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| Maximizing Resale Value
Published in Condo Management Magazine, July 1999 By William King It seems that more attention has been paid in the last few years to the health of associations than ever before. With the increased focus on budgets and planning, the gap between well-run associations and mismanaged associations appears to be widening. This ultimately translates to a wider gap in resale values. How big an affect does the association’s budget and reserve planning have on your value? What impact might a pending special assessment have on your resale plans? What steps can you take now to ensure maximum value upon resale?The increasing sophistication of buyers, agents, lenders and appraisers is resulting in more requests for budget and reserve data as part of the buying process. Simply put, an under funded association is going to cause some buyers to look elsewhere, or reduce the amount they are willing to pay for a unit based on anticipated increases in dues to make up the budget shortfall. More and more buyers are looking into this aspect of their purchase in advance of buying than ever before. Total housing cost is a critical factor in the home buying decision. For some buyers, an unexpected jump in monthly housing cost can be the difference between keeping and losing their home. An under funded association also becomes more vulnerable to poor quality materials and workmanship when addressing repair and replacement of its common area components. By getting behind the curve, the appeal of going with the low bid is increased. Poor quality exterior materials and workmanship may mean a potential buyer never sees the inside of your unit.Pending special assessments also cause some buyers to shop other properties. To the condo buyer, a special assessment is an additional out of pocket expense. While the individual unit may be in excellent condition, the property is essentially a "fixer upper". The seller used up the (roof, pool, etc.) and is now selling the property in as-is condition. As is the case in detached homes, "fixers" are typically discounted not only by the anticipated cost of repair, but also an added amount for their willingness to take on the problem. For many owners, their first exposure to the budget and planning process for common areas comes well after buying and taking possession of their unit. The announcement of a special assessment or the outright failure of a common area component (like a leaky roof) triggers their involvement in the association. At that point the emphasis is on damage control, not advance planning, and planning cannot come into focus until the more immediate problems are solved. Attending association meetings, being involved in the planning process and treating the common areas as an extension of your living space are critical in maintaining the value of your unit. As buyers their agents and lenders' appraisers place more emphasis on the association when evaluating an individual unit, it becomes increasingly important for the homeowner to be proactive in their association in advance of planning to sell. Bill King is a Certified Residential Real Estate Appraiser and Licensed Real Estate Broker. |
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