Condominium Conversions Awash in Housing Crisis

Reference is made to Jack McCabe’s article in this morning’s Herald Tribune, January 28, 2013.  Jack McCabe is right about the toxic conditions of runaway prices, ease of mortgage lending and the bust that it created.  However, it would be a mistake to conclude that Condominium Conversions cannot be done successfully, for both Developer and Purchaser, in the current market.  We’re doing it.

In our unpretentious, yet tony City of Venice, we are just completing a fabulous Condominium Conversion, Casa Madrid at 845 The Esplanade.  Converted from apartments to condominiums in January 2012, twelve (12) of the thirteen (13) units have been remodeled and renovated.  There is only one (1) left.  They’re beautiful, with all of the finishes today’s buyer wants, deed access to the beach, and reasonably priced. We have sold all but one in less than a year --- just one left. Due to some of the issues raised in Mr. McCabe’s article, Fannie Mae and Freddie Mac (the primary purchaser of mortgage loans in the secondary market) will not provide financing on any condominium conversions until one (1) year after 90% of the units have been sold and control of the Association has been turned over to the unit owners.  Thereafter, the Association can apply to Fannie Mae and Freddie Mac to have the Condominium Development certified as “Warrantable”, and thereby qualify for financing for both re-sales and refinancing. Since financing through Fannie Mae and Freddie Mac could not be arranged until one (1) year after we sold 90% of the units, for Casa Madrid we arranged for alternate financing through a local lender and at competitive terms.  The result is that buyers who wanted to finance their purchase of one of these units were able to do so.  Most importantly, for risk aversion and marketability by the new individual condominium owners for either refinancing or re-sale to subsequent third party buyers, the units should qualify as Warrantable by Fannie Mae and Freddie Mac a year from now. So, condominium conversions remain an attractive investment vehicle for both Developer and Buyer.  We’re doing it and selling them today … successfully.