(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.