Philadelphia Real Estate Blog

1) Have you ever walked into a condo and found someone naked?

Trulia, Zillow, etc… Really?

 Perhaps you could just

 Rub A Magic Lamp

 to determine Center City Condo Values….

I think the methods used by many Online sites to show specific area condo values is just horse crap. You would have to be kinda’ simple to believe that the emotional punch of a condo is not going to seriously affect it’s value. Selling factors such as price, days-on-market and demand can be heavily influenced by a condos Showing Ability, Floor Height, and View. I know of no on-line real estate site that can take these factors into account …therefore possibly throwing off estimates of value for a Center City condo.  And you can’t logically argue  that value is “generalized within a given zip code”. That would be folly.Because if that were the case, then “1830”  and The DORCHESTER  values would be more in line with one another.   Throw the emotional punch or lack thereof into the mix and you have an exceedingly wide chasm of values and trying to generalize those values might prove daunting.

  And another example of how miscalcuations can also be achieved……

Over the past 3-5 years,many local publications have declared that the Center City zip code of 19102 has blossomed in terms of value growth.     Really?  I would suggest that the additions of The Ritz Carlton, the Aria, The Ellington, and The Grande have artificially bloated their calculations of area  values, average sale price, number of sales, etc moreso than true appreciation could ever have mustered.

You know you want to. All my buyers do….it is just part and parcel in terms of the buying process. Believe me when I tell you that you are going to be tortured. Mortgage lenders have rules they have to follow, and these loans are sold on the secondary market via Fannie Mae….and of course they have their rules as well.

There is no such thing as a Sure Thing. No surprise there. But time and time again I see Philadelphia condos where the seller has spent money in order to hopefully improve the resale value of their condo. In most instances, condo owners upgrade for their own Use and Enjoyment- but some do improve with the goal being a higher resale value. Here are common upgrading mistakes I see in the Center City Condo marketplace:

Mick Jagger once said “It’s alright letting yourself go, as long as you can get yourself back”.   I like that…and think the phrase is apt when considering a condo purchase. I bought in a building that was perceived to have a hint of  risk (in terms of value retention)-

but I snagged the condo at such a great price, I know that if I ever want to move to the moon– I can sell my condo without losing money.

But you do have to be wary of the units I call the “HOTEL CALIFORNIA” condos- meaning you can check out anytime you like, but you can never leave- because you simply can resell the damned thing.

Here are 5 things to consider when determining the risk of a condo purchase:

1) The Cost of the Condo- If you buy a Center City condo at half the price similar condos are selling for- then most of the risk is removed. It gets back to one issue- NOT OVERPAYING.

2) Owner Occupancy Ratios can be an issue in SOME buildings- as a lack of Fannie Mae Warrant-ability can be a sign of a risky condo purchase. BUT by no means is this the only factor- it may just be a factor in assessing the risk.

3) Reputation and Resale History- There are buildings in town where NO CONDO has resold for 5 years. Not as rare as you might think. If no one else is buying in the building- you need to start asking me questions as to why.

4) Deferred Maintenance– I can name two buildings off the top of my head that need HUNDREDS OF THOUSANDS of dollars of repair, upkeep and maintenance work just to put them on par with their competition. I generally would avoid, unless of course you can just steal the condo outright (at a killer price). Otherwise, future assessments may wreak havoc on your investment dollars in that Philadelphia condo.

5) Buying within the Price Frames of the building- Buying a $2M condo in a building where the average price is $250,000 and is overwhelmingly populated with say studios may not be in your best financial interest, and may be a risky purchase.

OK…here is how 2013 will be remembered:  Buyers got their mo-jo back

I have recently seen many more multiple offers and buyer competing with each other, a shortened “DOM” (days on market), sales over asking price and clear inventory reduction throughout the entire Center City condo market.

The next logical step is an across the board price increase. We are already seeing some segments of the market experience sizable gains in the first half of 2013- And now I think the rest of the market is catching up….expect to see those gains really show their face in the spring 2014 market.

From a Realtor’s perspective- the upside is that more comparable sales are now in the MLS- and many within segments where no prior relevant comparables existed (recent ones anyway).

This is going to be huge for further price escalations as Appraisers now have something concrete to base their values upon.

-Mark

Don’t believe everything you read, or every comparable you see. NOT all condo space is created equal, and not all two bedrooms in the same building are of the same value.  Duh. There are soooo many factors that infuence value-

HOW DO YOU THEN CORRECTLY COMPARE APPLES TO APPLES?

Here are some Tips:

1) Ask to see EVERY sale in the building in the past 2 years. Ask for the public records and MLS records.

2) Find a map of the building, and see which units face “The Park”, and which overlook the DUMPSTERS – Positioning within a Center City condo building plays a role in value!

3) Inquire as to seller concessions that may have result in a higher recorded sales price for comps in newer buildings. And ask “did that unit include any extras like free parking?” Cuz if it did, it is going to distort the comps.

4) Floor height value- may or may not play a part in comps/ comp value. Newer Philadelphia condos are GREATLY based upon floor height.

5) Know that ALL pictures in the MLS look good- they don’t show dirt, clutter, or a poor showing ability (generally speaking).

And know that “Fact Sheets” and MLS sheets are like Resumes- full of bullsh** and dog doo. Never take that info for granted- you must confirm!

6) AND THE BIGGEST factor to warp comps- Interior condition. Hugely huge in comp valuation.

Here is a good example of “Not All Space Being Created Equally”…

Equally sized two bed units at the Plaza can vary in price from $400k- $700k. Condition, and view have huge impacts on value and pricing.

So clearly comps can be deceiving – if you don’t know…ask me. Please.

You can check out anytime you like… but can you ever leave (sell) that condo ?

What is the Achilles heel to resale and value? Key fatal flaws in a condo may prove difficult to resell a condo.

I asked around the Real Estate Community, and here is what most Realtors believe to be a tough sell:

1) A very expensive unit in a low rise building without an elevator – On a high floor.  Meaning $1M for a 5th floor walk up. Though some of the best deals in town can be found on the 3rd floors of many blgds.

2) A Three story tall cheap metal spiral staircase that screams “death” ?  Yeah, that isn’t easy to overcome.

One flight of spirals in town is a great space saver. Three flights can be visually daunting.

3) Condo fees over over $1 per sq ft per month without a doorman, parking, pool, or even a gym. An inverse relationship can exist between condo fees and resale value. Add the burden of non- fanne mae warrant-ability, and you have on tough sale on your hands.

4) Buildings that just look like sh*t- from the exterior, to the lobby, elevators, and hallways. Where ongoing maintenance is clearly not a priortiy.

NOW….there is one possible upside to buying a condo in a building that may possess some of the above characteristics – And that would be price. An exceedingly well priced condo can be forgiven for its many attached sins.