Building Insights in Under 1 Minute
Myth Busting: I won't be able to sell my unit if our consultant finds something wrong.
Reality: You wouldn't be calling a consultant for simple things that a contractor could quickly handle, so if your issues are that bad, it's time for a holistic approach.
I was talking with a construction defect attorney and Board today about the 4 stages of a construction repair process that I thought I would share for your benefit, hopefully you can read it in under a minute....
Stage 1: You have leaks and problems, and everyone knows it, but it's big and ugly and nobody is outlining a clear path for repairs. This stage is accompanied by buckets for the leaks and analysis paralysis—"We know we have a problem; we need buckets in the living room and towels on the windows, and we have complaints from the membership about their issues, and we don't know what to do." Insider secret: The market knows it too. The realtors are touring the property, they see the buckets, they hear about the in-fighting, they have just sold a unit there and their client is complaining to them, so the market already knows that this place has problems. As a result, realtors don't want to show listings there and skittish owners are trying to sell quick before an assessment for repairs, flooding the market with competition within your own building. The market's dark cloud (with lightning bolts) has already moved in over your building, you just don't know it yet.
Stage 2: You finally call or find someone like J2 who can help you understand what the problem is and how to fix it. They do an inspection, you have their report, and a contractor's repair cost and are now trying to figure out how to pay for it. Do you have reserves? Do you need to sue the builder? Is there insurance coverage? In Stage 2, there is a chilling effect on sales even without litigation, because government backed mortgages now ask for "pending claims" or known assessments—you know you have damage and you need to fix it, so you have to disclose it. This stage is a function of time, the longer it takes to get through this stage, the longer the delay in sales. This only hurts those who are trying to sell. Living through this stage, or having the grit to get through it is the hard part, and the stages of grief are real. You experience denial, anger, depression, bargaining, and finally acceptance. This is where Boards quit or get voted out, or where they really shine and lead their community through this process with the help of a good team.
Stage 3: Repairs have begun. Yes, it can be noisy and disruptive, but everyone else, including the market takes notice—"Hey, they are fixing that once great building!" The Jones' next door wonder what's happening. Nothing beats action. Everyone who has waited this long loves to see progress, and the new building materials and modern colors start taking shape. The numbers regarding the assessment are known because the contracts are signed and the work is under construction. The market's black cloud disappears and realtors start bringing new clients to show them the newly fixed building. Mortgages are being approved because there is an action plan in place and it's being carried out. The older the community the better, because the new units aren't as big, don't have common elements anymore (clubhouse, etc.), and the parking is more abundant—these all make these newly repaired units more valuable.
Stage 4: Repairs are done. All the work is done, the neighbors are now talking to each other again and friendly at the mailbox, the Board is no longer running a construction project, and the best part is that your unit's value has gone up and your reserve study dues have gone down, because replacement time frames are a lot longer than they were. The annual budget looks better too, because there isn't a big unplanned expense line item of leak repair or water damage cleanup bills. We did a recent study of unit prices before the fix and after the fix and found a 35% gain in value. Sure, some of this could be linked to market conditions, but no longer having the dark cloud over your property and having a new looking place fixed right definitely has an effect also.
Most Board's follow these stages step by step, because they need the recovery money as part of a claim in stage 2 to fund the repairs in stage 3, however, you don't always have to do it that way. If you have the money to start repairs now, you can do stages 2 and 3 together to save time and get the dark clouds moving on to that dump of a community down the street.
If you have a suspicion something is wrong with your building, it likely is, and the market already knows about it, so the faster you can get to stage 4 the better. We can help with stages 1-3, please
reach out if you have any questions.