Post by a. Pizzarelli on Sept 23, 2014 11:24:59 GMT -5
Depending where you are in the world a 1200 sq ft condo will have different monthly maintenance fees. It's plausible to expect a range of $200 to $1,800 a month.
Can you guess which maintenance fee is a New York City High Rise & which one is a Garden (4 stories & less) Style condo in Nebraska?
Monthly maintenance fees depend heavily on the amount of common area a building/community covers, services such as valet, spa, pool, or simply an elevator and local geographic items such as unique insurances.
In Florida we have an additional layer of H.o.A. style fees as they relate to fancy schmancy Country Club Lifestyles. These communities with their finely trimmed grass, clean roads and Sunday brunches tend to have another layer of fees known as membership fees, annual dues and in some cases a P.O.A. fee. Yeah, seriously.
A property purchase within one South Florida's fee layered communities would look something like this.
Home Purchase Price: $X
Membership Fee: $65,000 (may be refundable, partially refundable or non-refundable.)
Monthly H.O.A. Fee: $ 650 (based on the size and style of your property)
Monthly P.O.A. Fee $ 350 (usually a flat fee across all homeowners in a community)
Annual Dues $X
Food & Beverage Min $X (some CC's require members to commit to a min spend requirement)
So as you can see, depending where you live the cost and expenses vary greatly.
A 3500 sq ft house may sell for $350,000 in a general population area and a very similar 3500 sq ft house may sell for $700,000 in a gated community with all of the above fees.
Keeping this 3500 sq ft house as an example what would you think would happen if you cut the price of the $700,000 property even to the price of the $350,000? Which property would sell 1st?
Chances are very high that the $350,000 property without the fees sells 1st and the $700,000 house that is now $350,000 languishes on the market.
Why?
Here's why. Communities like Country Clubs and condominiums with their fees are designed from the ground up. The fees that are charged are related to the price of the property that is to be built and sold. If prices dip below a certain value the proper buyer who is willing and able to pay these fees will not appear. Instead multiple buyers capable to pay the price but not the fee will appear.
A simple example is the #TheSlade #DowntownWPB 1200~ish 2/2 that has a near $800 a month HOA Fee. The properties are priced circa $250,000. However, home buyers in a $250,000 are more comfortable with a $500 a month maintenance fee. The right answer for a Slade 2/2 right now is to be priced in the $350,000 value. A $350,000~$450,000 condo buyer expects the maintenance fee to be $800~ish where the $250,000 condo buyer is turned off the property by it.
A more complex is an equity membership country club community on the Treasure Coast. A recent sale of a 2200 sq ft single family was $51,000. That's right, $51,000. There are 1400 sq ft condos in this same community selling circa $20,000. Sounds like a steal right? You'll take two? Well each of these properties require a $65,000 club equity membership and average $700 month for the monthly HOA & POA charges. These fees do not add up to a buyer of such a home. This home looks like it is trying to be flipped for about $180,000 which is still off the mark of what it's true valuation on 2014 should be. There are two other similar offerings on the market right now; $130,000 and $275,000 are the asking prices. Can you guess which one is actually priced correctly?
If we hop in our time machine and look back to circa 2002 we see a comp sale for $240,000 which adjusted for inflation is $315,000. So the $275,000 property is actually the properly priced property. It's too bad cause there is no shot that property will sell when you can nearly buy two other homes for the price of the properly priced property.
There are 21 homes in this subdivision of this near 700 home development. These 21 homes based on the recent comp sale of $51,000 are collectively valued at $1,071,000. If these properties were property priced to their intended value the 21 homes would be valued circa $6,615,000. St. Lucie County where this community is located has a property tax rate of near 3%. Property tax appraisals tend to be less than market sale prices. However in this subdivision the Property Tax appraisal is actually near double the $51,000 comp. So a taxable value on these 21 properties is about $2,200,000 yielding near $66,000 in P.T. revenue. If these properties were trading at the market value they were intended we could estimate that the tax assessment would be about 80% of the $6,615,000 valuation and would yield circa $158,760 in PT revenue.
Well this is all great Anthony. Thanks for pointing out how our ultra awesome community is grossly undervalued. "Your Welcome." So what's the solution?
The solution is easier said then done. The solution for these style communities is to really understand where properties need to be priced and to get all your property owners on the same page. My thoughts are it may take an extended period of no sales to properly readjust property values, but considering how undervalued current sales may be in pockets of our market the appeal to ownership may be strong enough for your community to come together and make it happen. I also believe that would be buyers will appreciate the efforts within your community and we may be surprised to see that the 1st few critical sales to reset your areas values come faster than projected.
I'd love to hear your feedback on the topic and encourage y'll to join the conversation below.
Best Wishes,
a.
Can you guess which maintenance fee is a New York City High Rise & which one is a Garden (4 stories & less) Style condo in Nebraska?
Monthly maintenance fees depend heavily on the amount of common area a building/community covers, services such as valet, spa, pool, or simply an elevator and local geographic items such as unique insurances.
In Florida we have an additional layer of H.o.A. style fees as they relate to fancy schmancy Country Club Lifestyles. These communities with their finely trimmed grass, clean roads and Sunday brunches tend to have another layer of fees known as membership fees, annual dues and in some cases a P.O.A. fee. Yeah, seriously.
A property purchase within one South Florida's fee layered communities would look something like this.
Home Purchase Price: $X
Membership Fee: $65,000 (may be refundable, partially refundable or non-refundable.)
Monthly H.O.A. Fee: $ 650 (based on the size and style of your property)
Monthly P.O.A. Fee $ 350 (usually a flat fee across all homeowners in a community)
Annual Dues $X
Food & Beverage Min $X (some CC's require members to commit to a min spend requirement)
So as you can see, depending where you live the cost and expenses vary greatly.
A 3500 sq ft house may sell for $350,000 in a general population area and a very similar 3500 sq ft house may sell for $700,000 in a gated community with all of the above fees.
Keeping this 3500 sq ft house as an example what would you think would happen if you cut the price of the $700,000 property even to the price of the $350,000? Which property would sell 1st?
Chances are very high that the $350,000 property without the fees sells 1st and the $700,000 house that is now $350,000 languishes on the market.
Why?
Here's why. Communities like Country Clubs and condominiums with their fees are designed from the ground up. The fees that are charged are related to the price of the property that is to be built and sold. If prices dip below a certain value the proper buyer who is willing and able to pay these fees will not appear. Instead multiple buyers capable to pay the price but not the fee will appear.
A simple example is the #TheSlade #DowntownWPB 1200~ish 2/2 that has a near $800 a month HOA Fee. The properties are priced circa $250,000. However, home buyers in a $250,000 are more comfortable with a $500 a month maintenance fee. The right answer for a Slade 2/2 right now is to be priced in the $350,000 value. A $350,000~$450,000 condo buyer expects the maintenance fee to be $800~ish where the $250,000 condo buyer is turned off the property by it.
A more complex is an equity membership country club community on the Treasure Coast. A recent sale of a 2200 sq ft single family was $51,000. That's right, $51,000. There are 1400 sq ft condos in this same community selling circa $20,000. Sounds like a steal right? You'll take two? Well each of these properties require a $65,000 club equity membership and average $700 month for the monthly HOA & POA charges. These fees do not add up to a buyer of such a home. This home looks like it is trying to be flipped for about $180,000 which is still off the mark of what it's true valuation on 2014 should be. There are two other similar offerings on the market right now; $130,000 and $275,000 are the asking prices. Can you guess which one is actually priced correctly?
If we hop in our time machine and look back to circa 2002 we see a comp sale for $240,000 which adjusted for inflation is $315,000. So the $275,000 property is actually the properly priced property. It's too bad cause there is no shot that property will sell when you can nearly buy two other homes for the price of the properly priced property.
There are 21 homes in this subdivision of this near 700 home development. These 21 homes based on the recent comp sale of $51,000 are collectively valued at $1,071,000. If these properties were property priced to their intended value the 21 homes would be valued circa $6,615,000. St. Lucie County where this community is located has a property tax rate of near 3%. Property tax appraisals tend to be less than market sale prices. However in this subdivision the Property Tax appraisal is actually near double the $51,000 comp. So a taxable value on these 21 properties is about $2,200,000 yielding near $66,000 in P.T. revenue. If these properties were trading at the market value they were intended we could estimate that the tax assessment would be about 80% of the $6,615,000 valuation and would yield circa $158,760 in PT revenue.
Well this is all great Anthony. Thanks for pointing out how our ultra awesome community is grossly undervalued. "Your Welcome." So what's the solution?
The solution is easier said then done. The solution for these style communities is to really understand where properties need to be priced and to get all your property owners on the same page. My thoughts are it may take an extended period of no sales to properly readjust property values, but considering how undervalued current sales may be in pockets of our market the appeal to ownership may be strong enough for your community to come together and make it happen. I also believe that would be buyers will appreciate the efforts within your community and we may be surprised to see that the 1st few critical sales to reset your areas values come faster than projected.
I'd love to hear your feedback on the topic and encourage y'll to join the conversation below.
Best Wishes,
a.