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Life's Good Here

Improving a Condo's Image Requires More Than a Positive Slogan

Article written by Jack Carr, P.E., R.S., LEED AP, Criterium Engineers
Published in Condo Media, August 2013

Crossing the bridge over the Piscataqua into Maine, you will notice we do not have billboards except the one in Kittery on the right side that proclaims, "Welcome to Maine - The way life should be." That got me to thinking about a new client's comment at a recent board meeting when I asked how things were at his condominum and he responded, "My condo. Yes, life's good here."

Of course everyone around the table recognized immediately he was parodying the recently announced slogan for the city of Portland, "Portland, Maine. Yes, life's good here." As part of the public relations launch of this new slogan, businesses and organizations were encouraged to tag their own names to create a tie-in, such as, "My Store. Yes, life's good here."

Though this slogan may remind you of words on a T-shirt or an appliance logo, the branding image message is clear. If only it were that simple to improve the image of a business or a condominium. As I said, this slogan got me to thinking of the meaningful ways a condominium's image is viewed by outsiders and what can be done to improve it.

When I have to deliver bad news to a condo board such as a discovered hidden building problem or underfunding in their reserves, I always suggest to the board that they remind their unit owners not to "hang out their dirty laundry." Sharing this type of negative information with a unit owner's hairdresser or dentist often results in the information becoming quickly distorted and the wrong story may be circulating in the local community or real estate market.

This is not to suggest this information be kept secret, as potential unit buyers have a due diligence right to be provided the correct available information to make an informed purchase decision. But in that case, the information can be provided in a controlled manner.

Beyond Curb Appeal

Regarding the general outside appearance of the condo complex, most folks recognize the importance of curb appeal. In these modern days, real estate brokers are looking beyond the outside appearance of the condo facade or the amenities available. They are asking to see the last two or three board meeting minutes to discover serious issues currently being considered. They are also asking about the percentage of renters, assessment arrears, and the overall financial condition of the association.

Though the Maine condominium market avoided much of the devastating wave of foreclosures and other financial problems experienced in other corners of the country, there are associations in Maine lacking adequate financial controls and capital improvement plans. Much of this goes back to a history of Maine condo boards having an independent streak as well as their overall size allowing them to be self-managed.

It is not unusual to find a Maine condo association without a formal reserve fund in place. Rather, they depend on an internally generated budget for operation and capital improvement needs. This type of management can work, particularly if it is a relatively new association, but whether this less formal practice can function, there are problems due to the changes occurring in lending practices.

Six or seven years ago, lending guidelines allowed much more lax policies including sub-prime loans. At that time the Federal Housing Administration (FHA) accounted for less than 5 percent of the mortgage market share. Since the collapse of the mortgage market, Fannie Mae and Freddie Mac have dramatically tightened the underwriting guidelines.

This means banks and other lending institutions are looking at their own lending policies. Knowing they will be selling some of their loans to Fannie Mae, they tend to model their policies over the new requirements dictated by FHA and the U.S. Department of Housing and Urban Development (HUD). These new standards have severely increased the requirements for the level of reserve funds held by a condominium association before a prospective buyer can secure a loan to purchase a unit within that community.

This new underwriting requirement makes it mandatory a reserve fund must be established and it must be funded by setting aside 10 percent of the money collected monthly by an association. Therefore many condos are performing reserve fund studies for the sole reason of gaining FHA certification to attract a wider range of buyers and thus protect their unit owners' ability to sell. In effect, as important as curb appeal may be to attract buyers, demonstrating a solid financial basis is now key to hanging out a sign at the condo's entrance saying, "Yes. Life is good here."
 

 
© 2013 CRITERIUM ENGINEERS