Do You Understand High Rise Assessments? A 2/2 at 701 S. Wells in Printers Row
This 2-bedroom in Wells Street Tower at 701 S. Wells in the Printers Row neighborhood of the South Loop came on the market in March 2015.
Wells Street Tower was built in 2002 and was a big deal for the neighborhood at the time because it was the first new construction in/near Printers Row in decades.
It’s a full service building with 170 units and parking with a doorman and an exercise room. There’s NO pool.
This 2-bedroom unit faces east.
The kitchen has maple cabinets, granite counter tops and stainless steel appliances.
It has the highly coveted side-by-side washer/dryer.
The unit also has parking, for $25,000 extra, and central air.
The assessments are $755 a month and appear to include heat, a/c, gas, the doorman and possibly cable (as one of the listings said it did include it- but this listing does not include it.)
Are most condo high rise buyers unrealistic about the rise of assessments over a decade or more?
Leigh Marcus at @Properties has the listing. See the pictures here.
Unit #2502: 2 bedrooms, 2 baths, 1215 square feet
- Sold in December 2002 for $348,000 (included the parking)
- Originally listed in March 2015 for $365,000
- Reduced
- Currently listed for $325,000 (parking is $25,000 extra)
- Assessments of $755 a month (includes heat, a/c, gas, doorman)
- Taxes of $4221
- Central Air
- Side-by-side washer/dryer
- Bedroom #1: 15×14
- Bedroom #2: 12×11
Those HOAs are not bad if the building has built up a nice reserve fund and updates the building’s mechanical systems as needed as well as hallways etc.
You pay to have a doorman, staff, work out room, gas/heat, etc included in your HOAs.
I have about 900 sq ft (different building) and my HOAs are 550ish. They went up a few percent this year after 10 years of no raises but we have a large reserve fund and no specials.
Buyers need to understand that A. high rises have higher costs, especially if they have a high level of amenity and service,B. maintenance and replacement costs will rise as the building ages, and C. an association needs to maintain a generous reserve to cover the costs of making major repairs and replacements of mechanical elements, and avoid the cost of financing these repairs.
The HOA for this unit is no higher than you would expect for a 2-2 in a high rise with doorman and generally high level of service. However, expect it to increase as the building ages. If you’re affronted by the cost, consider buying something in a low-rise with no elevators, lobby, pool, or large staff.
They probably had a special assessment recently and are replentishing the reserves. It happens.
“They probably had a special assessment recently and are replentishing the reserves. It happens.”
Just 13 years into the life of the building?
And, if so, how many can afford a $200 increase in the assessments yoy? One of the bank owned units in this building says the assessments are $582 a month, so I’m assuming these are the “old” assessments.
When assessments go up- they NEVER go down. They will only keep going up from here.
It costs a lot of money to run a large building. People are, frankly, truly clueless about the cost. They rage on the older vintage condo and co-op buildings and those assessments when, frankly, most of them are the BEST run buildings in the city!
If you add up the costs of the assessments and taxes in Wells Street Tower it isn’t that far off of what you’re paying in the Edgewater Apartments (that building is maybe about $250 higher.) But that building also has a pool, gardens and other amenities.
“The HOA for this unit is no higher than you would expect for a 2-2 in a high rise with doorman and generally high level of service. However, expect it to increase as the building ages. If you’re affronted by the cost, consider buying something in a low-rise with no elevators, lobby, pool, or large staff.”
Sadly- it IS higher than what most people expect to pay because they’ve moved into new construction buildings over the last 10 years which keep rates artificially low, sometimes for years. So in those new construction buildings (heck, even when Wells Street Tower was “new”) the 1200 sq ft 2/2 paid $400 to $450 a month. Maybe it went up like $15 a year.
So how do you suddenly get over $700 a month? When will the other buildings all built in circa 2005- 2008 get there? Many owners are in for a rude awakening.
As you said Laura- it costs money to run these big buildings. Big money. Carpet needs to be replaced. Hallways painted. Things happen. Heaven forbid you’re an owner when the windows need to be replaced (in one older building the owner told me it cost him $25,000).
“And, if so, how many can afford a $200 increase in the assessments yoy?”
I would ‘hope’ that anyone buying a $350,000 condo can afford that… then again some folks are pretty dumb.
And yes you can have a special assessment 13 years into the life of a building. Heck we just had one and our building is only 10 years old. Turns out the developer took a short cut, so we had to fix it. We didn’t even find out that was the problem until about 10 years into the life of the building. Something could have easily happened here too. Chicago winters are brutal on these cement buildings.
I’ve owned both SFH and a condo. I think the shock value of assessments, both special and monthly, is overplayed. In ~10 years of owning the condo in a midrise, elevator building, our monthly assessments have gone up < %10. Our reserves are healthy at $5k per unit, and the one special was to correct a building defect as in sonies case. In return the value we receive is all maintenance is handled and taken care of.
For the SFH there is no such thing as a monthly assessment to discuss pre-purchase, but I'd certainly consider the new furnace, a/c unit, water heater, sealing of crawlspace, roof, electrical never ending capital improvements as 'special assessments'. So the SFH doesn't take a set few hundred out of your account each month, but it certainly gets you back at a few k in big hits.
So in target property, it's $9600 a year. Peel out gas, cable, some electric for a conservative $200 a month, we're at $7200 a year. Ignore the door man cost – a modest SFH (dare I say 1200 sq ft to compare equally) will incur $7200 annualized in upkeep; especially if you include opportunity costs of managing repairs.
Heh. TL;DR: To answer the question yes, I understand high rise costs.
Don’t forget that during the bust cycle many residential condo buildings had owners that were not paying assessments. Bigger buildings survive this type of struggle better than smaller ones but when 5% to 10% of the units are not paying into the fund a building needs to cut services and try to offset the lost revenue from the other owners.
When those units foreclosed some of the back assessments were caught up but not always or in full. SInce this building had issues my guess would be that drain on income added a bit to the $755 number.
When you buy a condo you need to really look at the financials and see how much of the take is going into reserves every year vs. how big the reserves are and consider that in terms of what the capital budget is for the next few years. A really well run building will do a reserve study and look at their capital outlays way out into the future and then build the reserves to handle that. Not every building does the reserve study and not every building will properly build the reserves.
I always tell people they should assume that assessments will go up with inflation. What most people don’t get is the tradeoff between a cheaper unit with a larger assessment vs. a more expensive unit with a smaller assessment. In my mind a $100/ month difference will allow you to spend an additional $30,000 on the purchase price for the same annual cost (assuming a 4% capital cost).
I live in the building, but in a 1BD. The HOA includes Cable TV and Internet in addition to what you’ve outlined above. There have been no special assessments in my time there.
I feel sorry that these 2/2 dwellers have to pay for a doorman. What do they even do? and don’t say they get your UPS packages, that’s nothing. The 2/2 dwellers have to say hello to these doormen when they stumble home drunk or with with some hoebag in tow. They’d rather not have to deal with the doorman seeing them at all. How about all those forced and ungenuine “hellos” in-and-out on some crappy gray work morning?
LoL @ helmetofer – thats exactly how i felt about my doorman in my former condo. The guy hardly ever actually opened the door for me. Mostly spent his hours chit-chatting/flirting with girls in the building.
I live in a doorpeople building and they come in extremely handy. It’s like having a mini butler. They don’t do anything I can’t do, but I just assign them the task. And I have to pay for having my little taskrabbit right there. Also, and most importantly, if the doorperson is being managed correctly, it secures a building. Every visitor has to be announced in our building so that makes it much for secure than a guy walking in behind a drunk resident and getting up in the elevators and wreaking havoc. So you just have to pick what you pay for. Absolutely I would never pay for a pool, particularly an outdoor pool in Chicago but you just have to decide what you value and put a price tag on it.
It’s true that you would have costs associated with owning a SFH that you don’t have living in a big building. However, I maintain that this does not fully justify the high level of assessments. I have owned in several high-rises and have had the opportunity to analysis the details of their expenditures. It is shocking how much waste is involved in maintenance/repair costs. Rarely is work done at really competitive costs. The management companies will often refuse to consider anything else than Union workers, or licensed pros for jobs that a SFH owner would hire a skilled handyman at a third of the cost. They also often have “relationships” with companies which they favor, and even if the Board insists on their getting three bids, it is very easy to hand pick ones that make the ones they want the job to go to to look favorable. On several instances, I have given the building managers bids from workers I knew for the exact same work at less than half the cost that they claimed it would cost, and they have just ignored these and hired the ones they wanted. Bringing this up to the Board has been awkward since the building manager always sat in on the board meetings!
Doorman costs are also ridiculous. The quality differs depending on the building, but I have lived in buildings that provide Aeron chairs behind desks for the doormen, and they just sit there and chat on the phone most of the day. The ones who insist on making small talk every time you walk in and out are actually even worse. I have taken to going in and out the back loading dock just to avoid having to make inane chatter! And how about the holiday gratuities you have to fork over, after having paid for their vacations, uniforms, disability insurance, etc?
My building has a security guard for the weekends. Its great, keeps the drunks out and no pointless chit chat during the week. Also very affordable compared to a doorman.
http://globaleconomicanalysis.blogspot.com/2015/05/beware-tax-man-has-eyes-on-you.html
RE taxes could go up 50%. There will need to be cuts. Will this lead to civil unrest?
“he keeps the drunks out”
What does this mean? The singles and DINKs are the drunks. They have to get back to their units, right?
Assessments within a building also vary, so just because the bank owned unit is $200 less does not necessarily mean that is an “old” assessment. Assessments generally go up as the floor level goes up, so this unit on the 25th floor could have assessments $200 more than a unit on the 7th floor for example. Same thing for view, an east facing unit would generally have higher assessments than a west or south facing unit (in the SLoop). And of course square footage, even though two units are both 2/2 it does not mean they have the same layout.
The answer is not civil unrest, but rather, municipal bankruptcy and the division of Chicago into multiple cities. This author argues that Chicago has gotten too big through it’s annexations over the years and it’s time to do them. He proposes Lakeview separate from the city and go back to it’s preannexation status. I don’t know if it’s realistic or not but it’s an interesting concept…
http://affordablehousinginstitute.org/blogs/us/2015/04/a-tale-of-two-cities-part-1-the-epicenter-of-americas-transportation-system.html
hd, Lol, there is no chance that Lake View is going to de-annex.
We know from watching Greece that cuts and austerity will be rejected by a Left wing brainwashed populace. They feel entitled to their entitlements even if there isn’t money to pay for them. Bankruptcy will be fought by the elite “1-ers” of the Highland Park crowd like Rahm, Rauner, Zell (trib), the David Ferro (suntimes) Family and even the non-HPer’s like the Crains.
Bondholders have powerful friends in Neocon (Rauner) and Neolib (Rahm/Ferro) circles, they’re aren’t going to take a haircut or get screwed in a bankruptcy, at least not right away.
So, when the money runs out, there will be cuts, and the people are getting drunk on Revolution brew(ing) and they will be out in force protesting once it become apparent the people are going to face cuts, but not the crowd that eats Eli’s cheesecake at hotel conferences the Standard Club.
Greece has no money (like Chicago), huge deficits and too much debt (like Chicago), but they elected a Far Left party (syriza) because the people wanted no cuts and austerity. Bankruptcy still has happened there either. But civii unrest has.
Chicago is about 1-2 years behind in this process? What do you think?
PS In case you were wondering who the “1% ers” are like Rauner, Rahm, Zell, Ferro etc. These are the “Let Us Eat Cheesecake” crowd that won’t be taking any haircuts on bond holdings.
“Candidates for membership must be sponsored by three existing Club Members.”
https://www.stclub.org/web/guest/membership
The people will eventually start protesting. Chuy tapped into this sentiment and got into a run off, embarrassing the Neocon/Neolib Standard Club elitists.
“What does this mean? The singles and DINKs are the drunks. They have to get back to their units, right?”
While true, there is a large ‘club presence’ around if you know what I mean, he keeps that trash out and lets the DINKS back to their places of residence lol
“there is a large ‘club presence’ around if you know what I mean”
Actually no. What does this mean? Where are these club drunks doing in a residential hi-rise lobby and even if there was no security guard or doorman, where would they go (in the bldg.) and why? There’s no open bar I’m assuming.
you’d be pretty surprised where random drunk/high kids from schaumburg wind up when inebriated a nearby highrise lobby wouldn’t be low on their list of places to ‘hang out’ or barf in or whatever
Speaking of the “club presence” Sonies, you are one lucky son of a gun that Spybar and Sound Bar do not cater to that demographic. Otherwise you’d be having the same problems that residents near the Funky Buddha had to deal with when that place was still open. I can’t believe that the bouncer of that place was allowed to work there. No wonder why people can’t stand douche bag bouncers.
http://www.dnainfo.com/chicago/20150218/river-west/funky-buddha-club-site-of-shootings-now-permanently-closed-alderman
The owner of the funky buddha is a lawyer who lives in Oak Brook Terrance. He sued the Village of Elmhurst after his house flooded in 2010 and his claims were all dismissed. He has a webpage, you should check out his pic. Unless I’ve got the wrong guy, he’s like your typical dupage county corporate dude. looks like he could work as a consultant or something for the big 4.
“Assessments generally go up as the floor level goes up, so this unit on the 25th floor could have assessments $200 more than a unit on the 7th floor for example.”
No- this is incorrect. Only prices of units go up by floor. Assessments are usually done by square footage- no matter what the floor. It’s not like the unit on the 25th uses the workout room more than the one on the 6th floor.
“No- this is incorrect. Only prices of units go up by floor. Assessments are usually done by square footage- no matter what the floor. It’s not like the unit on the 25th uses the workout room more than the one on the 6th floor.”
I beg to differ, but in all the high rises I have owned in, the assessments were linked to the percentage ownership that the unit consisted of in the building. The percentage ownership was determined when the building was originally either built or converted into condo. The original determination usually was made based on a combination of square footage, how high of a floor it is on, and the exposure and view if these are more favorable in one side of the building over another. Over the years, the price of a unit may change based on how much money was spent during interior renovations, whether a former spectacular view was blocked by a new building, etc. etc. However, the percentage ownership, having been set at the beginning, remains unchanged, and the assessments will continue to be based on that. I don’t know any legal way the percentage ownership can be changed in a building unless the size of the unit changes, and I don’t know any legal way that assessments, therefore, can be detached from the percentage ownership as the determinant.
An interesting observation on new developments – the original price difference for the same unit on different floors is often not continued once the units start being resold. As long as there is no critical view difference from one floor to another, a unit that originally commanded $7,000 more than another identical unit unit one floor below USUALLY will not sell for that much more several years later (all else being equal) if the views are identical, just one floor different.
Another interesting thing about assessments differing for differing floors. Whereas the justification of higher assessments for higher floors in high-rise buildings is that you do generally get a better view, assessments also go up as you go up floors in small walk-up buildings as well. A third floor unit in a three-unit brownstone will have a higher assessment than an identical square footage unit on the first floor despite the fact that the tedium of having to walk up two flights of stairs every day arguably negates the advantage of getting more light (usually) on the higher floor. But there is no doubt about the fact that it is the norm for assessments to be higher on higher floors, not just prices!
I concur with Vissi on that last point. The higher floors still get a premium but I don’ think it’s anywhere near what it was when the developer sold it. That’s just based on anecdotal observations.
Imho, In a really fair world, assessments should be based at least partly on number of people occupying each unit! I used to live in an 1,800 s.f. unit on one of the highest floors of a building all by myself and paid $1,430/month in assessments. The guy occupying the 600 s.f. studio apartment next to mine paid one third of that to get exactly the same building services I did – same lousy doorman service, same use of exercise room, same air conditioning in the hallways, same elevator use. The family of four living in the identical unit as mine one floor down got all these services for four people for slightly less than what I paid just for service for one. How is this fair?
Sabrina: “Assessments are usually done by square footage- no matter what the floor.”
Assessments are *usually* done by percentage interest. Percentage interest is determined, per statute, by the value assigned by the Condo Declarant (usu, the developer):
“(765 ILCS 605/4) (from Ch. 30, par. 304)
Sec. 4. Declaration – Contents.) The declaration shall set forth the following particulars:
…
(e) The percentage of ownership interest in the common elements allocated to each unit. Such percentages shall be computed by taking as a basis the value of each unit in relation to the value of the property as a whole, and having once been determined and set forth as herein provided, such percentages shall remain constant unless otherwise provided in this Act or thereafter changed by agreement of all unit owners.”
Thus, usually, assuming that the Developer assigned a higher value to higher floors, the assessment is higher for higher floors.
Vissi: “I don’t know any legal way the percentage ownership can be changed in a building unless the size of the unit changes”
Also answered in the same section of the statute: unanimous consent gets the percentages changed.
“How is this fair?”
Dude had to live with his wife and kids, but you got to live alone?
His view would’ve been that you shoulda paid double.
This is slightly off topic, but about assessments. I brought this issue up last year, but there are new developments for which am seeking advice about. Our 6-unit walk-up condo building in Lincoln Park has an a Order of Possession against one of the owners since 1996 that we went to court to obtain because she was $850 in arrears in her assessments. I can’t believe the judge ordered her evicted in such a small amount, but I understand she didn’t dispute it because there was some mental problem involved. Since 1996, the Association has been stuck managing the unit – renting it out and doing maintenance/repairs. We pay the unit’s share of assessments out of the rent money, and also take $200/month out of it as “management fee”. (We were told it had to be a “reasonable” amount.) But the current owners (none of whom were around in 1996) are sick and tired of being saddled with this unit and we also fear we may have some legal vulnerability keeping the Order of Possession. I recently discovered that all the owner has to do is to petition the court to get back her unit, since all the assessments are current, and there is, in fact, $75,000 in the account set up for her accumulated from 19 years of rental income. She would be given her rights to get it back no problem. But for some reason, she has not done so. My preference has been that we should contact her and urge her to take this action, since she may not know this. But the other owners don’t want her back, and they hired an attorney who told us that we can petition the courts to force a sale of the unit. (Ownership would be taken away from her, but any proceeds of the sale, which would resemble a foreclosure sale, after all expenses including our attorney fees were paid, would be turned over to her.) When O asked the attorney (who came with no recommendations other than being a personal friend of the owner who is spearheading this movement) what Just Cause we had to ask the law to forcibly take this action, he said (and he wrote this in the letter to the owner) that she was in violation of the Condo Declarations that stated that we could force a sale if assessments were delinquent and if the owner was not responsibly
maintaining her unit, and that she had not done so since 1996.) But is this true? The assessments are completely up to date, paid for by funds derived from rental income on property she owns, and as for the maintenance issue,
she has legally not been allowed to access her unit since 1996, so how was she supposed to maintain it? I can’t believe we have a strong legal case for this action, and if she contests it and we lose, we would have to pay all our legal fees (which could very well be in the tens of thousands) ourselves! Anyone here have enough real estate legal background to give your opinion on this?
Vissi:
If you can’t maintain the order of possession, how likely is it that a judge would order a sale?
The order of possession is the *lesser* remedy, and if the facts do not support the continued enforcement of it, how is the more serious remedy likely?
Sounds like a bad idea for everyone, unless the lawyer is offering to do it on contingency, with payment only if the Association prevails.
Anon – We HAVE maintained the Order of Possession. In fact, we’re stuck with it because the owner is not taking any action to petition it removed. Our lawyer tells is we don’t even have the option of keeping the unit empty if we don’t want to rent it out any more (and just continue to pay the unit’s assessment from the huge excess fund in the bank account), because that might make us vulnerable to accusations that we were not being good “custodians” while retaining our Order of Possession!
This:
“we also fear we may have some legal vulnerability keeping the Order of Possession”
implied otherwise. Guess you meant to include ‘if we stop renting the unit’.
Hire an un-affilaited rental management company, pay them the market rate for their services out of the rent, and continue to rent it out.
I, personally, would be most concerned about the $75k in what is, essentially, a trust account. Hope that that is sufficiently fire-walled from access by any one or two folks (including your condo manager, if you have one) acting unscrupulously. *that* is the liability I’d be worried about.
Why’s the building falling over in that photo?
😉