The State of DC: Are Condo Fees Costing You Equity?

by PoP Sponsor August 9, 2018 at 12:15 pm 0

This column is written by Metro DC Houses, a local real estate team serving DC, MD, VA made up of Colin Johnson, the immediate past President for the D.C. Association of Realtors and Christopher Suranna, the current President for the D.C. Association of Realtors.

The question we wanted to answer this month is, “do condo fees negatively impact appreciation if over an average number?”

We chose the Georgetown zip code 20007 and found over the last 10 years the average condo fee for a one-bedroom unit is $514 dollars per month.

Condo fees vary based on services provide in building, so our assumption is condos with higher fees have more services and units with lower fees have fewer services. We didn’t consider anything except bedroom-count and on average we saw fewer units sold with higher condo fees (29 units) and more with lower condo fees (52 units).

There is another thing to consider in this evaluation, borrowing power because condo fees can limit the amount a purchaser can borrow if they are only approved for a certain amount per month.

As an example, if someone is qualified to afford $2000 a month and a condo fee is $500 that purchaser can now only afford debt equal to $1500 per month and obviously interest rates vary with that amount.

Based on our findings higher condo fees do negatively impact appreciation for units that have fees above average over the last ten years. For units that have condo fees below average the properties did appreciated slightly higher. One should also note that units with higher condo fees typically sell at a higher sales price than units with lower condo fees.

In our experience, condo fees do not directly relate one-to-one on value, but it can be concluded that enough consumers did not take this into consideration when conducting comps.

It is likely in some cases a consumer compared a lower condo fee unit with one of a higher condo fee, which typically sells for a higher price and in enough of those situations probably over-valued those properties over the years.


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