How To: Pick the Right Condo

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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3. Tipster: Mozaic Condo Project Dead
4. Developer Sees Promise in Downtown Minneapolis Condo Market
5. Downtown Journal Picks Up 607 Washington Lofts Story