In Cambridge and Somerville, the vast majority of our homes are condos, and so it follows that the vast majority of my real estate deals are also condos. And the thing about condos is that they are a lot more complicated to buy and sell than single family homes — and I mean more complicated for the buyer, the seller, the agents and attorneys involved on both sides and certainly the lender.
There are a lot more factors involved in the sale/purchase of a condo, and a lot more potential stumbling blocks along the way. The good news is a little preparation prior to bringing your home to market can improve your home’s appeal to potential buyers and reduce or eliminate any factors that could otherwise lead to problems along the way.
So if you happen to be the owner of a condo that you’d like to sell, talk to your agent about how to best prepare your association in the following ways:
1) Address any areas of deferred maintenance on the building
Remember that before potential buyers step through your door, they will be looking at the exterior of your building and making judgements–good or bad–about whether they want to buy into your association. Things like peeling paint, rotting trim, or a broken pane of glass in the entry door may be things you and your condo-mates walk by daily without a second thought, but these deferred maintenance items can be very scary to potential buyers. First of all because they know that eventually they will have to be dealt with, which is a potential future cost for them. Second, it may cause them to wonder what’s wrong with the association that they are neglecting the building: Are the owners disorganized and/or not “invested” in the care of the building? Are trustees not able to get people’s buy-in on necessary projects? Are owners unwilling or unable to fund repairs? If potential buyers believe any of these to be true, it may cause them to run fast in the other direction.
If the building has been neglected for a while, it’s unlikely you’ll be able to tackle everything prior to listing, but at a minimum, you should sit down with the other unit owners and prioritize projects. Perhaps you can take on a few now — even a small fix can have a big impact if it’s something buyers will notice right away, for example, repainting a scuffed up entry hall or nailing down a loose board on front steps. And for those projects not on the immediate agenda, at least your agent will be able to truthfully tell concerned buyers that these items are on the association’s radar.
2) Stage common areas indoors and out
When you plan the staging for your home, don’t stop at your unit’s door — common areas need love too! Entries, halls, stairs and outdoor space should be uncluttered and clean. Be sure the path to your building’s door is clear and that any grass and plants are neatly trimmed. Keep trash and recycling bins tucked away on the side or back of the property so that they’re not the first thing a buyer sees from the street. If your halls are filled with bikes, strollers and/or piles of shoes, talk to your neighbors about bringing them inside their units or storing them elsewhere while your place is being marketed. Throw out any catalogs and junk mail piling up in your mail area. You want your buyers to get the impression that the people who live here care about their surroundings!
3) Get your financials in order
Most buyers understand that while larger, professionally managed associations have formal budgets and income statements, small associations are generally pretty informal with their finances. However, at a minimum you should have a sense of what is included in your operating budget and your approximate annual expenses for each. And because buyers always want to know what you have in reserve (especially if there are any big projects being planned or obviously needed), it may be worth getting together with your fellow trustees and contributing some additional funds to beef up your account. This is a “nice to have” for most buyers but a MUST if you are entertaining offers from buyers with less than 20% down who will be needing PMI. PMI companies will actually want to see an annual operating budget and require a reserve balance of at least 10% as well as a line item feeding 10% into reserves annually.
4) Anticipate and alleviate buyer concerns about low owner-occupancy
Most buyers who plan to live in the unit they will be buying would prefer a high rate of owner occupancy in the building. They like the vested interest, the accessibility of the other owners when things arise, and the relative stability of living among owners compared to tenants on annual leases. (Also, some lenders won’t finance in buildings with owner occupancies below a certain threshold, but let’s put that aside for now.)
But there’s nothing I can do about my association’s owner occupancy! I can hear you thinking (I’m psychic like that ;)) And while that’s certainly true, you CAN alleviate buyers’ concerns in a couple of ways. First of all, call a pre-sale condo association meeting to let the other owners know you are going to be selling and getting their buy in on items 1 and 2 above — when a building LOOKS good, it lets buyers know that the people who live there and the people who own, even if they don’t live there, care about maintaining the property, and that can go a long way. Also, ask the other owners (assuming they’re not the type that would scare someone off…) if they’d be willing to speak to buyers who may have concerns about how the association is run. Whether or not this is actually needed, it would be good for your agent to be able to let people know the option is open.
5) Know the limits of your buyer pool
There are some association situations entirely out of your control that will limit your buyer pool. For example, if your building has a hard-and-fast no-pet policy, you are ruling out a large chunk of the buying population who either currently has a pet, or wants the option of getting one in the future. If one person or entity owns more than 10% of the units in your building (basically more than one unit in smaller associations), this will require portfolio financing and you are ruling out any buyer who doesn’t want to pay the higher rate or doesn’t have the minimum 20% downpayment required. While there’s nothing you can really do about these scenarios, being aware of these limitations will help your agent to market the property appropriately and vet potential buyers to be sure the association will work for them. Luckily, in a low-inventory market like we’re in now, there are many potential buyers for every listed home, so even when some buyers are ruled out, there are generally still plenty in the mix that will want and be able to buy your home.
Happy days for sellers!