Forget Location, Location, Location

Today’s Condo Manta should be: “Association, Association, Association”

Condominium Associations Policies Are Playing a Heavier Role In Value Determination.

Many condo buyers are dismissing the old adage of “Location, Location, Location” as being the primary determining factor in the value of any given condominium in today’s uncertain real estate market. A host of factors- from the Owner Occupancy ratios, upkeep, finances, pet policies, and overall cache of any give condominium building will play a large role in determining the ability to sell a condo, and such “Unknown factors” contribute heavily to the appeal and value of many condominiums in today’s market.

The troubled mortgage market can add new pressures on condominium associations to limit the number of non owner-occupied units that comprise any given association. In order for a majority of buyers to obtain Fanne Mae warrant-able loans, the association must have at least fifty-one percent owner occupancy rates. Condo boards that ignore such requirements significantly diminish the number of qualified potential buyers for their building, as the lower owner-occupancy ratios require a heftier down payment from potential buyers to obtain financing. More hurdles to buy mean fewer qualified buyers, which leads less demand, and therefore often lower resale prices of the association’s condominiums.

A restrictive pet policy can also limit the ability of condos within the association to sell. “Most buyers are not going to give up their dog in order to look at any given condo building” reports Patrick Ellis of Prudential Fox and Roach Realtors in Philadelphia. “They simply will skip over the building, and look at condos which have more liberal pet policies” Ellis states.

In addition, a clear lack of maintenance may cause a buyer to overlook any given building which may otherwise suit their needs. ” I am looking to a condo purchase in order to reduce my responsibilities in terms of upkeep and maintenance, and will look past associations that visibly do not heed such responsibilities” say Carol Beaulieu, a potential condo buyer in Chicago. “The reason for my move is to allow someone else to cut the grass, fix the roof, and paint the exterior window trim when needed. I don’t want to have to become involved in seeing that issues of upkeep fall back into my lap- I want a pro-active association to deal with those concerns” say Beaulieu.

Additionally, lax condo associations that do not enforce rules can harm the value of units within the building. Allowing owners to ignore rules pertaining to noise, curfews, BBQ grills on balconies, smoking in common areas, and ill-trained doormen and staff can all have a deleterious effect on resale values. “A doorman who does is not trained to react to a fire alarm, or staff who cannot step up and remedy a broken elevator situation is going to be of little value to condo owners” says Mr. Ellis, a realtor in Philadelphia.

A closer look into the policies and operations of individual condominium associations can reveal unfavorable attributes that can wreak havoc on the real and perceived value of units within the association. The rule of “caveat emptor” should extend past the individual condominium unit, and onto to the operations of the condominium association in today’s competitive condominium market.

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