The additional challenges agents face when selling condos.
Because condos and townhouses are almost always the affordable end of the real estate market, many agents are dismissive about selling them. For these agents, the true mark of professional distinction is selling $2M houses, not $500k condos or $800k townhouses.
But selling condos and townhouses is actually more challenging than selling single-family homes. Why? Because homeowner's associations (HOAs) add another layer of complexity to the marketing of homes, seller disclosure and negotiation.
Let's take the example of an HOA that's just raised its dues to over $500 per month. Since the idea of paying even $400 sends chills through most townhouse buyers, dues of over $500 present a real marketing challenge. So how would you handle this challenge if you were an agent with a listing in this development?
1) Show the dues at the previous amount. Thus the incorrect dues will appear on the Internet where buyers will see them.
2) Show the dues at the previous amount, with a note buried in the fine print to "call agent for HOA dues". Again, the incorrect dues will appear on the Internet where buyers will see them.
3) Don't show the dues at any amount.
4) Show the dues at the new, correct amount.
If you picked choices 1, 2 or 3, congratulations, you think like the first three agents faced with this challenge. Now put on your buyer's hat and ask yourself, how would you like to find out how much the dues are? Right off the bat, or only after plodding though a two-inch thick disclosure package you may not read too closely because "it's just paperwork"?
Okay, here's another challenge. A falling tree branch damages the fence of a townhouse. It's the HOA's fence, and the HOA is supposed to repair it but, like many HOAs, this one hasn't gotten around to it. The townhouse goes on the market, and concerned buyers make their offer contingent (conditional) on the HOA repairing the fence. In other words, if the HOA doesn't fix the fence before escrow closes, sellers haven't held up their end of the deal and buyers can legally walk away from the deal with impunity. Sellers accept the offer.
What's wrong with this scenario? After all, it happens all the time with single-family homes: "I, buyer, will buy if you, seller, repair." But how would you feel, Mr. and Mrs. Seller, if your agent encouraged you to accept an offer that's contingent on the city filling a pothole in front of your house? And what would you think, Mr. and Mrs. Buyer, if your agent suggested that you make such an offer?
Because the sellers of that townhouse can't make the HOA fix the fence, any more than the seller of a single-family home can make the city fill that pothole. And neither seller has the authority to do the repair themselves. So the agent for the sellers of the townhouse has gotten his clients into a contract they can't legally perform, and the agent for the buyers of the townhouse has gotten her clients into an contract that can't legally be performed. Do they even have a valid contract?
Dumb luck intervenes, as it often does in real estate, and the HOA obligingly repairs the fence before escrow closes. But what if the HOA had dug in its heels, as they often do, and said, "No, you'll have to wait until we get around to it, and that'll be in, oh, maybe a year, if we don't forget"?
Moral: If you're selling your condo or townhouse, minimize your risk. Make sure your agent knows what an HOA is, what it can do and what it most likely will do.