Impact of Special Assessment on Condo Property Value

[ConcernedInIL]

What is the name of your state? IL

I am wondering if there is a general ballpark percentage impact to property values of a special assessment (regardless of amount of special assessment). My condo board's attitude toward special assessments is very careless - I would like to go to them with some numbers to make them take these decisions more seriously. I recently heard that the impact was approx 1-2% (i.e. $3000 - $6000 on a $300K condo) - can you please confirm / advise? Thank you!

[IndianaOwner]

Not to be sarcastic but yes, if you have a condo that would sell for $300K and there is a $6K outstanding special assessment then if will probably sell for 2% less which is $300K-$6K.

A special assessment usually means you need $X for repairs...just like you would repair a home before selling or give a reduction in price.

[nextwife]

Actually, it IS more complicated than that. An individual homeowner has multiple options when faced with a pricey repair: a credit to the buyer, doing work themselves, a tem fix and putting off to next year to tackle the big expense.shopping price or just paying someone to fix it.

Not so with special assessments to cover repairs, rather than a condo association maintaining a proper budget, lang term repair schedule and an appropriate "reserve for replacement". I have seen marginally successful condo developments DOOMED by overuse of special assessments. Unlike a homeowner, the codo owner does NOT have those multiple options to tackle a repair need and must pony up the special assessment. And inevitably, many condo owners are unprepared to pay a big chunk all at once, especially retirees on fixed invcomes who bought in at lower prices. In underwriting, a history of foreclosures and heavy special assessments can impact negatively on the underwriter
's comfort level with a given development.

[tranquility]

I have to agree with nextwife, it is very hard to see the effect on condo price from a special assessment. That is because an SA indicates many things. The quality of the board, the quality of the property and the needs of the property. For example, if there is a big special assessment out there for a roof, that may be a sign of poor management and I might discount the condo even more than the direct cost of the assessment. Everyone knows a roof will be needed every so often, a little should be put aside every month to pay for it. It's not a suprise when you re-roof, although the exact timing may be difficult to guess.

[nextwife]

Originally Posted by tranquility

I have to agree with nextwife, it is very hard to see the effect on condo price from a special assessment. That is because an SA indicates many things. The quality of the board, the quality of the property and the needs of the property. For example, if there is a big special assessment out there for a roof, that may be a sign of poor management and I might discount the condo even more than the direct cost of the assessment. Everyone knows a roof will be needed every so often, a little should be put aside every month to pay for it. It's not a suprise when you re-roof, although the exact timing may be difficult to guess.

Exactly. A properly managed budget takes functional obsolescence time frames into account and has a reserve for replacement plan for all repairs that should be able to be anticipated, in addition to an emergancy reserve for unanticipated expenses A roof is good about X years, the blacktop for X years, the gutters, the paint. and so on. Failure to plan shows a poorly managed association. Done right, there should be a schedule, years out, to relace all aging systems as they wear out. It should not be a surprise that a roof with a 20 year shingle is failing at about 19 years old!

[IndianaOwner]

We'll need more info to see if it is poor management.

I lived in a condo where the shingles needed replacing 10-12 years out versus the expected 25. Hence a special assessment was needed. Also, a few idiot owners caused major insurance claim and rates went up 8 times, hence another special assessment.

From the original post, it sounded to me that this is the first special assessment and the poster wanted some ammo to convince the board that they should not have a special assessment by saying it will be negative. What is more negative is not fixing what is broken...

[tranquility]

Clearly there are many reasons why a special assessment would be so appropriate to the circumstances that the discount to the value of the condo would be no more than the cost of the assessment. Heck, an appropriate SA might even improve the value of a condo if it meant the BOD was on top of things and handling things appropriately.

That is why I made the point of:

I have to agree with nextwife, it is very hard to see the effect on condo price from a special assessment.

And then gave a factual scenario as to why this is true. Of course more facts are needed. My point was that a special assessment never stands on its own as a number issue. It must always be considered within the totality of the association's board, needs and quality.