Serve Your Client by Discussing Condominium Fees Before Offers
Make Sure Your Buyer Understands How Condo Fees Can Rise
When home prices are steadily appreciating and times are good, it is easy to overlook discussions with buyers about things that do not seem relevant. However, when dealing with a condominium purchase, the buyer really needs to understand condo fees and the things that can bring about unexpected increases.
In 2007 and 2008, some lenders actually put out lists of condominiums and also areas where they simply would not consider new loans. One arbitrary factor was the requirement of more than 60% occupancy. When occupancy approached that number, loans dried up.
The problem centers around the ongoing costs of management, maintenance and operation of condo projects. Many of these costs are fixed, and they rise with inflation. They rarely decrease. As the costs are shared among the owners, the proportional burden can become too high when occupancy is down due to vacancy and foreclosures. People lose their condo homes when the fees combined with the mortgage just become too high to bear.
One thing we can do as real estate professionals is make sure that our buyers, particularly those buying at the top of their affordability range, understand the effects of reduced occupancy. Perhaps a spreadsheet could be presented that shows the current condo fees as adjusted for drops in occupancy of 10% or more.
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