Special Assessments in condos happen when there is no or not enough money allocated in the budget to do the work, that needs to be done. If the Assessments have been voted for and ratified, in Florida they are usually paid for by the Seller.
So, does it matter for the Buyer?
If you are looking to buy a Daytona condo, this is good to know. Because Special Assessments are to do the remodeling, and when condominiums (and condo-hotels) go through remodeling, the prices there always drop, and often quite significantly.
Knowing it, isn’t it a benefit for the Buyer?
Invariably, every time there is a Special Assessment/major remodeling work, the prices go down. I believe it happens even when there is no special assessment, and there is enough money to pay for the work. I believe that any major work on the building, any substantial remodeling causes the prices to go down.
Look at it like there is a war in one building. People tend to avoid to buy during the war. So, prices go down.
Why is that? Construction causes inconveniences, noise, mess, and problems with parking... Imaging the noise from jackhammers, when they are kicking out old concrete. All walls vibrate and the noise level is terrible.
This is usually not why people decide to leave, but if they were thinking of selling and moving because of their age, need to be closer to children, then this triggers the move. From the financial point of view, it makes little sense. They have paid the Assessment, and now want to leave.
There are usually more condos for sale in a building going through the remodeling, and therefore it is more difficult to sell fast. So, you need to drop the price to sell. And the other reason is that Buyers and Sellers often look at the price differently.
The Buyer knows that the market price is $220K, and $160K sounds too good to be true. The Seller bought the condo for $75K back in the 70s, have no debt, and for them selling for $160K without long wait is more important, than waiting for the time when they might fetch $220K. They may not have this time...
What it all means for the buyers? A lot if they understand the phenomenon and are hunting a unit in the condominium in the midst of remodeling, especially when there is a sizable Special Assessment (it adds financial salt and pepper to inconveniences).
The fun part is that very rarely buyers recognize these deals, even when you explain and show it to them. Humans are interesting creatures. We defy logic. In the market with shrinking inventory and rising prices it is not uncommon to hear from the Buyer that they would wait until the work is completed. Yep, but so do others, and the prices for condos, where the major renovation has been completed, go up quickly and dramatically.
If you are looking at a condo unit in a building undergoing major remodeling, and the price of comparable units start $50K higher and up, please, understand why it is happening. Check with your agent, and if this is because of the work on the building, then buy and do not wait till the work is over.
Why lose $50K in equity?
Fist posted with some changes on my website.