Condo Sales Drop: What You Should Know Before Buying One

Accidental landlords Amy and Lawrence LeVine are having trouble unloading their one-bedroom condominium in uptown Chicago, within walking distance from jogging and biking trails off Lake Michigan. They would love to put in a renter, rather than take a loss on the sale, but their condo association already booted out their one and only tenant due to a rental time-limit clause in the association's bylaws.The unit has been back on the market now since February 2010, sitting empty ever since their renter had to leave. "We were breaking even on the rent," says Lawrence, "but our renter would've liked to have stayed. We would have liked that too."

The LeVines are in an increasingly common predicament. Existing condominium and co-op sales fell 28.1 percent to a seasonally adjusted annual rate of 460,000 in July from 640,000 in June, and are 24.0 percent below the 605,000-unit level in July 2009, according to recent data from the National Association of Realtors. The median existing condo price nationally was $176,800 in July, down 1.7 percent from a year ago. The heavy supply makes it a good buyer's market.

This may be tough news for a condo owner to hear, especially given tales of homeowners associations causing some homeowners to lose their homes. However, there is hope for condo owners or those looking to buy a condo.
The LeVines priced their condo at $197,000, down from $225,000, for their south tier unit with granite countertops, stainless steel appliances, in-unit laundry and access to a rooftop deck. Even deeded parking is available, which is coveted in this Lakeview area short on public parking spaces. Other one-bedrooms currently for sale in the 2000-built seven-story building range in price from $234,000 to $296,000. Some two-bedroom units are also for sale.

Teacher Amy, 33, bought the unit in February 2004 when she was still single. As a married couple they moved to a bigger property in March 2007, thinking they'd have no problem selling it, but after it sat stale on the market for six months, they put in a renter. Now the unit sits empty while they await a buyer.

"While a buyer's intention initially may be to live in the unit, their potential for moving in the future is limited if they don't have the option to rent it in a soft sales market, or simply want to keep it as an investment property," says NAR spokesperson Walt Molony. "In a generally oversupplied condo market, buyers considering otherwise comparable units may steer clear of such restrictions."

LeVine, who spends a small part of each year living three hours north of his downtown Chicago office in his position as the director of the Perlstein Resort and Conference Center located in the Wisconsin Dells area, says that they were aware of the restriction when they sought to move: "I can understand why in certain areas they don't want there to be all these renters because it will destroy their building, but given the circumstances right now, it is a hardship for people who had to move out for a job or lifestyle change. For whatever reason people had to leave, there should be an ability to lift the restriction given that it is so hard to sell right now."

"As much as some of their restrictions are limiting owners who need to sell their units, the boards of directors for the associations have an obligation to enforce their documents," says Matt Zifrony, a director of a large homeowners association in Broward County, Fla., as well as a partner at law firm of Tripp Scott in Fort Lauderdale.

However, it is tough for associations to bend the rules for one owner without risking its future ability to enforce other rules, says Zifrony. "While at times a rule makes sense based on certain economic conditions, they still have an obligation to enforce it. If they stop enforcing it, they may lose the right to enforce any of their restrictions," he says.

But rules can be changed, says Zifrony. "Typically, if a sufficient number of owners do not want the restriction," he says, "they can vote on a change."

The LeVines and other sellers in their position just might want to double-check their association bylaws and then get a petition going to at least temporarily lift the renter clause until market conditions improve.

Still trying to decide which is right for you? Here are some
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