Friday, August 31, 2007

Special assessment not so special when selling your condo

I was contacted by a home owner for a price estimate of her condo. We have a nice portal on our web site where people can request an estimate and it's administered to an expert in their area.

The condo is a gut rehab conversion in Albany Park. Two bedrooms, one bath in a courtyard building. Small balcony, no parking and converted in 2004. The building is a block from the Kimball Brown Line stop, which is probably the biggest selling point in my opinion. The condo was purchased for $175K in April of 2004.

Oh yeah… and a special assessment of $12,000 per unit.

Apparently the building had structural defects in the roof. I didn’t get into details with the woman, but I figure something like this happened:

Most of the owners that bought the places were first time buyers. When the developer turned the condo association over to the owners, the Association probably failed to hire an inspector to evaluate the common areas. This would include the roof. It is common for new associations to make these crucial errors right out of the gate. Even if the idea was brought up, they may have simply failed to follow through.

So, the warranty period ran out and the owners had no recourse (or did not understand what recourse they had)when roof problems were discovered... and a special assessment was levied to fix the problem. Twenty- four units at $12,000 a pop? That’s a huge oversight.

The condo Association could have avoided the special assessment by hiring a structural inspection of the property for $1000 to $3000 depending on the size of the building and scope of the inspection. Seems cheap now. And what about the property report for the building? A property report is required and available to the buyers of a new conversion building. The defect must have been there prior to conversion as the building was not new construction. If the defect was not listed on the property report, then the developer must have caused it during construction.

Either way, a two bed one bath unit of this type is a hard sell in Albany Park right now. The special caused a raise in unit assessment from $165 to $247 for the next 5 years which doesn’t help.

I suggested listing the unit at $189K and hope for the best.

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