Do Higher Condo Fees Mean Lower Listing Price?

• March 1, 2010
• 6 Comments

by Michele Lerner

Along with the mystery behind what condo fees cover, many homebuyers wonder how these fees affect unit prices. For example, do high condo fees go hand-in-hand with high condo prices? All else being equal, will a unit with a high condo fee have a lower purchase price than one with a low fee? We will attempt to answer these questions below.

“Condo fees are usually inversely related to condo prices,” Long & Foster’s Rachel Valentino told UrbanTurf. “In other words, the higher the condo fee, the lower the list price.”

Valentino noted that she sees this inverse relationship illustrated frequently in older buildings like the Watergate or many of the condo buildings near Massachusetts Avenue and Cathedral Avenue in Wesley Heights. She said that clients will frequently call her when they see a low-priced unit in a good building, but upon further inspection it is realized that the unit has an extraordinarily high condo or co-op fee.

Valentino acknowledges, though, that the link between condo fees and condo prices is complicated.

“You have to make sure you are comparing apples to apples because condo fees cover different things in different buildings,” she said. “If the condo fee is higher because it covers a number of costs and amenities, then the condo price won’t necessarily be lower.”

Realtor Lou Muscarella with Century 21 New Millennium says that it would be pretty difficult to find condo units in different buildings that are the same in every aspect, except for the condo fee. That said, in many cases, a condo with a higher fee could have a lower purchase price.

“A condo fee above $500 definitely takes away from the value of a property and becomes almost like an incurable defect along the lines of a location on a very busy street or a ground floor unit,” Muscarella explained. He said that condos with a high fee typically take longer to sell and anything which sits on the market for long will naturally require a price reduction before it will go under contract.

Muscarella and Valentino both said that appraisers may look at condo fees as part of their estimate of the property value, since the fees are part of any complete real estate listing. It would be expected that fees which are exceptionally higher or lower than the norm for a particular size and type of condo would have an impact on the appraised value. But if those high fees come with a swimming pool, secured parking, a fitness center and a gym, they are not likely to lower the appraised price.

This article originally published at http://dc.urbanturf.com/articles/blog/do_higher_condo_fees_mean_lower_listing_price/1802

6 Comments

1. SWester said at 6:44 pm on Monday March 1, 2010:

   Condo fees are a tough factor to understand accurately without proper due diligence.

   On one hand, high condo fees could reflect outstanding amenities, as listed in the article, and could include all utilities minus, say, cable. On the other hand, the shared cost of utilities and the reliability of management to arrange proper funding for common elements could lead to dangerous surges in those fees (which tend to recover from unnecessary increases). In other words, some major potential for tragedy of the commons.

   It’s strange, because down here in SW, home of some of the most absurdly disproportionate condo fees ($800/mo. for a 700 sq ft 1 BR!), one of the explanations is that it is a remnant of the days when extra security was needed in the area. I suppose they never “adjusted” back down…oh well, I’m happy in my newer building which has fees at around $280 for a 1 BR, including water utility.

1. Mark S. said at 8:09 am on Tuesday March 2, 2010:

   As a new purchaser moving back to DC after a 22 year absence, I can say that after two, yes TWO years of looking at new and existing condos that a large deciding factor in the purchase was finding a large 1200sf. space with a fee UNDER $500. was a challenge! The total monthly charges was as much a deciding factor as the purchase price and the appeal of the unit and the location.

   I find that the biggest difference in fee division was the building size and on-site concierge services.  Most of the new downtown projects, Yale Lofts, Landmark Lofts, Metropole, etc…all have the same basic amenities….roof top pools, exercise rooms, parking. The real difference for us was the smaller building, often under 20 units with a security system and without the need for a “front desk” management staff resulting in several hundred dollars a month less. 

   I do see the pros and cons of living in a limited service building, but after 19 years in a Boston full service building, it is nice to walk through the lobby with the dogs at 6am and not have to make conversation with a doorman who feels they know everyone’s business, I can easily park my own car and gather my own drycleaning and we’re banking that extra couple of hundred dolars a month too. 

   In the long run, how do others feel about giving up some services for a lower fee?

1. UnoTres said at 12:05 pm on Tuesday March 2, 2010:

   Condo fees are not only higher because of amenities, but often reflect an old ailing building with numerous issues that need to be addressed. This is done through assessments and higher fees.

1. SWester said at 12:34 pm on Tuesday March 2, 2010:

   Mark:

   It’s an interesting trade-off when it comes to limited service vs. full service building, for sure.  On one hand, the extra cash is nice.  Then again, I find it easier to justify the higher monthly payment when the convenience/security factors play in (e.g. I’d probably be spending $ on an outside gym membership, water bill, etc).  Also, knowing that at night there is a security guard wandering the premises and that I can rely on a staffed front desk should I ever have a problem - these are nice consolations as well. The extra plus to my building complex is that I don’t have to enter through the staffed entrance unless I want to - the other entrances are key-access only.

   But ultimately, you’re right - it really is a personal preference.

1. David said at 5:04 am on Friday March 5, 2010:

   Hmmm, no mention that with a higher condo fee the buyer has less money for a mortgage payment???  Thus, the lender will approve you for less of a mortgage, leading to a lower potential purchase price.

1. SdR said at 7:18 pm on Sunday March 21, 2010:

   @Mark S.
   I am on your side- after living in a condo in NY with all the amenities possible and paying big condo fees for them, I would very much like to live in a condo without a doorman, just a secure entrance. Living in my condo was like going from my office to another office(my home), no privacy(the doormen know everything possible about every tenant), all my guests had to be announced and sign in a register etc.
   I just want a nice apartment in a quiet building not part of an enterprise with gym, swimming pool, library, and so and so.
   Why was so difficult to find a good condo ? Only because of the fees ? I am moving to Washington and would like to buy. Any advice ?

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