Own a dog? Thinking of having kids? Want to replace the carpet for hardwood? Then you better be careful what condo you buy.
According to a recent study, published this year in the Journal of Real Estate Finance and Economics, building restrictions in condos can dramatically impact the sale price.
The study analyzed resale condo restrictions and their respective selling prices for 22,000 condos sold in the Ft. Lauderdale, Florida area. The authors found that when housing prices fell, by in large, condos with restrictions were sold at a discount, compared to similar units with no restrictions.
“We found this very interesting, as many seniors will often pay a premium for a condo unit in an age restricted building,” explains Dr. Charles Carter, a former professor in Baltimore, Maryland and one of the study’s co-authors. According to Carter, a restriction on the age of the owner is seen as a benefit when real estate is doing well—prompting buyers to pay a premium for these condos—but the restriction appears to force a discount on the condo sale price when the housing market is suffering.
Bottom line: If you plan on selling the condo at a later date, don’t pay a premium for a condo in a building with an age restriction.
For those considering a condo building with pet restrictions be forewarned: no-dog (or pet) policies consistently lower the sale price of condos, regardless of whether the real estate market is hot or not. Carter isn’t surprised by the findings, “considering all the studies that show how beneficial pets are to one’s emotional and psychological health.”
Bottom line: Buying a condo that doesn’t allow dogs or cats (or other fury or feathered friends) will mean a discounted sale price when you decide to move.
While Carter’s study didn’t examine restrictive remodelling rules, I can tell you anecdotally how condos with reno-rules in Vancouver’s hot property market sit on MLS for two, three, sometimes four times longer than similar condos without remodelling restrictions. And why not? Who would want to buy a condo that denies the new owners the ability to change the carpeted flooring to hardwood?
And don’t forget rental restrictions. While some restrictions can be beneficial—so that buildings don’t become a rental ghettos with 50% of more of the units occupied by non-owners—limits that are too restrictive can hurt the resale value of the condo.
“Condo boards make the rules,” says Carter, “so these results should certainly prompt some discussion at board meetings.”