Author Topic: Selling a condo building as a whole.  (Read 1309 times)

AlanStache

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Selling a condo building as a whole.
« on: October 30, 2019, 07:00:30 PM »
The condo I still own from a past life is now in a position to be sold.  When I informed the condo board president he asked if I might be interested in all four of us owners selling the building as a whole.  I said yes I am interested and there was a quick third voice of interest.  The fourth owner has yet to say anything but he is always very slow in any communication.  I will lay out the basic situation and am interested in any thoughts and things I should look out for.

1) 4 units in the building, each 2 bedroom & 1 bath ~1100sqft
2) The other three units are rented out, mine is now (nearly) empty.
3) I was the last to buy in 2008, I think the others bought higher than me, best guess is they are all above water.
4) The other 3 units have been rented out for +7 years at least since the owners lived in them.  I think they all had some hope that prices would get back up to where they bought at but that has not happened.  and I dont see it.
4a) I would be shocked if anyone had any plain to move back into there unit - we all have moved on. 
5) Is in an up and coming area, new micro breweries are opening up and is near a college
6) A few realtors have said that nothing in the area has stayed on the market long
7) realtor I contacted ran a quick number and estimated my place to sell for ~110-115, this is in line what what I guessed, I bought for 163$ :-( 
8) I have no interest in being a landlord and would be happy to cash out and buy SCHB. 
8.a) I could probably rent and be more or less month to month even.
9) Building was built in ~1920, remodeled in early 2000's.  Is basically ok but has old plumbing that at some point will need replacement and there are some knob and tube wiring.  The foundation has settled in places but is stable. 
10) I think the building has good potential to be remodeled and fixed up, other properties (mostly single family homes) in the area have.
11) We four owners have a call scheduled sunday to talk it over. 
12) I dont think anyone has really looked at the details of dissolving the condo association.  When I read the rules +10 years ago it did talk about owners being able to own multiple units and merge them for a larger share of votes.  So I assume one person could buy all four units and do as they liked.
 
My biggest concern is all this taking a year for us four to agree on a seller and price, that could be a year my place is empty while others are getting rent.  Not sure about renting my unit while the building is for sale.  The condo pres likes to argue and in past had FUD-ed conversations into the action he wanted; but he brought all this up so maybe not. 

If there is anything I left out please ask and I will answer as best I can.  Thanks.

BECABECA

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Re: Selling a condo building as a whole.
« Reply #1 on: October 30, 2019, 07:13:17 PM »
I donít see selling collectively as giving you any advantage over selling individually, and rather I just see a lot of potential disadvantages. Usually, real estate speculators stand to make tons of money by getting a city to approve subdividing their property, so they can sell it off individually. Youíd essentially be doing the opposite. Also, when someone buys in bulk (like buying 4 at once instead of 1), they usually get quite a discount. You will have a lot less buyers able to afford all 4 places than you would just 1. And whatís your placeís condition like compared to the others? Given you havenít had renters in there trashing the place, Iím guessing yours is the prettiest of the bunch. Not to mention having to all agree to accept an offer... what if 3 of 4 want to accept?

I only see downside in doing this collectively.

AlanStache

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Re: Selling a condo building as a whole.
« Reply #2 on: October 31, 2019, 07:12:25 AM »
An upside that I should have mentioned is that in past a one of the owners did try to sell and may have had some trouble because of the age and infrastructure of the building.  We are not sure but they may have been scared off by an older building, but that was a number of years ago and the market may have heated up since.  Upside being that someone looking to remodel the building could look past some plumbing/electrical work and price that in easier or at least would not be as immediately turned off.  The association does have ~20k in reserves that a renovator would get to use as they saw fit.

But yes there are potentially show stopper downside risks to selling collectively and I am not sure I would get any premium for it.  I am not sure if selling the building requires all 4 or only 3 people to agree. 

Xlar

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Re: Selling a condo building as a whole.
« Reply #3 on: October 31, 2019, 01:27:31 PM »
An upside that I should have mentioned is that in past a one of the owners did try to sell and may have had some trouble because of the age and infrastructure of the building.  We are not sure but they may have been scared off by an older building, but that was a number of years ago and the market may have heated up since.  Upside being that someone looking to remodel the building could look past some plumbing/electrical work and price that in easier or at least would not be as immediately turned off.  The association does have ~20k in reserves that a renovator would get to use as they saw fit.

But yes there are potentially show stopper downside risks to selling collectively and I am not sure I would get any premium for it.  I am not sure if selling the building requires all 4 or only 3 people to agree.

I don't see how your building being in need or repairs is an upside? If you're looking for an investor that will purchase this property and fix it up the standard math is the (sale price) = (After repair value)*0.7 - (Repair cost).

So if you expect your place to sell for $115k have you take this into account? What do you expect the cost of repairs to be to just your unit? Is that something that you can pay for yourself? Is your unit in good enough condition you could sell it normally on the MLS to a traditional buyer that wants to live there? If you can that is definitely better than trying to sell it to an investor. (I guess unless they aren't a very good investor, lol)

SndcxxJ

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Re: Selling a condo building as a whole.
« Reply #4 on: November 05, 2019, 10:33:28 PM »
As I see it, the only reason to combine efforts is if there is something to gain.  If you had an investor that was interested only if they could get all units and they are willing to pay a premium for it, then great.  Short of that, I don't see the point.  Condo properties that are sold in bulk (around the bay area CA) go for about 75% of what each condo could go for individually.  In fact, buying bulk property and then individually selling each one off is a process that folks do for profit.  For you to do the opposite would have to have some extenuating circumstances that makes more sense then not. 
One approach could be to sell your condo to one of the other owners in the building so they can go down this road without you.  That way you can make your quick exit, and get away from what is probably a waste of time.

AlanStache

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Re: Selling a condo building as a whole.
« Reply #5 on: November 06, 2019, 08:10:19 AM »
Thanks for the input.  We had a conference call Sunday.  All went smoothly, I dont think the others are willing to sell for 115k (they would like ~150), they said they would do some leg work on finding a potential buyer.  I need ~2 more weekends to get the unit cleaned out any way, so we will all talk again in two weeks.   There are a few companies that seem to own many rental buildings in the area so they were going to cold call them and see what happens. 

At this point I see a few likely outcomes
1) They dont do the leg work.  They seem to understand I dont want the unit empty indefinitely and would probably not fuss to much if I moved forward with selling as an individual unit after they demonstrated they were not willing to put in the hours to sell as a whole. 
2) They get lower numbers for the building than they want to sell for.  Again they would not fuss if I started selling on my own.
3) They get high numbers for the building.  Then we consider selling the building in full.

We did meet with a commercial realtor before the call.  She was either incompetent or being actively deceptive with the comps she showed me for just my unit.  Said it could sell for 150-165 with all her comps in a different and more desirable area.  She did run comps for the building but there really are very few quads around.  On a per sqft basis she came up with numbers that are at the lower end of what others might be willing to sell that still had a premium.  We will see.

I could potentially put money into the unit to raise the sale price.  I am not confident that 20k for new kitchen/bath would be fully recouped and really would rather not deal with that hassle.  If I were in a 30 year mortgage and could be month to month cash positive I might consider upgrading and renting but I am not and am happy to walk away (currently own ~60k so refinancing might be hard).