Condo con­ver­sions remain an attrac­tive choice for first-time buy­ers.

(Note: this is an update of an arti­cle I wrote more than a year ago for my web­site GNADE.com .)

Although the Seat­tle real estate mar­ket has cooled off since 2006, condo con­ver­sions are still an attrac­tive option for first-time home buy­ers. With good rea­son because often it’s the only afford­able option.

Over the past four years, devel­op­ers have plucked one east­side apart­ment com­plex after another from the Seat­tle east­side land­scape and cre­ated new real estate for sale. Some of the more recent con­ver­sions are in or near down­town Red­mond, such as the River­walk at Red­mond — built orig­i­nally in 1983, The Boul­der (1985), and the Bella Vista (1981). A con­ver­sion in progress is the Cham­pagne (1969) in Belle­vue near 148th on NE 8th Street.

Option pack­ages and earnest money

First, the dol­lar fig­ure adver­tised is usu­ally just the “base price.” Option pack­ages can add any­where from three to ten per­cent. Some sell­ers ask for half of the option pack­age price to be paid at the time the buyer and the seller have a “signed-around” pur­chase and sale agree­ment . This option pack­age down pay­ment is often not refund­able. The earnest money itself can be steep, espe­cially at the begin­ning of a con­ver­sion project.

Poten­tial hur­dles

The ten­ants (lessee) rights are pro­tected by their lease con­tract and they will usu­ally vacate the premises at the end of the lease. This means that a com­plex is not nec­es­sar­ily being con­verted in the most log­i­cal fashion.

In the cur­rent credit mar­ket it is hard enough to find a lender. The num­ber of lenders for con­ver­sions is already lim­ited because the con­dos are “non-warrantable” with the Depart­ment of Hous­ing and Urban Devel­op­ment (HUD). Often, the seller adver­tises a pre­ferred lender and, in addi­tion, offers other finan­cial incen­tives for buy­ers using that lender.

Find out the details; then get involved.

The con­ver­sion usu­ally involves the gut­ting of the inte­ri­ors, new floor­ing, new inte­rior build-out, new doors, paint­ing, trim, fin­ishes, fix­tures and appli­ances. Because in a con­do­minium com­plex a buyer also buys a per­cent­age of the com­mon areas , it’s impor­tant to know exactly what’s being improved or con­verted .

I rec­om­mend to my clients to join the Board of the Home Own­ers Asso­ci­a­tion at least for the first year. That way they can play a role in revis­ing the ini­tial rules of the asso­ci­a­tion, such as allow­ing pets and des­ig­nat­ing vis­i­tor parking.

Buyer Beware!

Given the spe­cial cir­cum­stances of condo con­ver­sions is pre­cisely why a buyer should be rep­re­sented by an agent . In the more buyer friendly mar­ket of 2008, some developers/sellers are now adver­tis­ing “agent friendly,” mean­ing we “need you to bring the buyers.”

Invest­ing in con­ver­sion con­dos

The many condo con­ver­sions have con­tributed to increas­ing rents in the Seat­tle area . So buy­ing a unit in a con­do­minium con­ver­sion project with the idea of rent­ing it out may be a sound invest­ment. The num­ber of non-owner occu­pied is usu­ally lim­ited; so it pays to check first.