Critical Questions For Prospective Condo Buyers
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Critical Questions For Prospective Condo Buyers
How many homes have closed in the Has the condominium received project
condominium project? approval from Fannie Mae and is the entire
This is important because it reveals the “momentum” of a condo project approved (i.e., not just certain floors of
project. Don’t buy into the explanation of units “under” contract; the condo project)?
ask them for the recorded/closed sales! The primary reason you
In today’s market, Fannie Mae, Freddie Mac and FHA have new
should be concerned about this number is that some lenders
stricter rules when it comes to condo financing. At the moment,
cannot finance condos when the owner percentage is below 50%.
Fannie Mae, Freddie Mac and FHA account for around 90 percent
Your condo is typically more marketable with a higher percentage
of all loans being approved. So if you’re looking for a home loan,
of closed/recorded homes. Similarly, the risk of downward
you’ll need to play by their rules. Buyers may now find themselves
pressure on pricing is more acute when many of the project’s
trapped in contracts if they are buying in a condominium project
condos remain unsold.
that has not been approved or can’t be approved. These days,
if financing is not available through Fannie Mae for your condo,
Washington Square has closed/recorded over 230 of its 377
the number of lenders available is reduced dramatically, which will
condominium residences. Please ask your sales executive for
significantly affect your ability to resell the condo in the future.
the most up to date number.
Some projects have a partial approval, meaning only certain
Have prices precipitously declined over the past blocks or floors of condos in a project are approved by Fannie
12 to 18 months in the project? Mae. Buyers should beware of purchasing a condo under such
No one wants to buy a stock on the way down; much less a circumstances. While the condominium project may have special
valuable condominium. Typically, condominium projects with financing set up for your purchase of a condo, such special
excessive inventory have no choice, but to continually drop prices financing options are rarely available once you resell your condo
to attract new buyers. Condo buyers should be wary of such to a third party. Make sure Fannie Mae has approved all condos,
projects. If lower and lower pricing is the only way a condo project not just certain floors of the condominium project.
can attract new buyers, it is likely the value of your new condo will
be eroded by further price decreases. While no one can predict Washington Square has Fannie Mae approval for the entire
the future, history can provide a valuable forecast. If prices have project through various lenders.
continually dropped over the past 12-18 months at a project, it is
safe to say they will continue to drop over time until you see a Is the condo project FHA approved and can an
leveling off or even a slight increase. A steady average pricing over FHA loan be closed presently?
a 12-month period is typically indicative of stable pricing within a
With the recent problems suffered by subprime mortgage
condominium project.
lenders, FHA loans are making a strong comeback as a useful
alternative for first-time home buyers and home buyers with less
While undergoing a substantial price decrease immediately
than perfect credit. FHA does not provide or guarantee loans, it
following the credit crisis, Washington Square has maintained
insures loans. The insurance either eliminates or minimizes the
average pricing over the past 12-18 months. Ask your Washington
default risk lenders face when buyers make down payments of
Square sales executive for the most recent statistics.
less than 20 percent. Prior to assuming this type of risk, the FHA
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Critical Questions For Prospective Condo Buyers… continued
comprehensively reviews a condo project to assess the project’s Certificate of Occupancy (CO) before purchasing.
overall stability and longevity. It is important to know whether any
FHA loans have closed in a project as some condo projects will Washington Square received a Final Certificate of Occupancy in
obtain a preliminary approval, but must sell a certain number of December of 2008.
units before they are officially permitted to close FHA loans. If
the FHA is unwilling to take on the risk of loans closed in a condo
project, buyers should likewise be cautious of purchasing in such When is the construction loan due for the
a condo project. condominium project?
This is an important question to ask the sales representative of
Washington Square is an FHA approved project and has closed any new condominium project. Construction loans are taken
various units with FHA loans. out by the developer to construct the condominium project and
typically are due shortly after construction is completed. If the
Who is the developer behind the condominium developer is unable to pay off the construction loan when due,
project? the lender can foreclose on the condo project. This will not affect
your individual condo as it is released from the construction loan
It is to your benefit to be familiar with the face behind the name of
when you close escrow, but the lender will assume ownership of
any condominium project. The strength of a developer is critical
any unsold condos in the building, often resulting in a “fire sale”
to the success of a condominium project. Since the credit crisis,
of all unsold condos. This can significantly affect the value of your
many developers have walked away from their condominium
condo.
projects leaving their projects in the hands of their lenders. It
is common for these projects to deteriorate as a result of these
Washington Square’s construction loan was paid off in July of
lenders having little to no experience managing condominium
2010.
projects. Simply having an HOA manager is not the equivalent of
having an experienced developer committed to the success of the
condominium project. Have Homeowners Association dues
commenced?
Wasatch Development is the original developer of Washington With newly constructed condominium projects, the developer
Square and the Superblock and in its 30 years of business, often sets monthly association dues very low and/or subsidizes
Wasatch Development has never handed a project back to a the dues in order to attract buyers. If kept artificially low by the
lender. developer for too long, you will likely see a dramatic increase (30-
50%) in monthly dues once the assessments actually commence
Has the project received a Final Certificate of and/or the developer’s role is diminished. Exercise caution
Occupancy? when considering purchasing a property with reduced or delayed
HOA dues because this really means that the developer hasn’t
A Temporary Certificate of Occupancy (TCO) has an expiration
commenced the actual dues for the project. This is a ticking time
date. This means that while the condominium meets the
bomb which can explode into higher dues or special assessments
minimum guidelines for occupancy, this is a temporary approval
down the road.
that is subject to expiration. If you purchase a condo that has a
TCO, you should consult an attorney and a professional architect
Washington Square commenced association dues in August of
or engineer to determine the requirements for obtaining a Final
2008.
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Critical Questions For Prospective Condo Buyers… continued
Has the Homeowners Association (HOA) been Washington Square has the lowest actual homeowner-controlled
association dues in downtown Bellevue for comparable high-
formed and is it homeowner-controlled?
rise luxury condominium projects.
There is a certain time when the HOA is formed and the developer
turns over the HOA to the homeowners of a condominium
Does the condominium project have a
project. Dues are instated and the homeowners are given the
authority to manage their own community. Potential buyers have replacement reserve study?
the right to know when the HOA will be formed and how many A replacement reserve study is a study made of all the major capital
closings must occur before it is turned over. The success of the systems in the association. Professional engineers evaluate how
condominium community is directly related to the caliber of the much life the systems have left and how much they’re likely to
association. If the association board of directors is functioning cost when they wear out. From that, the association can calculate
properly and has resident board members to represent the how much money it should set aside each year to have enough
interests of the homeowners, then the entire community will have to replace those items when they do wear out. If your condo
better chances of functioning correctly in the long term. On the project does not have a reserve study, your association may not
other hand, if the association has not been formed or there are have enough money to replace critical systems when they wear
no resident board members, you have no assurance that your out, which can result in expensive special assessments to you as
interests will be represented and decisions could be made by the a homeowner.
developer that affects your condo’s market value.
Washington Square completed a reserve study in August of
Washington Square’s HOA was formed in August of 2008 and 2009.
dues commenced as of that date. The HOA currently has three
resident board members and the HOA was transitioned to Is the Association’s Replacement Reserve
resident control in May of 2010.
Account adequately funded pursuant to a
Reserve Study and held in a separate bank
How do the monthly dues compare with
account?
comparable nearby condominium projects?
The replacement reserve account is for capital improvements and
The answer is important not only to your wallet, but to your
emergency repairs to your condo building and grounds that may
condo’s future market value. When the association dues are very
occur over time. Typically developers and some associations do
high compared to the competition, this holds down the market
not maintain reserves or inadequately fund the reserve account.
value of condos in that community. It is not uncommon for
Some condo projects will claim to have sufficient reserves, but if
developers to artificially supplement the HOA budget to give
no reserve study has been completed and the reserve funds are
the appearance of low HOA dues. It is important for you to see
not held in a separate bank account, the project may not have an
the actual HOA budget so you can assess whether the budget
adequate reserve fund.
reasonably addresses the needs of the Association. Typically, if
a homeowners association is homeowner-controlled you can
Washington Square’s Replacement Reserve Account is funded
reasonably assume that the budget is true and accurate and is not
in conformance with the standards suggested by the Federal
being subsidized or artificially inflated by the developer.
Housing Administration. Since the Replacement Reserve
Account is increased monthly, please ask your sales executive
for a current balance.
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Critical Questions For Prospective Condo Buyers… continued
Has the HOA performed an Envelope Does the HOA have functioning chartered
Investigation Study for the Project? committees?
An Envelope Investigation Study is an examination, via a third party Chartered committees are the internal volunteers who enforce
consultant, of the building envelope, mechanical and structural the rules and regulations and other community enhancement
systems, and other common elements of a condominium programs. Having committees formed with able bodies is a strong
project. So, why is this important to a potential condo buyer? If indication of a well run association.
the building envelope was not installed property and/or there are
other problems found with the mechanical systems of a project, Washington Square has four chartered committees: Architectural,
homeowners have only 4 years from the date of first sale in the Financial, Rules Violation, and Community Enrichment. These
project to bring a claim against the developer. If the HOA is not committees help support the Board of Directors in ensuring
homeowner-controlled, many developers or lenders in control will a smoothly operated association to protect property values at
avoid initiating an Envelope Inspection before the 4-year period, Washington Square.
leaving homeowners with no warranty rights. The last thing you
want is to purchase a condo only to be hit with a large assessment Is the condominium complex professionally
for an item that could have been corrected and/or covered by the
managed?
developer. By finding out whether an Envelope Investigation Study
has been completed for your new condo you can potentially avoid Except for very small condo associations (6 condos or less),
any large assessment fees down the road. every condo association needs a professional property manager.
You should be wary of buying a condo in a complex that is self-
Washington Square’s HOA performed an Envelope Investigation managed, often by the homeowners living in the property. Running
Study in the summer of 2010. a condo association is too large of a job for volunteer residents.
Washington Square is professionally managed by Associa EMB
Are there any liens against the project?
Management, one of the largest association managers in the
A mechanic’s lien is a mechanism that allows contractors to country. Learn more about Associa EMB Management at www.
have a lien against your condo building when they’ve performed embmanagement.com.
construction-type services on the property. It’s a powerful tool
because many lenders refuse to lend on projects with liens
Do any investors control large blocks of units?
attached to them. They’ll require the lien be paid before any new
loan may close. Thus, a lien can affect your ability to close on your When sales are slow at a condominium project or developers
condo or sell it in the future. On new construction, you can even find themselves in financial trouble, large blocks of condos are
be joined in a lawsuit to foreclose the lien, regardless of whether sometimes sold to one single investor. Selling condos in bulk
you personally did anything wrong. Always make sure all liens brings cash in quickly for developers, but investors interested in
have been removed from your condo building before buying your bulk purchases insist on steep discounts (30-50%) from the prices
condo. buyers of single units would be expected to pay. Further once
the investor owns the block of condos, he/she will typically either
Washington Square has no liens against the property. rent them for the time being or sell them. Either way, an investor
bulk purchase of condos can significantly reduce the value of your
condo unit. Also, lenders will be more reluctant to lend in a condo
complex with bulk blocks of condos owned by one single investor.
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Critical Questions For Prospective Condo Buyers… continued
No bulk sales of condos to a single investor have occurred at Are there any homeowners that would be
Washington Square.
willing to share their experience thus far?
People love to talk about things they are proud of. Even more so
Is there guest parking, and if so what are the
when they have continued to enjoy their experience, love their
conditions of use? home, or received great service. You should ask if you can speak
Developers typically overlook providing enough parking for condo or correspond with someone who purchased in the condo project
complex residents, let alone their guests. This may not seem like you are considering so you can understand their experience living
a big issue, but as a condo buyer you will have family and guests there thus far.
visit you and having accessible guest parking onsite will make life
easier for you and your guests. We are more than happy to refer you to current homeowners who
you can speak with about their experience living at Washington
Washington Square has a spacious underground parking garage Square. Please feel free to ask one of our sales executives for
located onsite with complimentary validation for your guests. homeowner references.
There is also surface level guest parking available on our access
drive and near the entry to the residential garage. Needless to
say Washington Square has plenty of available parking for you
and your guests.
Is there a warranty for my condo and how are
warranty requests resolved? Is there an onsite
warranty resolve team?
Typically there are a number of different warranties that come
with the purchase of your condo unit. State mandated, developer,
appliance warranties and others. It is important for you to find
out what warranties come with your condo purchase. You will also
want to know how the warranty requests are handled specifically
within the condo project. Some condo complexes boast a warranty,
but do little to expeditiously resolve warranty requests once they
actually occur.
Washington Square offers a comprehensive Home Warranty
Program and retains an on onsite warranty team to resolve your
warranty requests expeditiously.
943 107th Pl SE, Bellevue, WA 98004
425.974.7000
www.washingtonsquareliving.com
www.washingtonsquarebuzz.com
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