Group Condo Purchase

October 14, 2011 5:03 PM

What do I need to consider with regards to a group buy of a condo?

I own a condo in a good 40 unit building. It holds it's value and is in a desirable location. For a number of reasons, we have a unit for sale far below even this terrible market. As owners we are considering a 'group buy' of this unit. In other words, I can buy 'shares' along with any other owner of this unit that is up for sale at a price far below any comparable unit.

We'd then turn around and sell the unit after making some improvements.

We could buy the unit for $220K. We'd put $30k into it. Comparable units in the same building are going for $330k.

What should I consider, what concerns should I have other than the obvious?

posted by rryan to work & money (7 answers total)

If the price really was 33% below market, you would not be able to buy the condo. Some other price speculator would buy it.
posted by saeculorum at 5:23 PM on October 14, 2011 [3 favorites]

Is the Condo *really* 33% below market value? It's hard to think that there wouldn't be people out there wanting to buy a property for 10% less than it's fair value - let alone 30% cheaper.

I would do some research to try to find out the actual reason why this property is selling for such low price.
posted by helloworlditsme at 6:11 PM on October 14, 2011 [3 favorites]

I hate to ask the obvious, but have you actually SEEN the inside of this condo? What kind of condition is it in: does it just need a coat of paint, or does the kitchen and bath need major upgrading? Do the windows need replacement? Has a professional RE inspector checked it over, and what does his report say?
What about debts or liens on the property --- debt owed to the HOA, to contractors and repairmen, to a bank or other mortgage-holder?

Perhaps I'm looking a gift horse in the mouth, but there's a reason the price is so low. (Unless perhaps the comparable units $330K valuation is wildly inflated.....)
posted by easily confused at 6:36 PM on October 14, 2011

Here's more information; the past owner passed away of old age. Their children have inherited it and have told the condo association they will put it up for sale at the stated price. Because of condo rules, the association has the option to buy before it goes to market. A lawyer will confirm all of this. If it's not correct, then I'm out.

I'm really interested in anyone who has purchase property in a group before- perhaps in a similar situation?
posted by rryan at 6:52 PM on October 14, 2011

You are correct in that you have "the right of first refusal" and that you can buy it at the contract price that someone else gets for it (or what you offer and get accepted for it).

Do you actually want to own a share of the apartment or do you just want to see the apartment sell for a higher price? My guess is the latter.

I would approach them and tell them that it is actually worth more. Then again, if it is really selling for that much less, my guess would be that they would have multiple bidders and the price would go up.

Considering the price, I don't think you could lose too much if you all go in on it. But the one thing I do suggest is that ONE person takes control of the renovations and handles everything. NO ALTERNATIVES. Otherwise you will have 40~ people all saying they want this and that, when all you want to do is flip it in the least amount of time possible. Worst case scenario? Everyone is on the hook for the monthlies until you do sell it.

Realize that any profit would go to the building, and not to your pocket.
posted by darkgroove at 6:58 PM on October 14, 2011 [1 favorite]

The biggest risks I see to you are price declines and newly-discovered problems that raise construction costs. One consideration is that your low-price buy could lower the comps, thereby lowering what the unit will appraise and qualify for financing for. I'd check that an appraiser will be able to disregard that sale. Also, you are entering a (North American) slow sales period; do you mind your money being tied up for awhile? Also, if the jobs picture worsens before sales pick up, the final price you can ask might erode. And are city taxes and other holding costs factored in to your budget?
posted by slidell at 8:25 AM on October 15, 2011

Sounds like a recipe for disaster. You have a group of people who are pooling money together to buy a condo in order to prop of the going rate of condos in your condo. Then you will have management by committee, in which no one will be able to agree on renovations, management of the condo unit, selling price, how to market it, etc. I'd just wash my hands of it.

If the market really is pricing the unit at $220k, then that's its value, whether condo members buy it or not.

I don't see how you benefit here.
posted by dfriedman at 12:26 PM on October 15, 2011 [1 favorite]