Quote:
Originally Posted by Rizzo
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1. How common is this in Chicago?
2. Is there a formula for minimum asking price per unit
3. How common are leasebacks?
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More common than it used to be. I wouldn't say it's super-common, though.
Condo associations that do this tend to be associations with a low rate of owner-occupancy, or where assessments are unusually high. Both of those things put downward pressure on sales value. Low owner-occupancy can limit certain kinds of mortgages, especially Federally-backed ones, and also tend to be less popular with people who actually want to live in the unit because part of the allure of a condo over an apartment is generally having more mature neighbors who are less likely to be noisy or otherwise obnoxious (not that there aren't obnoxious condo owners, it's just that there are more obnoxious renters in most cases).
I rented a condo unit in 159 W Goethe, a vintage building in Old Town, for a couple years starting in 1999. By coincidence, the exact unit I'd rented ended up being used as a comp (
comparable) for the appraisal when I bought my current condo. Several years ago it was in the press that the condo association at 159 W Goethe
sold out to be converted to apartments. At the time, the articles said that it was sold because over half of the units were not owner-occupied. The price paid seemed low, but based on my experience living there, it probably required a fair bit of renovation by the developer. If someone had just moved in, I'm sure they'd have been really irritated, but hopefully the developer would, at the very least, make them whole even if it meant paying them a bit more than other owners. Legally, though, I don't think they're required to as long as 75% of owners vote to sell en masse. Pricing, though, is just like any other real estate deal, in that it's negotiable. An association could be willing to sell in principle, but unable to negotiate a price good enough that 75% will take it. In the case of 159 W Goethe, a lot of the owners had bought in the mid-1990s when prices were as low as 1/3 of what their offer was, so even though individual owners might have made a little more selling on their own, the fact that so many were investment units at that point and they'd mostly bought in at a very low price anyway, made it easier for the developer to get the needed votes.
Sometimes investors who want to own a bunch of condos will take a long view, too, and just start buying individual units until they control enough votes to swing a sale of the rest. Or they can make it impossible for other owners to vote to sell to another developer, if the investor wants to keep them. That sort of move can be very controversial and anger other owners, though, and can provoke lawsuits, such as for
540 N Lake Shore Drive.
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