Issues concerning Downtown as described by the Downtown Council. River to 31st Street, I-35 to Bruce R. Watkins.
That's why you saw in Portland and Denver, buildings built and marketed as "luxury apartments" and then about ten years later they are converted to condos. After a certain amount of time (10 years?) that liability to the builder/developer is gone.DaveKCMO wrote:i'm also told by a local architect that they won't touch condos now because of the liability issues.
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design/construction issues.kcjak wrote:Sorry, but I'm not very educated on real estate issues as they relate to the condo market. Liability for what? Defaulting on a home loan?
I can understand why a developer wouldn't start out as condos because they take too much time to sell and/or need to sell a good half of building before starting construction. Starting out as leased units then once full convert to condo has been the national pattern for a while now. The market conditions maybe not quite there yet for condo demand (on the higher end) and if able to get over $2/sqft leasing, there may be no drive to transition yet. Under $300K condos seem to be moving pretty well though, at least in Plaza area.
Lets take one example that I'm familiar with:kcjak wrote:Sorry, but I'm not very educated on real estate issues as they relate to the condo market. Liability for what? Defaulting on a home loan?
Developer builds condo with his LLC. Much like with a new single family home, that builder is liable for the building to not have basic defects etc.
Unfortunately that developer (not going to name any names, but he happens to currently like crappy, suburban style apts in RM) seems to be very unlucky in building buildings that have water issues. The owners complain a lot, the HOA gets involved and eventually they get frustrated with a lack of solutions from the developer and they sue. The developer & builder and their LLCs are liable to pay for losses if they lose that lawsuit.
Now instead of making it a condo for people to purchase - take that same new building and make it an apartment building with all renters. The renters are still ticked about water coming into their residence, but they don't have a lot of means to sue or go after the builder. Whatever investor or owner of the building might still try to work out something to fix the problem and might even sue, but the likelyhood is much less. After a certain number of years, the building converts to Condos with owners. Even if the water problem is still there, the builder and developer are out of it and have no or at least less liability.
That's just one scenario. I think Denver even has a law that for 10 years (something like that) the builder has liability to the owner for defects. After that, those buildings often convert over to Condos if the market warrants it.
There are lots of reasons, besides liabilities, for not building condos. And conversions can be tricky, mainly due to the Dodd Frank laws that were enacted in response to condo development problems tied to the housing bubble of 2008-ish. They make buyer financing very difficult. Also, a lot of developers use historic tax credits and other incentives to build rental housing. When those expire or are all used up, they are likely to convert to condos, which usually requires a 2nd significant investment.
^ I've heard about people getting steep discounts on condos in other markets by being one of the first buyers and paying cash. Is this because the developer needs to get to the 50% sold mark to allow for other buyers to enter with a conventional mortgage? Have any of the higher end condos in KC given these types of discounts on purchase?
The threshold is 51% and it's especially difficult for small buildings to convert. Basically, the first 51% of sales need to be conventional loans (which are very difficult to get) or cash, which makes the pool of buyers pretty small in a market like ours. The restrictions are a mess and need to be reformed. Even the guys who wrote the act feel that way.
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yeah the market isn't the problem...it's the lending/construction.....which is why moving some of these apartments to condos could be a better lending route for the builders.