The West Loop and Fulton Market district real estate inventory is predominantly made up of condos and condo-lofts for sale so it is important to know the basics when buying a condo in a building with a homeowners association and other owners involved.
1) Self Managed vs Professionally Managed Buildings - What's the Difference?
If you are buying a condo in the West Loop in a smaller building with 2 - 4 units, chances are the building will be self managed meaning there isn't a professional property management company hired to take care of the everyday maintenance and budgeting for the building. In a self-managed building, it is the combined effort of all of the condo owners in the building to manage the building and make important planning and financial decisions for the greater good of the building and all of the unit owners. This type of building requires owners to be "hands on" and more actively involved in day-to-day maintenance and upkeep of the building. There are very few 2 - 4 unit buildings in the West Loop and Fulton Market District, but you can find 2 - 4 unit buildings in other areas around the West Loop like University Village (south of the 290 Expressway) and the Near West Side / United Center Park (just west of Ashland Ave).
If you are buying a condo in a larger building with more than 4 units, chances are the building will be professionally managed. A property management company helps to alleviate responsibility from the condo owners in the building and the property management company will schedule routine maintenance as needed. A property management company will also invoice owners for monthly HOA assessments, plan for special projects, take care of exterior and interior maintenance of the building's common areas. Hiring a property management company can be expensive, so home buyers can expect buildings with professional property management companies to have higher monthly assessments. You will find many buildings with professional property management companies in the West Loop, Fulton Market District, West Loop Gate and Fulton River District.
What is Involved in Properly Managing a Condo Building?
Budget for regular maintenance, common area utility costs (electric, gas, water), upcoming special projects (roof repair, tuck pointing, paving, etc.)
Schedule regular exterior maintenance (shoveling, landscaping etc.) and interior maintenance + cleaning of the common areas of the building
Hire and schedule on-site doorman staff, janitor, repairman, other contractors as needed etc.
Hold meetings with unit owners to plan and vote on special projects and address other issues in the building as needed
Maintain a solid reserve account for the building to cover large and small projects as needed
Coordinate move-in and move-out times, collect moving fees, coordinate elevator usage for moving
Enforce rental restrictions
As your West Loop real estate agents, we can answer any of your questions about buying a West Loop condo. We ensure that we do our due diligence on any condo building that our clients are looking to buy in so that we know the condition of the building and the homeowners association.
Call 312-767-7504 to get started on the home buying process with an expert West Loop Realtor today.
West Loop Home Buyer Agent
2) What is a "Special Assessment" and How can a Special Assessment Effect Me?
If you are in the market to buy a home and searching for a condo in the West Loop or Fulton Market District, you will undoubtedly hear the term "special assessment" from time to time during your search for a home. While touring condos for sale, your West Loop real estate agent should be asking the sellers agents if there are any upcoming, planned or pending special assessments.
Every condo building has a reserve account. Think of a reserve account as the building's piggy bank. Every month, when you pay your monthly assessments, a portion of those monthly assessment payments covers the regular maintenance and staffing for the building, and another portion goes into the reserve account for the building to plan for large and small projects that may come up in the future.
Examples of West Loop Condo Building Special Assessment Scenarios
An example of a small project may be that the building is thinking about re-carpeting the common hallways within the next year. The owners of the building or property management company gets quotes from 3 different carpeting companies. After receiving the quotes, the building decides that they will need approximately $20,000 to re-carpet the hallways.
An example of a large project may be that the building is experiencing some leaking coming from the roof into some of the top-floor units. The building has 3 different roofing companies look at the roof and receives quotes from all of them. All of the roofers say the building needs a new rubber coating in order to prevent more leaking from occurring. The new roof will cost approximately $80,000.
Using these 2 scenarios as an example, the building has 2 projects that need to be attended to. The building has $90,000 in reserves and the owners do not want to deplete the reserve account to pay for the roof. The owners collectively vote to levy a special assessment to pay for the roof. There are 40 units in the building and each unit is approximately the same size with 2 bedrooms and 2 bathrooms so each owner pays a $2,000 special assessment to pay for the roof. The owners also vote to pay for the re-carpeting of the hallways out of the reserve account so that leaves $70,000 in building reserves.
Technically an owner's share of the special assessment is based on the unit's square footage or percentage ownership in the building but we kept things simple in this example for learning purposes. The building could also vote to take out a loan to cover the cost of the roof and each unit owner's monthly assessment would be raised accordingly to cover the monthly loan payment for the roof repairs.
When buying a condo in the West Loop, your West Loop real estate agent should help to ensure that there are no upcoming, pending or planned special assessments for the building you are looking to buy a condo in. If there is an upcoming special assessment, your real estate agent and attorney will ensure that the money due for the special assessment is paid for by the seller at closing. If the money for the special assessment is not yet due, the seller will put money into an escrow account and you will be able to draw from the escrow account to pay for the special assessment. After the special assessment is paid in full, the balance will go back to the seller.
Questions on buying a home in the West Loop? Call 312-767-7504 to get started with an expert West Loop Home Buyer Realtor today.
West Loop Home Buyer Realtor
3) Rental Restrictions - Why Are Rental Rules in Condo Buildings Important?
Pride of homeownership does not exist with renters, and for that reason most renters tend to treat their units poorly. This is ultimately the reason why buildings implement rental restrictions. Rental rules are in place to protect the owner occupants in the building and the condition of the building as a whole. Keep in mind, that a homeowners association may choose to change the rules on rentals at anytime. What the rule is today, could be changed tomorrow so never expect rental rules and restrictions to stay the same forever.
Another reason why rental restrictions are in place in most buildings is because if the % owner occupancy in the building falls below 50%, a regular mortgage lender will view the building as a "non-warrantable" or "high-risk" condo building and a potential homebuyer may not be able to get a loan to purchase a condo in that building. This would effect every homeowner in the building because when it is time to sell, the buyer pool will be less because financing options will be restricted to cash buyers and buyers who obtain a loan from a small portfolio lender which will carry a higher interest rate and make financing to purchase a condo in the building less attractive.
Examples of Types of Rental Rules and Restrictions in Condo Buildings
Leases must be a minimum of one-year in length
Rental Cap of 10 (using 10 as an example, a maximum of 10 units can be rented at anytime). You might see a rental cap like this in a building with 20 units to ensure that the % owner occupancy never dips below 50%.
No short-term or Airbnb rentals allowed
A rental fee may apply to owners who choose to rent their unit to a tenant
In Chicago, you as a homeowner will qualify for the homeowner tax exemption as long as you occupy the home or condo that you purchase. Once you choose to rent the home or condo to a tenant, you will no longer qualify for the homeowner tax exemption and you can expect your property taxes to increase. Every year, homeowners in Chicago can apply for the homeowner tax exemption via the Cook County Assessor's office website.
Your West Loop real estate agent along with your real estate attorney will get to know the details of the rental restrictions during your real estate transaction. The rental rules should be clearly defined in the building's rules and regulations document and you should receive a copy of these rules during the attorney review period of your transaction.
4) Multiple Offers - How to Get Your Offer Accepted in a Low Buyer Inventory Market
The West Loop and Fulton Market District real estate market is HOT and with a hot homebuyer market, comes multiple offers. Handling multiple offers means paying close to list price and sometimes even over list price to win in multiple offers and get the home that you want.
Within the boundaries of the West Loop and Fulton Market District (Grand Ave to the north, 290 Expressway to the south, Chicago River to the east and Ashland Ave to the west) the Average Percent of Original List Price Received has been more than 99.5% since 2016.
5) Rules of West Loop Real Estate
The #1 rule of real estate is: Location, Location, Location! And the #2 rule is Time is of the Essence. When you find the home that you want, moving fast could help you avoid multiple offers and save you thousands of dollars. Once you are in a bidding war, the price of the home tends to rise above the list price.
Low homebuyer inventory is the norm in the Chicago real estate market. As a buyer looking to purchase a home in Chicago, your Chicago real estate agent should be advising you on the best offer strategy for the home you are interested in purchasing based on the listing price, time on market and a variety of other real estate sales statistics in the neighborhood.
Every home or condo listing will be different and in addition to the purchase price, there are a variety of other factors your West Loop real estate agent can use to make your offer more attractive to a seller that will increase your chances of getting the home you want in a multiple offer scenario.
Get in touch with a real estate agent that knows the Near West Side home buyer market! Call 312-767-7504 to get started on your West Loop home search today.
West Loop Real Estate Expert