Q: Most Realtors representing condo buyers don’t educate their buyers about condo reserve funding: the pros and cons of fully funding, partially funding or non-funding of reserves.
My beachfront condo in Florida was listed for 15 months with enough showings but no offers. After a while, I contacted some of the buyers’ real estate agents and inquired about [information given to buyers]. Most of them admitted that the buyers were given the condominium documents, but most agents did not educate the condo buyer about this information.
Also, most older condominium buildings that have cast-iron pipes are experiencing leaks throughout their buildings. I’ve found that most real estate agents are afraid to discuss this issue. My building recently replaced all the pipes, but I feel this improvement was not discussed with the buyers because agents were afraid of scaring them. Meanwhile, by not bringing it up, they were even more frightened.
Will you please provide your input on these two issues?
A: Your first question relates to the type of information real estate agents give to potential buyers about condominium associations and the second is how these agents should educate buyers about this information.
Both topics can be tricky for real estate agents to navigate. Real estate agents are just that: real estate agents. They are not attorneys, real estate inspectors, financial advisors or building experts, and asking them to take on these roles makes them nervous. They’re out of their comfort zone.
Your listing agent might be great at showing your property and telling the buyer about all the wonderful things you have done to your condominium. Your agent may also be great at showing off the common amenities of your building and letting buyers know what your building and home have to offer.
However, once you start discussing condominium documentation and the particulars of what a condominium association has (or has not) done to a building, or the amount or lack of reserves a condominium building has, the broker may become uncomfortable decoding what the documents mean and may prefer to deliver that information for buyers to digest and see for themselves.
Your issue is differentiation: How do you market your building’s improvements to your prospective buyers and show off the work that has been done when it is behind the building’s walls? Just as you market the new kitchen, bathrooms, paint job and flooring, you might want to put together a list of improvements your building has undertaken over the last several years. In your case, promoting the replacement of old galvanized pipes with new copper pipes.
You should know that most buyers don’t focus on what’s behind the walls of a home or condominium building even though they should. You’re right in thinking that the replacement of your corroded pipes may have cost you and the other owners in your condominium building quite a bit, and that expense is a paid-for improvement. But quantifying and describing that expense and improvement is tough.
Try putting together a whole list of improvements that your building has completed in the past couple of years to give to your prospects. You might even include this in the marketing information you hand out to brokers and agents. This list will at least give the buyers (and their agents) some idea that your building has been proactive and has updated, and made improvements to, the building.
On the issue of educating buyers, listing agents and real estate agents representing buyers are not in the business, generally, of educating buyers on the financials of buildings. They can deliver the information to the buyers, and they can tell them what they know about the building. We doubt, however, that real estate agents will go much further than that. If they do, the agents risk having buyers come back and accuse them of deceiving them if the reserves are not enough to cover unexpected expenses or say that the financials weren’t as good as the agents represented.
For this reason, real estate agents will stick with what they know: information about the physical characteristics of the property they are selling. If the financials of your homeowners association are that good, you can provide the potential buyers with this information along with the improvements your building has made.
(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.)
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