Home Buying in Chicago>Question Details

Erica, Home Buyer in Chicago, IL

Should I be nervous buying in to a large condo conversion that has only been 30% sold? It worries me that in

Asked by Erica, Chicago, IL Thu Feb 7, 2008

this market they will never all sell.

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Answers

6
Hi Erica,

I agree with Patti that it's dificult to give you a clear answer without additional details such as:
Location
Type of unit
Views
Price
Days on market
Total number of units
Area amenities etc.........
Buying into a conversion that isn't complete or has vacant units is always a risk in any market. Sales velocity is important in the analysis also. If you sell 30 units in a 100 unit conversion in 3 months, you could expect a sell-out in a year. However, if 30 units have sold in the last year, you'll see another 2 years and 4 months before a sell-out occurs. The longer the timeframe the greater the chance of price reductions as a developer seeks to off-load inventory and reduce carrying costs. The same applies to a short timeframe when sales occur quickly and developers increase prices for remaining units.

I would research the current market and compare units available in the conversion to other units available in the area along with recent closed sales. That way if it looks too expensive, you can purchase another unit elsewhere. A final point to be aware of is the number of investors buying into the project. They may not show-up at the closing table if financing is difficult to obtain in the current environment which would distort the current 30% sold number. Subsequent renters of these units can also devalue units that are owner occupied due to lenders reluctance to lend into such a building thereby reducing your resale buyer pool.

Good luck, Ken.
Web Reference: http://www.KDRchicago.com
1 vote Thank Flag Link Mon Feb 11, 2008
Sounds like you may be describing a non-warrantable condo. If so, not all lenders will provide financing for this and they may require more down and/or charge a higher rate. In exchange you are likely getting a lower price than later purchasers. Wile you can always refinance later to a lower rate I would advise you to confirm rate & terms of your mortgage are acceptible before making the commitment.

Greg Zaccagni
1 vote Thank Flag Link Fri Feb 8, 2008
You should be concerned about more that that! Also of importance is the fact that the developers could lower their asking prices significantly to entice buyers. This will imediately depreciate your investment value.
It would not be good to purchase a condo in February for $229,900 only to find that a few weeks later the price had been dropped ti $195,000. You end up owning a home that in a very short time is not worth what you paid for it.

The "Eckler Team"
Century 21 Almar & Associates
Venice, Fl 34285

941-408-5363
1 vote Thank Flag Link Thu Feb 7, 2008
Hi Erica
Depends- How long has the property been on the market? Did you purchase a popular tier in the building? How would you compare the prices to the rest of whats out there?
If you feel like you got a good deal and are happy with the unit and plan to stay for 5+ years you should be fine no worries

Best of luck
Web Reference: http://www.KaleRealty.com
1 vote Thank Flag Link Thu Feb 7, 2008
Yes, it should worry you. The developer may begin to lower prices in addition to the incentives they provide and then you are underwater (your loan is more than the value of your home). Their is a glut of condos right now that may never sell you are better off with a more established building. Of course others may disagree but I represent buyers only and they never buy in a building like this,
1 vote Thank Flag Link Thu Feb 7, 2008
Hi Erica,

Without knowing more details, it's tough to say whether or not you should be concerned.

Where is the conversion?

How long has it been on the market?

How long do you plan to stay?

Is the area an area that would be a good rental market (i.e., proximity to public transportation, amenities, etc.)

Before you freak out too much, give us some more details....
0 votes Thank Flag Link Fri Feb 8, 2008
Patti Pereyra, Real Estate Pro in Chicago, IL
MVP'08
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