Would you be concerned about buying a condo in this situation? (Sheridan: sales, real estate)

[ChicagoGuy37]

My wife and I really like a condo in a 13 unit building in Rogers Park. We have actually made an offer on it and received a counter offer from the seller. Our agent mentioned the unit above the one we like sold last year for a little less. We started looking at the price and sale history for the building and discovered that at least 10 of the 13 units have been sold within the last two years, including all six on the side where we are looking. These are 10 different owners, all taking losses to get out within a very short amount of time. A) would you be concerned and B) what could possibly be causing this is and is it even a chance that it's a coincidence. We've asked our agent this question, and he has yet to even respond.

[TBideon]

What building?

[OKParker]

I'd be concerned - there is at least a chance something is wrong with the building.

[ChicagoGuy37]

I don't want to say exactly the building, but it's on Pratt a few blocks west of Sheridan. The crime map for the block and surrounding area is safe compared to further north or west. We really liked the place, and I'm kicking myself for even looking into the sales history. Would this be a deal breaker for you as a buyer? If there's a problem, you should find it at inspection or attorney review right?

[koctail]

Maybe the condo voted to ban renting, so all the investors had to sell?

[ChicagoGuy37]

There isn't a ban on renting. The only restriction is a two year wait upon purchase before renting and the building is currently 92% owner occupied.

[GoCUBS1]

If you haven't already, look into the homeowners association. Try to get a copy of the minutes. What are the fees and the reserve funds? Any special assessments/major capital improvements coming up?

[sfcambridge]

Honestly, I would try to talk to someone in the building to get the low down. I would want to know if there is a problem with heat/water leaks/plumbing/windows etc...

That is way too much turnover for my comfort level.

Agree with checking the crime stats for the area and the building specifically.

Agree with GoCUBS1 - get a copy of the minutes of the last homeowners association and check on the results of their last reserve study, budget, and how much reserve funds they have etc... Any offer you make can be contingent on the results of you/your lawyer reviewing these documents AND on the results of an inspection. Definitely pay for the inspection. Something fishy is afoot...

[emathias]

Demand board minutes. Demand a signed letter stating there are no discussions of pending large special assessments and no discussions of structural deficiencies. That will hopefully reveal any deficiencies in the building or finances and will somewhat protect you if you are decieved.

But, it's also possible that there is a lot of turnover now because Rogers Park real estate was hit quit hard during the mortgage/housing crisis, with home plummeting in value. It's quite possible that prices in the building finally hit a price point where owners who had wanted to move for years could afford to, recovering enough that selling might still mean paper losses, but not so bad that owners would have to outlay cash to get out of them. It's possible that's all it is - a friend of mine owned in Rogers Park but had to move to New York for work. Pricing on his unit dropped so much that he would have had to outlay money to get out of it without just letting the bank forclose, which he didn't want to do. So he rented it out for a few years and when prices recovered enough that he could sell it and not have to lay out cash to get out, he did. That was about two years ago for him.

You could look at similar condo buildings in Rogers Park to see if there is a similar pattern there. I know that even in River North, where I own a condo, our association had almost zero sales during the crisis, but at least a couple every year since about three years ago when prices were back to almost peak and now that prices are above peak finally, there is regular sales activity in the association - and we're a 14-unit association, comparable since size to the one you're looking at.

[chet everett]

Originally Posted by emathias

Demand board minutes. Demand a signed letter stating there are no discussions of pending large special assessments and no discussions of structural deficiencies. That will hopefully reveal any deficiencies in the building or finances and will somewhat protect you if you are decieved.

But, it's also possible that there is a lot of turnover now because Rogers Park real estate was hit quit hard during the mortgage/housing crisis, with home plummeting in value. It's quite possible that prices in the building finally hit a price point where owners who had wanted to move for years could afford to, recovering enough that selling might still mean paper losses, but not so bad that owners would have to outlay cash to get out of them. It's possible that's all it is - a friend of mine owned in Rogers Park but had to move to New York for work. Pricing on his unit dropped so much that he would have had to outlay money to get out of it without just letting the bank forclose, which he didn't want to do. So he rented it out for a few years and when prices recovered enough that he could sell it and not have to lay out cash to get out, he did. That was about two years ago for him.

You could look at similar condo buildings in Rogers Park to see if there is a similar pattern there. I know that even in River North, where I own a condo, our association had almost zero sales during the crisis, but at least a couple every year since about three years ago when prices were back to almost peak and now that prices are above peak finally, there is regular sales activity in the association - and we're a 14-unit association, comparable since size to the one you're looking at.

I don't work as a real estate agent any more, and have not for some time, but what emathias lays out is PRECISELY what I did MANY times for buyers who wanted to understand the VALUE of a condo. It is very likely there there was a "wave" of owners who either for financial reasons or because of changes in their life wanted / needed to wait until there was sufficient demand before selling. These patterns are rarer in single family homes, as even the most cookie cutter tract of homes you still have MUCH more variation in who buys -- there are empty nesters in ranches tight along side folks just starting their family, lots of people that hang on to the family house as they accumulate more "stuff" than can be cheaply moved to U-Store-It, etc...

It is also true that LOTS of people who were temporarily underwater on condos get fed up with "playing landlord" and once prices recover they decide to get out and leave the whole chapter behind.

A good BUYERS AGENT can quickly produce reports that show the price trends for all the nearby buildings as well as things average time between sales and records of refinance / foreclosure in the buildings which can be very useful pieces of information when determining if there were in fact several sellers that were faced challenges... A GREAT buyers agent will even network with the listing agents and get the insider scoop on what sorts of factors motivated prior sales...