We’re fast approaching the busy Spring real estate season, and many people are getting ready to put their condos on the market. That means there’s a lot of discussion happening citywide between sellers and real estate agents about value.
There are a lot of factors that can limit resale value, but I wanted to highlight a few things that can narrow the buyer pool for your condo. Here are my top five, based on what I’ve seen recently in the market.
1. Serious pet restrictions: It’s typical for HOAs to allow for one- to two pets. But if your HOA bans dogs and cats outright, you’re going to have a challenge.
2. Weird parking: A tiny or oddball parking space, difficult tandem arrangement (e.g., having to back two or more cars out onto a very busy street) are some of the situations I’ve seen limit the buyer pool. If you’re comparing your condo to one that recently sold with an independent, standard space, make sure you adjust for the nature of your parking.
3. Very high HOA dues: Everyone has a budget, and excessively high monthly HOA dues can blow some buyers out of the water. When buyers are preapproved for a loan, they factor in a ceiling on HOA dues–typically $500 or so. If your condo’s dues run north of $500 a month—and you don’t have many amenities—it may take longer to find the buyer.
4. High rental-to-owner ratio: Most buyers looking to owner occupy their condo are wary of buildings where more than a quarter of the units are rented. Many lenders won’t do 30-year fixed loans on buildings with excessive numbers of rentals.
5. HOA litigation: If the HOA is currently in litigation with the building developer over construction defects, it may take a bit of time to sell your condo. There are unfortunately a lot of unanswered questions in a defect situation, such as whether the owners may be in for a future special assessment. Few lenders will touch a building like this until the HOA resolves the litigation. (A bank like First Republic will grant loans, but they’ll be adjustable-rate mortgages requiring larger down payments.)