Elements that Impact Condo Values

In this fast paced real estate market, there will occasionally be a condominium unit or community that seems to languish on the market. While condition and location are obvious elements that impact value and buyer desirability, there are other factors that owners have little control over that may impact resale value.

  1. Overly Restrictive Pet Rules  –  many HOAs permit pets with realistic restrictions on the number of pets per home, size/weight and sometimes breeds. If your HOA bans all pets, or just dogs, that can narrow the window of buyers. Be up front about pet policies when listing your home for sale.
  2. Parking  –  a condo with  no assigned parking or that is difficult to access, is unsecured or uncovered,may have a more difficult time competing in the market. Your condo may have a better view or higher quality upgrades, but if there’s no parking the value may need to be adjusted to overcome parking objections. Sometimes there are owner spaces available for rent – be sure potential buyers know about that option.
  3. Unusually High HOA Dues  –  unlike a house, when buyers apply for a loan to purchase a condo, the lender includes the monthly HODs in the buyer’s loan qualification calculations. The buyer may qualify to purchase the condo, but not qualify for the mortgage plus monthly HOA dues. If the monthly dues are on the high side, and there aren’t amenities or upgrade plans to justify the figure, it may take longer to find the right buyer. Provide detail of all the amenities and services included in the HODs as well as any future capital improvements planned.
  4. High Non-Owner Occupancy Percentage  –  buyers, especially those planning to occupy the condo, prefer to invest in a community where there is stability with more owners than renters occupying the homes. And though rental caps are more difficult to enforce, lenders also like to see at least a 50% owner occupancy, or higher, in communities where they’re planning to lend.
  5. HOA Litigation  –  just about any condo community built in Washington State since July 1990 has gone through litigation with the developer over defects or warranty issues.That process can take years to resolve, leaving unanswered questions regarding defects, repairs or future special assessments. Buyers are less likely to assume the risk and few lenders will approve a loan in a community until the HOA resolves the litigation.

Its difficult for sellers to control or change some elements that can impact their home’s value. As a seller its important to be educated about what’s happening in your community and how the HOA and Board are handling issues that impact all owners. Before you list your home for sale, know what’s happening in your community. The more you know, the more information you can provide to buyers and real estate brokers, potentially eliminating or resolving perceived negative issues that could impact a sale or market value.

Condos are Not Maintenance Free

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One of the advantages of a condo or townhouse lifestyle is the low maintenance. Homeowners aren’t generally responsible for maintaining the exterior of the structure, roof, landscaping, garage doors, etc. However, owning a condo or townhouse isn’t “maintenance free”.

Home repairs often come without warning – the hot water tank or an appliance fails, the plumbing leaks, etc. With a condominium, its important to know what elements of the home are the responsibility of the owner to maintain and which fall under the responsibility of the homeowner association.  (This information is disclosed in the Declarations, Covenants, Conditions & Restrictions – CC&Rs – which are part of the resale certificate every buyer receives.) There are ways you can avoid maintenance surprises:

  • Have a structural inspection. The inspector will provide information on whether a system or appliance is in good working order, is older and has a limited life span or is on its last legs. If an appliance, furnace, mechanical feature, etc. is not in working order, a buyer can request that the seller replace or repair the item prior to closing.
  • Purchase a home warranty. The annual cost is $400+- and like car insurance, there is a deductible, but if a major appliance or mechanical system fails a warranty may cover a large percentage of the repair or replacement bill.  Home warranties aren’t just for new purchases – a warranty can be purchased at any time by an existing owner.

Purchasing a home is expensive – the costs for the down payment, closing costs, moving expenses, etc. add up quickly. The last thing a new owner needs is an unexpected repair bill. Be aware of the expected lifespan of all the elements in the home and, if purchasing a condominium, know what elements the homeowner and the homeowner association are responsible for maintaining/replacing. Its wise to set aside a budgeted amount monthly for emergency home repairs or purchase a home warranty. Emergency home repairs are never convenient and are always more expensive than expected. Be prepared.