” to the buyer within (blank) days from mutual acceptance. You have a limited period of time to cancel the contract based on the resale certificate and when that timeframe runs out, you lose that right. The period is normally 5 days.

I want to talk more about the practical aspects of this event, rather than the legalese, so the above is short and not all inclusive and simply an introduction. In the past several weeks I have cancelled two escrows based on the resale certificate, or more accurately the buyers cancelled escrow based on the resale certificate, and so I think this topic is timely and worth noting. I will give a real life example as an anecdotal story to raise some of the issues involved, keeping this post short(er), and will go into more detail on my blog, where I can be as prolific as I want 🙂

I showed a condo at night. We went up the elevator and into the unit and we at that point were more concerned with getting the property into escrow than examining all aspects thoroughly. It was a one of a kind condo. I knew that if the buyer lost the opportunity to make an offer, I could not easily find them another like this one. And so the offer was prepared and accepted rather quickly. We had two timeframes to further examine that choice, one was the home inspection and the other was the resale certificate info and timeframe.

During the home inspection which was in the light of day, we walked all over the complex and found two alarming issues. The inspection itself was fine. The alarming issues were part of the common area and HOA responsibility. Neither of the issues we viewed were addressed in any way in the Seller’s Disclosure “Form 17”. I asked the listing agent to go look at the problems we viewed and respond, he would not do so and said the seller had no knowledge regarding what we could readily see. I believe that was true as they did not go where we went, which was everywhere. When the resale certificate arrived, there was almost no information regarding the issue, the minutes in the resale certificate being from 2002 through 2004 were not any help. There was a minor, yet bold notation, regarding one of the issues with an estimate of a very large cost. I am being vague as this is a real life current situation and you need to know the steps to take more than the actual detail. It was obvious that the total actual cost was not yet known and that the repairs would not be completed until several months out. The buyer cancelled the escrow based on the resale certificate. The seller did offer to pay the amount the HOA expected the total cost to be, but we deemed that to be insufficient. Another buyer may be willing and able to work something out acceptable to both parties, and that is OK. We returned the resale certificate so that the seller could use it to raise this issue to the next buyer in a more timely manner, should they choose to do that.

When you purchase a condo, be sure to walk all over the complex and view everything there is to view. Make notes of anything that is worth noting. The seller’s disclosure is normally about the unit itself, and not all issues of the complex. Likewise, the inspection is normally an inspection of the unit itself and not the roof or siding or other issues deemed to be HOA responsibility. When you receive the resale certificate, read the minutes thoroughly. Look at the Rules and Regulations, CC&R’s and By-Laws and make sure you understand and have no problem with these. Even if the mls says you can have pets and you see pets when you view the condo, that does not mean that pets are allowed. Look specifically at the pet rules and make sure you can comply with the written rules. Look at the amount in reserves and make sure that the amount is sufficient for the needs of the complex. Most importantly know that you have a very limited time to note a lot of things when you get the resale certificate.

All too often people take this big stack of “stuff” and do not even look at it. I do review it with and for my clients. There is no way I could put “Everything you need to know about the Resale Certificate” into a blog post. Hopefully this is enough to start a conversation via comments that is increasingly helpful and to red flag the issue. Again, I will try to add to my existing posts on this topic on my blog as well.

Condos in Seattle

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condoAre you looking for a condo that you can call home? I have a client who does not want to go through the hassle of listing his condos in the MLS. (He currently has renters and doesn’t want to have a parade of people going through their place). However, he is interested in selling them… Here are the details.

Condo #1 — 1400 Hubble Place on the southwest corner of the 13th floor.
This condo is very well maintained and has beautiful views. It is VERY close to downtown.
The condo has one-bedroom with approximately 570 total square feet. It includes one parking space in the building! The current market price for this condo is approximately 190K.

Condo #2 — 92nd St and 1st Ave NW (Northgate Plaza)
This condo is a one-bedroom, 760 sq foot place with a balcony and parking in the building. The unit is on the top (4th floor)!
The condo includes a swimming pool. The current market price for this condo is approximately 120K.

If you are seriously interested in a hassle free purchase of one of these condos, let me know and I can set up a showing!