We recently had the realization that we talk an awful lot about home buying and selling, but have touched upon condo buying and selling very little on this blog – But YES, we help people buy and sell condominiums, too, and we are actually very well versed in it!
Now keep in mind that the process for buying or selling a condominium varies from province to province or state to state, so what I will be going through on here is from a Manitoba perspective, but much of the theories are still the same.
So, without further adieu, let’s get into it! First of all, the condominium market is a VERY different market from our residential market. In Winnipeg, we are currently experiencing a very strong seller’s market when it comes to houses. However, when it comes to condominiums it could be likened to a balanced or potentially even a buyer’s market. For condos, there is a lot of inventory, it does tend to sit for longer, and oftentimes we see several price adjustments before a unit finally sells.
Why is our Condominium Market more akin to a Balanced or Buyer's Market?
Well, we first started seeing this slowing of the market in 2014 and 2015. Much of this was due to incoming legislation that was to take effect February 1, 2015. There were a few key parts of this new legislation that really changed the landscape of the selling process for condominiums. The first, was the change in what we called the “Cooling Off Period”. Prior to this, all purchasers were given 48 hours to review the condominium documents and they could change their mind for any reason. With the new legislation, this time was now extended to 7 days. Now 7 days is a really long time in the real estate world for one to change their mind. Say a new property came up that was more appealing, it gave the buyer ample opportunity to explore that opportunity and perhaps, change their mind. It cannot be waived, it is mandatory. Also, to add insult to injury, now if there was a “material change” to the condo rules, this cooling off period would actually be reopened and the buyer would have yet another 7 day period to change their mind, without any penalty. If they back out, they get their deposit back. So say you sold your condominium 2 months ago, the buyer is planning to move in in a few months and you’ve already packed your house up. Pretend your condominium corporation now announces that they have made a new special assessment as it turns out, the roof is rotten and they need all of the unit owners to chip in $3000 toward this new project. You then go to notify your buyer and hope that they still decide to proceed. It’s kind of brutal – a sale doesn’t necessarily mean a sale. We are all waiting on baited breath until that possession occurs.
The second thing that changed was the requirement for corporations to do reserve fund studies every five years so that a corporation knows where they stand, financially. Prior to this, condominium boards were determining themselves just what kind of funds they should have set aside for upcoming capital projects. Now however, they were required to hire professional companies versed in assessing appropriate reserve fund amounts to come, view the property, and assess upcoming capital expenditures for the corporation. Guess what this revealed!? Almost every condominium project showed a reserve fund balance that was UNDERFUNDED. I have yet to see a complex that had the reserve fund balance that was recommended within their reserve fund study. Once these studies started to come in, many boards increased the monthly condominium fees to try and bring their balances up to the professional recommendations. What this started to mean though, was that fees for most condominium projects went up significantly – much more significant than a 3% inflation rate. Some complexes instituted special assessments – which is oftentimes a one time fee, but more substantial – say that $3000 example I gave above.
Now, it isn’t unreasonable to say – all homeowners -whether it be a house or condo will incur unexpected costs. A furnace can go, a roof can leak, etc. and those all represent a large cash outlay. What I find people to find most upsetting though when it comes to condominium ownership, is they have less input over the final outcome. It is a voting process in which perhaps things don’t always go your way. You are making plans through consensus, and if that sounds awful to you, condominium ownership may not be for you!
There were a number of other document changes that came into effect in 2015, the majority of them just to do with the sheer number of documents that are required before that 7-day cooling off period can begin, but the two most notable changes were the extending of the cooling off period and the reserve fund study requirements – which often led to escalating monthly fees.
Other Factors Impacting the Market:
There have been a couple of other changes worth noting here too. Around this same time, we were also instructed that we could no longer advertise condominiums as 55 plus. It became a human rights issue – as in, you can’t discriminate based on age. I do still see this in rental apartments, and I’m not sure how they are allowed to do it there, but in condominium world, this became a huge no-no. Condos that once advertised as being exclusively a 55 plus community, now saw younger residents moving in. But gone are the days of advertising 55 plus condos for sale in Winnipeg!
Another factor that has been eating into our condominium market in Winnipeg, is the number of new construction options. Regardless of where you live, you are going to find condos for sale in South Winnipeg to north, east, and west. There has been a ton of development, which often is more desirable than the older, pre-existing options. Oftentimes, because the monthly fees in those new complexes are far lower than more established (read: aging), complexes. Condos in Winnipeg are slowly cannibalizing one another, in terms of resale value.
Another factor that seems to have impacted the resale of condominium is the baby boomer behaviour. As a Realtor, I am finding more often than not that my clients are either opting to just live in their homes for longer – the idea of living in a condominium is far less attractive to them, OR, they are oftentimes selling their home and moving into an apartment – so that they have more free cash flow from their home sale.
Steps to Selling A Condominium
Anyways, that is enough on why I think the market is oversupplied – at the end of the day, it is what it is. What is important though is the plan you formulate to sell your Winnipeg condominium. So, let’s start with where your Realtor comes in. The first step, is to have your Realtor come and do a comparative market analysis. This is where they look at comparable properties, make adjustments based on the amenities of your unit, and go through a valuation process. For me personally, I always give more weight to the units within the same complex. I find that even neighbouring buildings might have completely different management, amenities, and condo fees – so the more you can compare from within the same building, the better. Sometimes that isn’t an option, and you have to expand out to other complexes – which is totally okay, too.
Once you have arrived at a price and strategy, the next part, which in my opinion is the most important, is preparing the house for pictures. The goal is to paint as neutral of a canvas for a buyer, so that they can envision themselves living there. I’m not talking about removing all of your belongings and selling it vacant – rather, staging the space so that it is welcoming and inviting and so the buyer can envision themselves within the space. For this part, we send through our stager and she goes room-by-room with you to assess what should stay, and what should go (she says “edited”). Oftentimes we bring some pieces in to dress things up and add to the appeal.
Once the unit is properly staged, it is time for pictures and video! One of the biggest concerns of a buyer, are that a unit is going to be dark. So having all lights on, all blinds open, and oftentimes strategically placed mirrors (part of the aforementioned staging), to brighten the place up as much as possible. We can make things super light in pictures, but it is much harder to “brighten” a dark unit in video.
Around this same time, we should also be discussing the condominium documents required for the sale. Remember when I said that the cooling off period can’t begin until you have handed ALL of the required documents over to the purchaser? It’s no joke. And I promise that you will get an offer on your property quickly, if you don’t have those documents prepared. It is inevitable! I prefer to organize the condominium documents myself, just because it is something I deal in daily, I know what I am looking for, and I am versed in identifying what is and isn’t necessary. Some buyers want to handle the documents themselves, and that’s okay too.
Condominium Documents Required for a Sale in Manitoba
The condominium documents that you should be preparing is extensive – the list is 18 documents long. You will likely have some of the documents already in your possession from when you purchased – but there are documents that are time-sensitive such as the Disclosure Document, Financial Statements, Budgets, etc. Keep EVERYTHING the condominium complex sends to you – it might seem innocuous at the time, but trust me, when you go to assemble these documents you will be so glad that you kept everything. There will be some documents that are unavailable – but in general, you will need to produce about 12-15 of the documents on the list.
As a Purchaser, Pay Extra Attention to the following items:
If you are a purchaser receiving this list, there are some things that you should be on the lookout for:
- Condo Fees – there will be fees that often cover general expenses, maintenance, management, any amenities in the building, as well as a contribution to the reserve fund. Things to question: Just what is included in these fees and what will you be responsible for paying for separately? Are the fees in line with the fees you have seen on similar projects? High condo fees are oftentimes signs of past mismanagement.
- Special Assessments – in the disclosure document you are provided, it will oftentimes discuss whether or not there are any further upcoming special assessments. Sometimes, if there is word of an upcoming special assessment, but nothing has been formalized yet, you won’t find this in the disclosure statement though. There are other ways to find this information out though. Asking for past meeting minutes or talking to other unit owners are great ways to get additional detail. IF there is a special assessment coming, discuss it with your Realtor. It COULD be a sign of mismanagement, or it could be something within reason. Oftentimes, you can negotiate that the seller pays for this special assessment too.
- Reserve Fund Study – This is one of the required documents and provided your complex is at least 3 years old, one should be provided to you. These reserve fund studies are also required to be done every 5 years. Give this a thorough read through – it may be long and dry material, but it will talk about the building, it’s condition, and foreseeable projects. In the back, it will usually provide three different proposal amounts for ideal reserve fund balances and how to reach them. Look at the balance of the reserve fund stated in the disclosure and compare to this. Is the corporation on track to set aside the appropriate amount? If not, it could mean escalating condo fees or special assessments. The newer the building, the lower the reserve fund contribution portion, but as the building ages those payments should increase.
- Voting Rights and Ownership Interest – This is one more tidbit covered in your disclosure document. It talks about just what percentage of ownership within the complex, but it also talks about your voting rights. Most complexes split the percentage of ownership based on your square footage of ownership within the complex. Say there are 100 units in the building, all averaging 1000 square feet. But your unit is 1200 square feet. We could say that your percentage ownership is 1.2%. However, voting rights don’t always stay the same from complex to complex. One complex might give you 1.2% of the voting rights. You pay your special assessments, condo fees, reserve fund contributions based on that amount. However, other complexes will give each unit the same amount of voting rights – so if there are 100 units and you own 1, you could instead have 1% of the voting rights, even though your percentage ownership, and thus fees, are higher.
I am going to stop here, mostly because this has become one of the most long-winded posts on our blog, EVER. But there is a lot more to share about both buying and selling a condominium, and I may need to expand upon that in other posts.
But let me know if you found value in this. If you are enjoying information on condominiums, I am always happy to write about this in greater detail!
Phone: (204) 797-7945