Condo Media - August 2013 - 22

by Jack Carr, P.E., RS, LEED-AP

C A I

R e g i o n a l

N e w s

MAINe

Life’s Good Here
Improving a Condo’s Image Requires More Than a Positive Slogan

rossing the bridge over the Piscataqua into Maine, you will notice we do not have billboards
except the one in Kittery on the
right side that proclaims, “Welcome to
Maine — The way life should be.” That
got me to thinking about a new client’s
comment at a recent board meeting
when I asked how things were at his
condominium and he responded, “My
condo. Yes, life’s good here.”
Of course everyone around the table
recognized immediately he was parodying the recently announced slogan
for the city of Portland, “Portland,
Maine. Yes, life’s good here.” As part
of the public relations launch of this
new slogan, businesses and organizations were encouraged to tag their
own names to create a tie-in, such as,
“My Store. Yes, life’s good here.”
Though this slogan may remind you
of words on a T-shirt or an appliance
logo, the branding image message is
clear. If only it were that simple to
improve the image of a business or a
condominium. As I said, this slogan
got me to thinking of the meaningful ways a condominium’s image is
viewed by outsiders and what can be
done to improve it.
When I have to deliver bad news to
a condo board such as a discovered
hidden building problem or underfunding in their reserves, I always
suggest to the board that they remind
their unit owners not to “hang out
their dirty laundry.” Sharing this type
of negative information with a unit
owner’s hairdresser or dentist often
results in the information becoming
quickly distorted and the wrong story
may be circulating in the local community or real estate market.

Condo Media • August 2013

This is not to suggest this information be kept secret, as potential unit
buyers have a due diligence right
to be provided the correct available
information to make an informed
purchase decision. But in that case,
the information can be provided in a
controlled manner.

Beyond Curb Appeal

Regarding the general outside appearance of the condo complex, most folks
recognize the importance of curb appeal. In these modern days, real estate
brokers are looking beyond the outside
appearance of the condo façade or the
amenities available. They are asking to
see the last two or three board meeting
minutes to discover serious issues currently being considered. They are also
asking about the percentage of renters, assessment arrears, and the overall
financial condition of the association.
Though the Maine condominium
market avoided much of the devastating
wave of foreclosures and other financial
problems experienced in other corners
of the country, there are associations
in Maine lacking adequate financial
controls and capital improvement plans.
Much of this goes back to a history of
Maine condo boards having an independent streak as well as their overall size
allowing them to be self-managed.
It is not unusual to find a Maine condo association without a formal reserve
fund in place. Rather they depend on an
internally generated budget for operation and capital improvement needs. This
type of management can work, particularly if it is a relatively new association,
but whether this less formal practice can
function, there are problems due to the
changes occurring in lending practices.

Six or seven years ago, lending
guidelines allowed much more lax
policies including sub-prime loans.
At that time the Federal Housing
Administration (FHA) accounted for
less than 5 percent of the mortgage
market share. Since the collapse of the
mortgage market, Fannie Mae and
Freddie Mac have dramatically tightened the underwriting guidelines.
This means banks and other lending
institutions are looking at their own lending policies. Knowing they will be selling
some of their loans to Fannie Mae, they
tend to model their policies over the new
requirements dictated by FHA and the
U.S. Department of Housing and Urban
Development (HUD). These new standards have severely increased the requirements for the level of reserve funds held
by a condominium association before a
prospective buyer can secure a loan to
purchase a unit within that community.
This new underwriting requirement
makes it mandatory a reserve fund must
be established and it must be funded by
setting aside 10 percent of the money
collected monthly by an association.
Therefore many condos are performing
reserve fund studies for the sole reason
of gaining FHA certification to attract a
wider range of buyers and thus protect
their unit owners’ ability to sell. In effect, as important as curb appeal may be
to attract buyers, demonstrating a solid
financial basis is now key to hanging out
a sign at the condo’s entrance saying,
“Yes. Life is good here.” CM
Jack Carr, P.E., RS, LEED-AP, is
senior vice president with CriteriumEngineers in Portland, Maine. He is
a member of the Condo Media board
and a frequent author and speaker.

Condo Media - August 2013

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