How To: Pick the Right Condo

by Alex Stenback on January 3, 2007

One question we’ve been getting a lot lately of goes something like this:  "We want to buy a condo, but how do we know that we have picked the right condo project? "

In other words, once getting beyond the obvious qualifiers of price and general location (downtown? suburban?) how should one consider the seemingly endless list of other characteristics.  There’s the physical: highrise? many or fewer units? converted historic building or new construction? The intangible: Who manages the association? Does the developer know what they are doing? And the unkowable: Will my view stay forever? Will people want the 2007 version of "modern urban" in 2020?

You get the picture, and these are all great questions.  After the jump, we’ve summarized the key points to consider, kindly provided to us by Michael Roess, of iMetroproperty.com. Mike is a condo expert with experience developing and selling condos in San Francisco, New York, and Minneapolis.  He’s alos a frequent guest on our radio show.  Consider this your 2007 how to buy a condo primer: 

Select the building(s)
you are interested in very carefully: 

Smaller Buildings (20
units or less)

  • Be cautious of buildings that have
    too many and two few units.
  • Buildings that have too few
    units can be difficult to manage and control the common area expense
    (association dues).
  • It is difficult to find a property a
    property management company that will devote much time to a building that has
    fewer than 20 units.
  • Property management companies also
    charge a minimum management fee of $15,000-$18,000 and this can become a big
    expense per unit if there are only 10 units and this fee is negotiable if the
    building has a large number of units.
  • Be cautious of self-managed
    associations as this can cause conflict among resident and is uncomfortable
    (similar to a shared driveway).
  • When a large capital assessment
    arrives (roof, parking lot, exterior maintenance or replacement or boiler
    expense) this can result in a large assessment per
    unit.

Larger Buildings (100
Units or more)

  • Most loft and condo buyers are first
    or second time buyers and will live in the property 3-5 years so resale is a
    very important issue.
  • At any point in time it is likely
    that 5-7% of the units in any building will be for sale in any particular
    building
  • If the building has 400+ units like
    River West, River Station or The Towers you will be competing with 30 units when
    you decide to sell.
  • When we show a Buyer a large
    building that has many units for sale we find that they have a hard time
    recalling any one particular units they saw that day.
  • It is sometimes difficult to have a
    voice in a large building if you are concerned about homeowner’s dues or other
    issues as the association tends to be run by the management company (and their
    fee is often based on the expenses to run the
    building).
  • These buildings tend to have a great
    amenities package (swimming pool, health clubs, business centers,
    etc.)

 Over the years we have
found the following to be a good safe bet:

  • Mid size buildings that are well
    located (Warehouse District or Mill District).
  • Buildings that are unique (warehouse
    conversions or well designed new construction where the developer has not
    repeated their work over and over).
  • End units or units higher in the
    building.
  • Ground floor units are good provided
    there is something special (larger deck/on a green space/not on a city
    street).
  • Homeowner’s dues that are 20-30
    cents per square foot when you pay your own heat and utilities; 30-40 when it is
    included (stay away from older large buildings with high
    dues).

 Pick the right tool for
the job (get an agent that knows the market):

  • While friends and relatives are
    great they will often not possess the in depth knowledge of various buildings to
    help you make the best decision (an experienced agent will be able to tell you
    which buildings have been a success and why and which units were popular
    within a particular building
    ).
  • Have you agent run the market time
    for pending and sold units in the buildings you are
    considering.
  • Have your agent analyze then number
    of listings that have been cancelled or expired as a percentage of listed by
    building.
  • Have your Agent ask the property
    manager how many foreclosures there have been in the building you are interested
    for the past 24 months (seller could not sell and ultimately the property was
    foreclosed).
  • Have your Agent determine how much
    the dues have changed over the past three to five
    years.
  • Ask the property manager if they are
    expecting any special assessments for capital improvements and if there are
    funds in reserve to cover this type of expense should it
    occur.
  • Weigh the possibility of increasing
    interest rates against a building that will not be finished for 12-24 months to
    determine if you would still want/qualify for the payment if it were
    higher.
  • Educate yourself on recent mortgage
    practices/products (go to www.behindthemortgage.com for
    information).
  • Interview three lenders and ask them
    for an example of a recent transaction for a loft or condo so that you can audit
    their fees.

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{ 6 comments… read them below or add one }

Duane Thilmony January 3, 2007 at 11:40 am

Great article! I’m forwarding it to two current clients considering condos!

Harold Hill January 3, 2007 at 12:04 pm

Very cool, I’m just about to start looking in the ares you’ve mentioned. The timing is perfect.

Derrik Dyka January 4, 2007 at 11:44 am

Well said. A nice group of info in one central locale.

Stephen Gross January 11, 2007 at 10:20 am

I have a question about the last item (auditing similar transactions). I’ve never heard of that–can you explain in a little more detail?

Thanks,
–Steve (mrstephengross@hotmail.com)

Editor January 11, 2007 at 4:21 pm

In other words, don’t just accept the “preferred” lender special offer at face value. Check with a couple of lenders to negotiate the best fee/rate package.

Amy June 24, 2008 at 12:24 pm

Do you know these people: http://torontocondoinfo.wordpress.com/2008/03/18/how-to-pick-a-condo-yonge-and-eglinton/

Because they have an identical post to yours.

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