Steve Clay

A maintenance reserve: What an idea!

In the midst of our country's major financial crisis and with daily news casts about both public and private credit debt, it is refreshing to see a condominium community that has wisely put money aside since its inception. So while other complexes defer projects due to a lack of funds, FalmouthPort in Falmouth, MA just goes on about its business.

Falmouthport is a waterfront condo community on Cape Cod. Since it was built in the late 1970's, the Association Board with its professional management company, have managed the property in a highly professional manner.

Three points need to be highlighted:

1. The Board knew from day one that even though the complex was new, the day would come when repairs would be needed.

2. A Long-range Repair and Replacement plan was adopted and money was set aside.

3. The funds were invested conservatively. When stocks were rising wildly, the fund did not grow as fast as some would have liked. When the market tanked, however, the fund was barely touched.

What spurred this entry? Today the main road was repaved. No, there was not just a top coat applied; the old road was removed and a new one put in its place. And most important: there was no special assessment.

Now that summer is winding down, it's time to do all those things that you wanted to do but somehow didn't get to. Although many of the summer activities will soon give way to special fall events, there is still time to take advantage of some summer activites.

Click here for information on Lobster on the Lawn Mondays in Falmouth, MA. There's still time.

Dec. 31, 2008 May 15, 2009 July 31, 2009

• Units on the market 56 76 68
• Average sales per month 4.5 3 4
• Our absorption rate* 12.4 Months 25.3 Months 17 Months

*Absorption Rate: The number of months that it would take for all condos presently on the market to be sold. A balanced market is around 5 months.

• Sales % of original list price 85.3% 85.2% 89.5%
• Sales % of list price (at time of sale) 92.7% 94.57% 94.1%

Here are some statistics by price range:

0-299,000 300,000-399,000 400,000-499,000 500,000+

Listings 14 19 18 13

Sold (6 mo) 9 6 4 5

Pending 5 2 1 1

Average Days on Market (sold)

188 257 92 267

Positives:

•1. The fact that the number of condos listed for sale is down 11% is a good sign.

•2. The absorption rate is also down.

Negatives:

•1. The average sales price is down 10% from the same period a year ago (2008: $407,812; 2009: $367,576).

•2. In the past six months, 53 condos have come on the market while just 22 have been sold.

Conclusion: The continued downward pressure on sales prices means that the buyers' market continues.

Tomorrow I will post the statistics for the three upper Cape Cod towns combined: Falmouth, Mashpee and Bourne.

The downward pressure on the sales prices of Cape Condos continues as the challenges of getting financing continue.

The very same condo that I mentioned in May had a new buyer and a new lender and fell apart again at the last minute. This time it was about the buyer's income. Needless to say, the bank (in this case Citizens Bank) had preapproved the buyer, received all the information requested in a timely manner, and gave no indication of a problem until the day of the final commitment when they issued a "declination letter."

Another condo in a very well managed, well funded complex that has never had a special assessment, is under agreement with a strong buyer. The buyer is putting 20% down. Yesterday, the date of the final commitment, the lender (Provident) could not meet the original commitment date because their underwriters are backed up. The commitment is now due next week. Stay tuned.

Needless to say, this continues the downward pressure on condo prices because buyers are reluctant to get involved.

On the bright side, however, I do have a closing today on a very nice condo. Bank of America is providing the financing for this one.

We recently had the sale of a condo at Sea Oaks in Mashpee, MA fall apart over the condo associations refusal to answer four questions that required an opinion or judgement.

The mortgage provider had sent a form to the association's management company, American Properties Team of Woburn, MA. American Properties provided a comprehensive form that failed to answer four questions. Neither the lender or APT would budge.

There are several questions that I am attempting to get answered:

1. Can a condo be purchased with an FHA backed loan at a property managed by APT or any association whose attorneys refuse to allow them to answer questions requiring an opinion? (i.e. is the maintenance reserve adequate?)

2. Do all lenders use the same form?

3. Which lenders will accept the pre-prepared form provided by the association?

I will keep you updated.