The downturn in the housing market and the glut of condominiums in Chicago have combined to drive down prices and entice interest from potential buyers, as investors and disgruntled commuters alike are thinking about getting a place in the city.
“What we are seeing is a lot of people trying to take advantage of the slump in the condo market and purchase investment properties or weekend homes,” says Patricia A. O’Connor, a partner with Levenfeld Pearlstein, LLC. “If they have the cash or the ability to finance, there’s no doubt it’s a great opportunity to buy now. But you really have to think twice about the short-term benefit and the long-term commitment you’re making.”
Smart Business spoke with O’Connor about how to avoid common mistakes when purchasing a condo and how to make sound decisions.
What major issues should potential buyers be aware of when looking at condominiums?
If you are going from a single-family, freestanding home and moving into a condominium or town home, there are going to be issues, and the two biggest are economic commitment and lifestyle.
You have to understand that what you are buying into is membership in the organization. You are going to be bound by restrictive covenants, and if it’s a condo, you are also going to be bound by the terms of the Illinois Condominium Property Act.
Many purchasers want to buy a condo because they think they won’t have to take care of much, but that’s not the case. You’re not a renter. You are a joint owner of the common elements with every other owner in that association.
There are also rules of the association. People don’t necessarily realize that they can’t always do the construction they want to do. You have to go to the board for approval on anything that impacts the common elements.
Many issues can be avoided simply by doing due diligence. Take that extra step, because purchasing a condo is not like purchasing a single-family home, where you recognize that you are going to be able to make changes and will be responsible for the cost. People who buy condos don’t necessarily give a lot of thought to what they will and will not be responsible for cost-wise and what they can and cannot do.
What common mistakes do prospective buyers make?
You really need to think ahead. If you are looking at a foreclosure or short sale, it can be a great investment opportunity, but if there are a multitude of short sales and foreclosures in that building, that means there are a lot of condo units that aren’t paying their assessment. Who pays those assessments if they’re not paying? It falls on the other owners.
Also, if you have a personal economic crisis and you can’t pay your assessment, the association can evict you. You could end up out on the street.