Sunday, May 31, 2009

A Solid, Stable Condominium
Community is Attractive to Buyers

Based on today's article in the New York Times about buying nearly new as opposed to buying new, this entry highlights the notion that a well-run condominium community can position a unit purchase as either a great idea or a buyer's worst nightmare.

I'm fully aware that Whatcom county in Washington State is not New York City -- by any stretch -- but in the not-too-distant future, I'm convinced that the logic of the article will ring true in this geography. A prospective buyer of any condominium unit, regardless of the locale, is advised to complete minimal due diligence by reading all the minutes and all the financials available for that association before closing the sale.

(Owners, as well, are entitled to copies of minutes and financials, so as to better understand the status of the community. More importantly, owners are entitled to information regarding the maintenance, preservation and enhancement of their real estate investment on an ongoing and up-to-date basis. It's also up to the board to conduct the business of the association in such a way so as to deliver results that can reflect a solid state of the condominium community.)

A cursory Internet exploration of 'condominium financials', for example, brings up search results heavy with sad, unhappy and poor experiences of people who bought condominiums who either didn't explore the association's minutes and financials or ignored what they read. A few of the 'surprises' include assessments to repair unresolved infrastructure elements, unfunded reserve accounts, and mid-year assessment increases based on poor budgetary planning.

In Whatcom county, many condominium developments are relatively new, except perhaps in places like Birch Bay (where condominium ownership appears to represent mostly primo rental-investment opportunities, and has done for years).

That early period when a condominium project is newly occupied, called the declarant control period, is a tender time for the financial business of a real estate community. Opposing interests and agendas will cause friction insofar as keeping assessments low enough to sell units while assessing sufficient monies to pay the bills. In addition, how the assessment dollars are spent can also cause friction: does the landscape look like a spec development or a lived-in community? Are units sold (sold!) primarily as investments or as primary residences? What ratios of owner-occupied vs. rental units are required by lenders?

In an ideal world, developers work closely with fully qualified, experienced condominium property managers to operate, manage, guide, advise and otherwise help establish a solid footing for a stable condominium community.

In order to implement this strong recommendation, developers must understand that although a condominium development is a real estate project, a condominium association is not like any other kind of spec real estate development project. When the governing documents are written, the crafting attorney can state the name of the qualified management company and optionally terminate the relationship together with all the other 'sunset events' that occur at the end of the declarant control period.

It is especially difficult to assume the officer-ship of an association when the association has been poorly managed, poorly funded, and otherwise left by a developer to struggle with all the issues involved in managing and financing a condominium association.

However and whenever the owner-centric board assumes responsibility for the business of the association, in sum, a well-run, cohesive community can be attractive to prospective buyers, whether first-time condominium unit owners or seasoned condominium dwellers. It's up do a developer to establish the 'brand' of the association from the beginning.

Please read the Branding Tutorial if you're a board member and want to adjust your brand.

1 comment:

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