Best Practices in Buying a Condo in Portland
Portland has many condo buildings throughout the metro. More central the location, more high rise condo buildings you will see whereas low rises up to three levels high is more common in suburban areas. Buying a condo can be more of a difficult process than buying a house and greater your realtor’s ability to read and understand a variety of condo documents, better position you will be in as a buyer. You need more of a studious agent when it comes to buying a condo rather than someone who will simply refer you to a lawyer to review documents. You need an agent who is more of an investigator, or a lawyer who will do the homework upfront rather than a salesman only wanting to focus on selling. The nature of due diligence is quite different for condos, especially for high density buildings that naturally involve a significant amount of maintenance and repair costs for exterior and commons. You cannot simply rely on your inspection report to get a picture of what you’re purchasing. Your agent must identify overall building and budget issues upfront so it’s a lot of work and homework for the realtor. When it comes to an actual inspection of the unit itself, it’s real simple and almost negligible unlike an inspection for a detached single family home. Unless it’s a small townhouse-like building, your inspection is typically limited to the unit itself. How do you know there aren’t problems with exterior and other components in the building before you purchase it? The last thing a buyer wants is a special assessment not paid by sellers. That’s why you need a great real estate agent who can review a various condo documents and communicate with the HOA to make sure the condo building is not facing an imminent repair project that can cost the association millions of dollars. For a high-rise building, a project that costs 2-3 million dollars is not uncommon. For example, Portland Plaza in downtown Portland has recently identified a plumbing upgrade project to cost around three million dollars. Several other high rise condo buildings in downtown had plumbing issues as well that cost more than million dollars. Many of them went through a construction defect litigation with the original contractor. If the litigation favors defendants and the association must foot the entire bill, often the condo residents will face a large special assessment bill that can be a large amount of money. I have seen special assessments as much as $100,000 per resident they had to pay. This is the last thing a new buyer needs going into the purchase blind sighted.
Litigation & Special Assessments
Another issue is when a condo has a pending litigation. During the pendency of litigation, one cannot get a mortgage to purchase the unit. It has to be all cash deals. For that reason, it could be out of your reach so don’t put an offer in it and pay for inspection to find out later your lender cannot finance it. Your realtor should know this if he or she has any experience with condos. If you’re a cash buyer, that means more leverage for the buyer. Recently I sold a unit at John Ross in South Waterfront on the buyer’s side. The condo has a pending litigation and my buyer was a cash buyer. I got my buyer a great deal on the unit but I still had a ton of research to do to make sure that there will not be a special assessment in the future. To find this out, I reviewed the amount sought by the plaintiff in the lawsuit, claims made by the plaintiff, and reviewed the amount in the reserve and working capital to determine that it was unlikely that my client will face a special assessment. I didn’t just take words of the listing agent. I was able to add more value to my client because of my attorney background but I’m sure someone with enough education and expertise could have done the job. It was a lot more work and different types of work than representing a buyer on a house purchase, which primarily involves identifying issues with construction and repairs. Home inspectors for the most part will provide facts so the real work is the negotiation itself.
Comps for Condo Units
Pulling comps is really easy for a condo unit within the building. However, the challenge is comparing and distinguishing views. A high rise condo will have different units facing different direction. If the building is closer to Willamette River (or Columbia for Hayden Island such as Waterside Condo), the comparison needs a closer look as there are units with a full or a partial view of the river as well as no-view units. The challenge often comes when comparing different partial view units. Is the south river view better than the north river view? How much more valuable does a unit get higher it is located in the building? This comp identification is crucial on both sides of aisle as a realtor. I always perform this in-depth analysis when I am a buyer’s agent or a listing agent for a condo with a view. It’s an important process.
Parking & Storage
Some condos come with designated parking lots and a storage unit while others don’t. Even within the same condo building, some units will come with more parking lots and a storage unit when deeded separately. Not all listing agents provide all this information on the RMLS listing page so the buyer’s agent must find out about this and compare the situation with other units and recently sold comparables. A parking lot can cost as much as $20,000 when purchased separately and that is a significant cost that cannot be neglected when writing an offer.