New Condos: June 12, 2008 From our archives: Pricing on real estate depends on the market and the circumstance. And recently I would also add the strength of the buyer. But it is not unusual to see new construction drop the prices on the last units or even the last single family homes. I can list projects where I have seen that happen…to my dismay and to the values of the folks who purchased at full price. Existing condominium projects are starting to have concerns- and problems- where here are too many renters as compared to owner occupied units.Mortgage lenders are sometimes reluctant to approve loans where the investor ratios are higher than the owner occupied units. The secondary mortgage market such as Freddie Mac and Fannie Mae have imposed certain restrictions, such as no more than 40 or 60 percent of the units’ owners can be landlords.Many community associations’ leaders believe renters do not have the same incentive as owners to honor and respect the rules and regulations of the association and do not take good care of the property. Maybe that is a grey area, but it is more possible than not. So, if there are problems with existing condominiums, I suspect there will be even more issues when the association is brand new. Legally, the developer- as owner of the unsold, rented units-may be obligated to pay the condominium fees for the units that are rented, but the legal documents of the association have to be reviewed to make sure what he obligations of the developer are.The price was lowered to attract buyers. Do you have any guarantee the price will not be lowered more- after you buy? Real estate is in flux now and maybe for a while to come. Your investment is no longer guaranteed to give you a good return. If you are considering living in the unit and can get some more perks from the developer, then it may be something to consider. This is what you should ask the developer to do for you: 1. Pay all the closings costs and pre-paids, and 2.If the price of similar units is lowered within the next year, provide a proportionate rebate.If you are hesitant about number 2, ask them if they have ever practiced lowering the price on the last 10%...or look it up in your tax records. Again, the web is a great tool. As you know, I read a good bit about condos and about real estate and Benny Kass, a practicing attorney in Washington, has written some great articles on condominiums and I am learning a lot by being an avid reader of his columns. With thanks.

Home Owners Association” Definition: Wikipedia defines it well- “In the United States, a homeowner association (or homeowners association) (HOA) is a corporation formed by a real estate developer for the purpose of marketing, managing, and selling of homes and lots in a residential subdivision. It grants the developer privileged voting rights in governing the association, while allowing the developer to exit financial and legal responsibility of the organization, typically by transferring ownership of the association to the homeowners after selling off a predetermined number of lots. Membership in the homeowners association by a residential buyer is typically a condition of purchase; a buyer isn't given an option to reject it. Most homeowner associations are incorporated, and are subject to state statutes that govern non-profit corporations and homeowner associations. State oversight of homeowner associations is minimal, and varies from state to state.” Plus Points: The HOA defines the structure, the financial and legal responsibilities. So the documents create a structure, a sample of governing, rules and regulations.

Minus Points: The interpretation and the inexperience of many and or most of how a Board of Directors operates can sometimes cause rifts and stumbles. Granted some are better than others. Some are self-managed and do very well. Others not so well. Owners put a lot of faith in this tiny government counting on it to operate efficiently because this has to be better than cutting the grass and cleaning the gutters. It’s a toss-up, I bet.

Condominiums and Townhomes-Nuances, Part 2

 Attached housing means condominium, town house, co-ops and maybe even patio homes...what are the nuances and how do you know for sure?
Everything should be detailed in complex documents. Check for amendments they should be recorded.
Pets: dogs, cats and more, weight and number.
Insurances, all or part?
Cars and trucks, size and parking.
Guests?
Rentals?
Window treatments and storm doors?

More factoids:

1.Condos may be two story or three story...they may be attached or detached. They may be converted apartments, converted duplexes or single family homes.

2.There may be a weight limit for dogs and sometimes breeds may be named for acceptance.

3.Often, the streets and the parking areas of complexes are owned and maintained by the complex...and not by the city. That is why the streets are sometimes not on maps. They are considered private. Think assessment possibility in the future. Although sometimes the city can  take the streets and assume management.

4.Condos and town homes may look exactly alike...there are some complexes that are actually detached homes and they are in fact condominiums. Condos can appear in the most unexpected places. For example a large home in Dilworth was converted to condos, floor by floor and finally and recently, the attic was converted and fetched a handsome sum for the association.

5.Many complexes have attached garages or garages on a first level...it is important to have carbon monoxide detection equipment in good working order. These are required by law...testing often is a good practice.

Part 1: Condo? Townhome?

1. Legal descriptions define the kind of property: condo is space, footprint means townhouse. 
   
   
2. Co-ops and condos may look alike but their legal definition is very different. A co-op is a corporation with shares. The living unit is an apartment. Financing is also structured differently. In Charlotte, NC, there are two co-ops: Kimberlee and Morrocroft.
   
   
3. Sometimes people say "Garden" when they mean "all on one floor". A better description for that would be "flat" not unless there is no unit above or below.
   
   
4. Yes, the fancy name for condo is "Villa"...it still defines space.
   
   
5. Here's a telltale sign: a condo has a Unit File designation, ergo U/F. When in doubt look for U/F in the legal description. Interestingly enough, in Charlotte that number usually is the designation. For instance, Gaynor Arms was the very first condo in Charlotte, it is U/F1. Quail Hollow Estates is U/F 3. It is the third complex built.

      6. A townhouse requires a survey. A survey can only 
          be shot if there is space between the units. Most
          conversions, while looking like townhomes or     
          cottages are actually condos.

7. It may come as a surprise, but yes, there is a difference in financing for a condo and for a town home. It is important to make sure you know the legal definition of the unit you may be considering. The differences have changed as the mortgage lending business re-defines itself. In writing an offer or seeking financing, be doubly sure there are no nuances. The only constant in financing differences would be, but not always, hazard insurance.
   
   
8. Insurance: there is special condo insurance that insures from  the paint "in". The dwelling is covered by homeowners insurance. Be sure to read the master policy first because insurance coverage can vary. Improvements should be detailed because regular condo insurance may not cover what is perceived as regular loss. (See discussion on improvements covered by insurance).

      9.A townhome owner would need the same kind of
         insurance as a single family home. Often hazard
         insurance policies for a group command a lower
         premium.

     10.Attached housing (condominiums) depends on    
          certain qualifications for loan approval from FHA,
          VA and for Conventional type loans. Make sure
          you know what approvals the complex has. Why is
          this important? The old rule: be sure you can get 
          out when time comes for you to move on. Special
          financing and balloon type loans may deter you.

11. Check owner occupancy percentage. High investor ratios may make it hard for you to get a loan and if you do it may be at a higher rate and may require more money down.

Condominiums Questions/Answers for Buyers
Sellers can benefit from FHA queries as well.

1. Read Governing documents: Regulations, By-Laws, Covenants and Restrictions Are rentals allowed? Is there a limit to number and size of vehicles? Number and size of pets? Smoking?

2. Ask about Financial Status: Amount set aside for reserves, pending assessments, law suits pending or in progress. How do dues compare to like projects in the area...and what do they include. More and more town home ( these are bonafide townhouses, not condos) communities are including homeowners insurance because of better rates.

3. Investor ratios and owner occupied units. This can affect financing and perhaps your decision to buy in a heavily investor-owned property or even if you could if you wanted.

4. Ask about increases in dues in the preceding 5-6 years and what is the history of assessments and what were they for? Ask for the last three months of the Boards of Directors Meeting minutes.

5. Check the actives and the solds and the dates of each for the last year or so to get a snapshot of activity...too much, prices up or down?

6. New construction requires asking questions about the builder and the developer. Most handle management until a certain percentage of the units are sold.The big question and area of concern is almost always, the reserves. Ask for and go over financial reports line by line.

7. Watch promotions for the complex if it is a new one...there are usually some incentives...some you have to ask for, some not...check to see how many are still on the market and over what time period.

8. Check in at NC Real Estate Commission for a free brochure: Questions and Answers on Condos. 

9. Know about a good resource: Community Associations Institute in Alexandria, VA. They address many issues and answers for attached housing.http://www.caionline.org/

10. And remember Condo CanDo® is always near! Either in Blog and Podcast (both have searchable feature), twitter and web.

I have read that condominiums existed in Rome some 2000 years ago. Check this photograph taken under the entrance way to a very old community, the stone reads "Condo"...is there a doubt? Perhaps Romans bought into a multi-family structure for the same reason families today do...more time for leisure, less demand on utilities and in many cases, lower costs than single-family housing. Our lifestyle has evolved since then...most of the forward movement has happened since the 1970's.     

Today the condominium is the fastest growing shelter concept in America. In 1963 the government mortgage insurance was extended to condominiums through the enactment of an amendment to the National Housing Act. The concept was first accepted by the 55+ market as an alternative to single family housing in retirement areas and as second home investment in resort areas. And for a variety of reasons with the enthusiasm for condos propelling builders and developers,  the condo boom in the late 70's ran right into overbuilding. Even here in Charlotte. Kathryn Smetana built the very first new condominium on Gaynor Road in Cotswold: Gaynor Arms. A handsome building still...stately and well-built it serves to remind us that quality construction is long, long lasting. Then came the era when first timer condo buyers got married, had children, changed jobs, were transferred and there was a glut...and interest rates were high and condominiums got a bad rap...made worse by some faulty construction and some poor management and maintenance. Whew! If units didn't sell, they were rented...investor ratios grew, then complexes couldn't get financing. It was a tough market for attached housing.

Then Charlotte began to grow...the condominium market changed. In some areas sellers even made money...note: some areas. When I first started my database, there were 300+ condominiums and townhome complexes...as of today, I have data sheets on most of the 1000 residential condominium communities and that is just for Mecklenburg County

The Details

The biggest most important detail is, Read the Documents”. The homeowners Documents more than likely can be found on line within the Register of Deeds. There are two parts: The Rules and Regulations and the Covenants and Restrictions. These may sound boring and I must admit when I first started my tenure in Condo Land, I thought they were boring and even more foolishly that they were all same. I learned very quickly to pay attention, to read through every page and to recommend to everyone, buyers and sellers, new and old residents, to get them, read them, and observe the rules.

The principals are similar but that doesn’t mean it is okay to skip them.

Here are a few good examples: Who is responsible for windows should they need replacing? The owner of the unit or the HomeOwnersAssociation. This is a good one to know before you need to know. As a matter of fact they all are. The answer for windows broadly is- most often you are. Most common default of a window is a broken seal. Reading the documents will reveal who or who not is responsible for the windows.

Trucks and RV’s and Boats. Usually there is a special lot for parking boats and Rv’s and vehicles other than cars. And there might also be a restriction on the size of pick up truck can be parked in front of your condo. And dogs and cats. Weight size. Number of pets. And then there’s parking. Usually in a parking lot, spaces are assigned. In a deck or garage they may be deeded with the condominium or they may be leased. Same with storage.

Getting your attention?

Signs. I like this one because for a very long time and sometimes even now signs such as for sale signs are not permitted. There may be further guidelines if they are allowed about size and shape and where they might be posted and at what times.

Then there are blinds or curtains. Most require uniformity in color and style.

The most important and lengthy details address Investors. Before even getting remotely serious about a unit, know the exact number of investors. Many loan programs detail percentages allowed and if those numbers are high, the interest rate may change. Investors mean rentals. Some states are not allowing investors in attached housing and do not allow units to be rented except in dire emergency. Many of the older communities in Charlotte are changing or have changed their by-laws to prohibit investors from ownership

Lynnsy Logue for The Book of Condos:
You and New Construction:Representation

1.Does it cost more to have a real estate broker representing you for the purchase of new construction? 

A.No. The builder has this in operating expenses and you don't save money by going it alone.

2. What role does a real estate broker play in new construction?

A. Helps you with financial options: negotiating the contract, selecting the best mortgage options, studying the incentives, suggesting an inspector, reading the small print, reviewing the closing statement.Your broker is your advocate.

3.

Would my broker work for me even though the builder pays the brokerage fees? 

Yes. There is a standard form you can sign with your broker and the builder which states that your broker works for you and the builder is paying the fee. It states that the broker is loyal to you and represents you exclusively.

4. 

If there is a problem with the loan or the construction, will my broker be able to help...even if I use the builder's lender?

Yes. Your broker is able to jump in...anywhere, anytime to protect or explain your interests and concerns.

5.

Isn't it easier just to work with the builder's sales agent? 

Sometimes sales go without a hitch, a broker earns their salt by coping with the problems...and handling the details.It costs you no more to have an advocate. Also working with the builder's sales agent could be considered dual agency where no one really has representation.

Lynnsy Logue for The Book of Condos: Basic Use

Residential

There was a time when condominiums were often the first choice for home buyers. First timers find them attractive...in price, maintenance, and for the amenities: pool and tennis. Young marrieds and empty nesters are both drawn to the concept...with little need for playgrounds and other little chums to play with, attached housing is a logical choice. The market prices represent a wide range for various economic backgrounds. Often times condominiums and town homes offer communities of similar lifestyles.

Commercial

Commercial condominiums have always been with us in Charlotte. They offer the only significant alternative to leasing space. It is a viable alternative for owners can keep pace with inflation. Commercial condominium afford excellent tax benefits and appreciation to boot. Small groups of doctors, lawyers and accountants, health care providers, consultants find office condominiums flexible and highly attarctive as investment property.

Some creative approaches around the Charlotte region include live/work arrangements.

Conversions

There are many kinds of conversions: apartment houses, office buildings, mobile home parks, marinas, parking garages and many different kinds of rental property are being processed throughout the country. Where are conversions in Charlotte? Rockledge in Myers Park, Churchill in Cotswold, The Poplars, Uptown and Heathstead, South Park, which has a very interesting history.

Resort

At the beach, golf course communities, ski slopes and other vacation and recreation areas...resort condominiums for the professional instructors. A draw for investors and seasonal users are typical candidates for this market. With the change in the tax laws, second homes are heading list of home owners.

Above and below:
As Charlotte grows and the building cranes are across the city what cannot be seen, the subterranean condos and the condos in the sky with no visible borders. And yes, some of these are noted in Polaris. Thinking parking space beneath the buildings, think space over  mid-rise buildings like the Mint Museum uptown. We are and have been in a different condominium profile. Welcome to the future.

My father came home one day and announced that our
family was moving from our small town in Virginia to
Charlotte, N.C. And almost immediately, the thought
came to me, I heard my voice whisper internally,
"I am going home."
From the moment I drove across the city line, driving
my mother and young brother into our new city, our
new home, I could feel my heart beat faster. It was
as you might have already suspected, love at first sight.
And over the now sixty years I feel as though I am
one with the city and because of 30 years alone in
real estate and 30 years prior in high school and
a variety of colleges and classes as I embraced
self-education and well over a decade and a half
in the media,I see my self at all ages growing into
and with the city, being a hint, a shadow, an echo
in the alleys uptown and the dusty roads now
highways around the city and the countryside
where I  live. One.

 
Condos and Co-ops, Similar and Different

​The shift to condominium ownership is linked directly to the ascendance of the condominium form of ownership along with other perceived difficulties in cooperative ownership.

A Cooperative is a multi-family complex owned by a corporation organized for this purpose. A purchaser of shares in the corporation acquires a proprietary lease and the right to occupy a particular unit along with obligation to pay a pro-rated share of the corporate expense.

 The corporation is, in fact, a lessor and the purchaser a lessee.

 The corporation is governed by a Board of directors whose duties and powers are set forth in its by-laws.

        a. Joint liability (the shareholders in the corporation are jointly and severally liable for all debts incurred by the corporation) has been a major disincentive to the further growth of cooperative housing.

      b. Financial institutions apply more rigorous credit standards regarding the shareholders in the cooperative before advancing either construction or permanent financing. As a result of these standards and practices, the effective market for cooperative house is severely reduced, and consequently, the supply of those units is increasing at only a modest rate...in Charlotte, not at all.

Here are the two co-ops in Charlotte, NC. 

The Kimberlee off Park Road

Morrocroft , a neighbor to SouthPark

Insurance(s) for Condominiums

  In every condominium and co-operative and even townhome communities there is a master insurance policy. Each association requires a certain level of insurance. The Lender requires proof of this Master Policy . Further the coverage must be consistent with the legal requirements. The buyer’s lender has a form that is completed by the Home Owner’s Association regarding this policy. This master policy may not cover your personal loss. The master policy covers the common areas that owners share with others in the building like the roof, elevator, hallways and walkways for both physical damage and liability. If someone takes a tumble, the master policy provides coverage and if a lawsuit ensues, the master policy will also cover the legal costs incurred by the Home Owners Association.

If unit suffers maximum damage, the master policy will bear the expense for the restoration of ceilings and walls. And then there are the grey areas: appliances. Sometimes a master policy will cover them and sometimes not. Remember the deductible and your HOA should know that figure.

But…read carefully…any improvements that previous owners or you have made will not be covered. I read this in my insurance brochure, the word is “betterments”. Wallpaper or upgrades in the kitchen or bathroom are not covered. It is better to know this before you need to know this, right? The most common occurrences are the overflowing bath tub or shower. Tumbling water into the units below. The Master Policy will repair floors and ceilings…other items that were damaged like that hand woven Greek wall hanging, Persian rug or priceless water color will lack coverage. For those items, you will need your own individual policy. This insurance policy is known as an HO-6 policy. This gives you coverage subject to a deductible for your personal furniture, clothing and “betterments” in your unit.

Depending on your own financial situation, the HO-6 policy can also include such things as reimbursing you for monthly assessments and alternative lodging while you are unable to reside in your unit; water and sewer back-ups (which are all too common especially in older buildings); and even expensive jewelry, stamp or coin collections, or fur coats. You should be able to obtain this kind of policy through any insurance agent

Some associations require that every owner obtain the HO-6 policy, and many experts strongly recommended that every association make this a requirement.

Hotel-Condo Conceptually Attractive, but...Lynnsy Logueal Estate 

From an article published by the Associated Press, June 2005 Mike Schneider

"The hybrid concept of a luxury hotel that sells some of it units as condominiums has become one of the most popular trends in the industry in recent years. Condo-hotels in the past two or three years have expanded beyond traditional markets in ski resorts or Hawaii and into other tourist destinations such as Orlando and Las Vegas. Projects also are under construction in urban centers like Atlanta, Chicago and New York, where the Plaza Hotel is being converted.

The concept has risks for both the developer and the condo buyer.

2014-this application still holds.

Financial risks

The Securities and Exchange Commission considers the condo offering a security if income and expenses from the rental units are pooled and if a condo unit is sold with the explicit expectation the buyer will earn money or derive tax benefits from it. If the development is structured as a security, it can only be sold by a securities broker and it is easier for an investor to sue the developer under the SEC's anti-fraud rules, according to Los Angeles attorney Jim Butler.

Most developers choose not to sell their projects as securities to avoid the SEC complications, so they are prohibited from discussing the economic or tax benefits from a rental arrangement or project on how much a condo unit can earn in rental income. Many buyers make decisions without all the facts.

A developer typically has to come up with around 40 percent of the equity for a traditional hotel; a condo-hotel development requires much less investment.

"If you're not allowed to communicate revenue expectation, often times buyers are making a decision based on incorrect information or overly optimistic information," a quote from Mark Lunt, Ernst & Young in Miami.

1

These are snippets from years and years ago...could be history repeats itself?

Even though the Charlotte area apartment market is overbuilt now, real estate experts say the cycle eventually turns and the supply tightens.

Some local developers are reluctant to jump on the conversion bandwagon. They remember how quickly conditions can change.

The city experienced a conversion boom in the 1970s and 1980s that went bust after developers put too many units on the market at once, depressing sale prices and eroding resale value.

"The condo market really hadn't matured then," Martin said. "Demand was satisfied rather quickly in a limited market."

With a surge of empty nesters seeking to downsize and more young professionals entering the market, experts see this trend continuing -- at least as long as mortgage rates remain relatively low.

Apartment owners and investors pay close attention when property values rise in desirable neighborhoods near one of their complexes.

That's an important cue that the time might be right for converting rental units to for-sale condos. They compare current value with conversion value and determine how much to charge for a condo to make a profit.

Some do extensive renovations to buildings and grounds, adding such amenities as granite countertops and hardwood floors, while others simply repair, repaint and install fresh carpeting.

When renters are notified of a conversion and given an opportunity to buy their units, developers say most prefer to vacate. Some converters allow tenants to remain during the initial stages of renovation as units are completed a section at a time.

Condo buyers get the investment and tax advantages of home ownership, often for monthly payments similar to what they were charged for rent.

Note:
"Buyer beware," is the phrase most often heard in real estate.

The Book of Condos began long ago when I answered the hue and cry, pointing the way, the voice came, "Condo CanDo". I said, "I can't, they are  too hard". The voice repeated, "Condo CanDo." I had to go. I had to find the way. Feeling the nudge, sensing the pull, I leapt and found myself smack in the middle of attached housing. Many of them. And rather unwanted. I grew into fascination, oh, I fell, hook line and sinker...and soon they became my passion. This is how I met CondoCanDo...

Falling in love with Condos- All of them!

Yes, some are newer and some older, some traditional,some classic, some contemporary, some with parking, some not, some with storage, some not, some with investors, some not, some approved financing, some not, some allow pets, some not...well, you get my drift,
I am sure.

They are all different in a zillion different ways.

How exciting is that?

            When CondoCanDo® came into my life, there were no databases with all the condos and townhomes. The Internet had not spread across our land, digital photography was enormously expensive, many of the streets in condo complexes and within the complexes were not on the maps, and the type of heat could be determined by spotting the turquoise meters outside the buildings. I gathered information from Register of Deeds, reading the fishe files, going through the drawings, and other records to build a basis for my new found passion, Condominiums. Personally, it became a game for me as I drew 1000 maps with a CD from the city andArc software following the clusters of buildings I found on the tax maps. I love learning the nuances of each condominium
and still do to this day! 

Three cheers! With gratitude!

CondoCanDo!®