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Condo Can-Do: The Surprising Advantages of Selling Condos By Owner

Selling condos by owner offers some surprising advantages.

From eleven stories up, Sebastian Bochenok has a 180-degree view of the competition.

Hundreds of brick townhouses surround his highrise condo in Chicago’s South Loop. Four blocks east, Lake Michigan is a blue blur. That view won’t change, as much of this new neighborhood has been developed in the past decade. There’s not any land left for a scenery-blocking tower to rise between his two-bedroom unit and the horizon.

To the north, a grove of shiny, smooth towers reflect the passing clouds. To the south are trendy lofts reclaimed from industrial buildings that once formed the backbone of Chicago’s industrial past.

The South Loop rode the crest of the national real estate boom. The thousands of condo and townhouse units visible from Bochenok’s window didn’t exist a decade ago. Now, in sync with the national real estate bust, South Loop sales volume and prices have dropped dramatically. Prices are 25% lower now than they were in mid-2009, according to Zillow. Too many units, too few buyers, and shifting loan requirements have all undermined demand.

Selling condos by owner offers some surprising advantages for beleaguered condo owners.

The apples-to-apples comparison of similar condo units firms up appraisals. It’s easy to spread the word quickly when you have so many neighbors with a common interest: ensuring that association dues keep flowing. And when values are eroding, the pricing flexibility of selling direct more than offsets the effort of marketing.

Bochenok is counting on all those factors. He is currently asking $439,500, which reflects a $50,000 reduction that he could only afford by listing with ForSaleByOwner.com. Previously, the unit had been listed with a local agent.

With smoky glass mosaic tile backsplashes, upgraded cabinetry, an office niche and expansive closet space, the 1,395-square-foot unit offers more than a casual looker might assume. But Bochenok is counting on the view to pull in serious buyers. That, and his flexibility on price.

Apples to apples advantage

Condos enjoy a surprising advantage: it’s easier to establish value for a unit that is like many others than it is to figure out a value for a house that’s completely unique, points out Jaime Uziel, a San Francisco real estate lawyer and broker who specializes in for sale by owner transactions.

The more cookie-cutter the unit, the easier the appraisal. “A lot of condos in high-rise buildings are exactly the same,” says Uziel. “If other units have sold recently, you’ll have a much easier time pinning down the value.”

That advantage shrinks with the size of the condo association. A two-unit association that represents a two-unit building may actually be harder to appraise than a single-family house.

The importance of finding comparable recent sales can’t be underestimated. Spurred by reports of appraiser-agent collusion and fraud, regulators have been tightening and tweaking rules for appraisals. It’s common for purchase contracts to collapse when appraisals come in too low – often because appraisers can’t find enough recently sold comparable properties to patch together support for the sale price.

In large condo complexes, it’s easier to assemble sufficient comparables to support an appraisal. Even if the units are not identical, enough of their value is shared – through commonly held amenities – to establish a base for a per-square-foot value. Values for individual units can be built on that base.

Social networking

Getting the word out is easier when there’s a built-in megaphone: the homeowners’ association and its email list, intranet, and even the humble bulletin board.

Other condo owners represent a first-ring market – especially for owners of spacious units that others might consider a move up.

If neighborly affection doesn’t motivate other owners to spread the word, self-interest might. Every owner counts on the others keeping current on association dues. With rampant worry about the effect of condo foreclosures on the financial health of associations, other owners know that what helps you sell your unit protects everyone’s fiscal interest.

Netting equity

It’s no secret that condo values have badly eroded in many markets. Selling by owner won’t turn around a short sale or get you back above water. But if the market value of your unit is within 6% of your mortgage, you might break even – or even retain a few shreds of equity – by eliminating the agent’s commission.

Here’s how selling condos by owner pencils out:

  • A condo purchased in 2005 at the height of the boom, for $185,000 probably won’t claim that sale price today.
  • With an asking price of $180,000 and an outstanding mortgage balance of $160,000, the typical 6% agent’s commission totals $10,600 – and wipes out over half the remaining equity/
  • Paying a 3% commission to the buyer’s agent leaves our fictitious owner with equity of $14,600. Not a windfall, but likely enough to buy again, especially in the current market.