How Would We Accomplish This?

The above question will be a regular feature on this blog. Topics will vary but the first one will be:

• How Would We Stimulate Unit Sales?

I recently visited a unit which was advertised "For Sale". The purpose of this post is not to comment on the price or amenities of the unit I visited. 

What I realized from that visit was that our association had no BLMH marketing or sales materials at the showing. A potential buyer isn't just purchasing a unit. They are purchasing a percentage ownership in a community. Would the nature of that community influence a purchase decision? Would the perspective of the board on maintenance and related issues also influence potential buyers? Individuals in a condominium have no direct control over maintenance of the common elements. We are all at the effect of the association.

As part of the recent financial and housing meltdown, there has been a lot of publicity in the printed press and other popular media about the pros and cons of ownership of real estate in general and that includes condominiums. There has been increased scrutiny. Many stories including implosions in specific markets such as Florida, problems in Chicago, articles or news bits about associations in dire straights or underfunded, home owners who are underwater, discussion of the price bottoming process "are we there yet?", concerns by sociologists, realtors, owners, etc. The consensus seems to be that owners are attempting to sell in a buyers market and at a time when there are many questions and concerns.

Would it be beneficial to all if our association; i.e. the board of managers, addressed this? Should the association get involved, or should we just sit back and hope it all turns out?

If I were to take the position that "something should be done" the first question is what? What would benefit all unit owners including those currently selling? How does an association present itself in this current situation?

The broader question is "how to sell an association."  If we assume this is a crowded marketplace, then it is very important to create a distinction. I'm not a marketing or sales person. However, any successful business person knows that to distinguish themselves from the competition, they must create a market or "niche". Would that include advertising, the building of relationships and networking? In the market, what are our advantages? What are our strengths? What are the opportunities that are present to unit owners who live here? How can we address the concerns of buyers? "Find out what is wanted and needed, and then provide that" I was once told.

We do have a communications department; that is, we have a Communications Director and a Committee. Certainly the unit owner and realtor can produce their own "sales brochure" for the unit, and in the case of the unit I surveyed, they had. I have a copy. But they can't speak for the association nor can they speak for the board of managers, which is our leadership and knows where we are going. What about the marketing of this association? Why don't we have a "sales brochure" for our association?  Would that be useful in promoting sales? Costs of such things are reasonable today and with our committee experts, we certainly have the tools. We supposedly have the people. What's missing?

The questions are:

1. Should BLMH have sales marketing materials?
2. What information would that include to facilitate or to stimulate sales?
3. How aggressive should the association be in this matter?
4. Should our Board prepare a "Mission Statement" for inclusion in this brochure or handout? If so, what would be included in that statement?
5. What other information should be included in the brochure? In these uncertain times, buyers are discriminating. What about the quality of our reserves? What about the current maintenance plans and programs? What about articulating a 10 year plan?
6. Are buyers interested in stability? Do they want information that will assure them that they are making a valid investment? Or, do we simply "hope" they will read all of the documents, prepare a questionnaire of their own and interview management (as I did before I purchased) and so on? I suggest that in the current market environment, buyers are less willing to take on risk. 
7. I have been told that at one time, there was a waiting list of people who wanted to purchase here. At that time there was no need to produce sales or marketing materials. Times and situations have changed. We have a board largely comprised of people who have expressed a commitment to change, or were nominated by one who does. So, how about some change that will facilitate sales without compromising any unit owners?
8. I'm sure we are all aware that our immediate vicinity offers unique lifestyle choices. Are the buyers equally aware? See Ref. (7).  We are located at the intersection of two remarkable communities. In our vicinity there are good schools, incredible shopping, a nearby community college with all sorts of inexpensive "adult education" courses, Wheaton College, an award winning Park System, a Forest Preserve system which is second to none, golf, hobbies, the Willowbrook Wildlife Center, the Morton Arboretum, more restaurants than one can possibly afford to visit, not one but two interesting and charming downtowns within about 3 miles, not one but two community libraries, lots of entertainment, including one of the earliest talking movie houses in the country (the nearby Tivoli was the second in the U.S. to have sound, opened in 1928, is a single screen theater which still provides an organ concert on Saturday night and upgraded wide screen 2D and 3D experience at reduced prices). There is also the neighboring Glen Art Theater See Ref. (7) . What more could someone want?  Perhaps something is missing? 
9. Critics of a marketing program or defeatists may say that there are so many homes and condo's in the immediate vicinity that have exactly what we do. That simply isn't true. Such a statement glosses over and ignores the amenities of the association. If my realtor told me that, I'd get a new one. Ref. (7). 
10. Should such a brochure or materials be made? If so, could it be made available to unit owners "at the cost" of printing?  I'm not suggesting another "freebie" for specific unit owners. Not when everyone is pinching pennies. But if a seller wants to do what is necessary, providing additional tools "at cost" would be acceptable, wouldn't it?
11. What else should be included in this brochure?
12. What else should be done?  I'm not suggesting spending fees on special amenities geared to a specific unit owner or owners. I'm not suggesting special plantings, new trees, or special or unusual alterations to make a building or a street more desirable, etc. Such specific improvements or expenses can be discussed by the board of managers during normal association meetings, if they are inclined to spend money to stimulate sales. I also suggest that if owners want special amenities, perhaps the individuals should pay for them, if they fall within general guidelines. For example, special planters and cement objects at building entrances. However, I would expect such discussion to be open and to include a much broader discussion of the entire issue.  Bottom line: I'm not calling for the expenditure of association funds here beyond immediate printing costs and those are to be reimbursed by the sellers. 
13. I also believe this warrants much more than a 5 minute discussion. I suggest this requires a plan.

As it is now, sellers allow the prospective buyer to "fill in the blanks". The prospective buyer, in the absence of information, can make up just about anything they desire about BLMH. For example: There were potholes on Lakecliffe See Ref. (7). last fall and while discussed, they were not repaired. Over the winter they spread and grew. They have now been repaired and our management, FUPM was instructed by the board during April's association meeting to look more closely into the cause of this problem. I believe the intention is to provide a better solution. That doesn't answer the question of why this association allowed Lakecliffe See Ref. (7) to get to that state. Is that significant to buyers? Well, I hate to be the bearer of bad tidings, but everyone who enters our community drives on that street, over the pot holes or into them.  That's six months of negative advertising.  Are there other examples that are visible when a buyer drives or walks the grounds?

Should our board of managers produce a Mission Statement and state clearly and succinctly what their priorities and commitments are? Would that help? Would that assist unit sales? Would such a statement be consistent with "fiduciary duties"? If it were decided to produce such a statement would that statement include our current practices and programs? Would it include our projected dates for these programs and projected solutions for any visible problems which could be a problem for a potential buyer, etc.?

Would such a Mission Statement go a long way to providing certainty for everyone, buyers and unit owners alike?  How about clearly defined statements about accumulating and spending reserves, about policy regarding special assessments, about where this association intends to be in 5 and 10 years, which is the length of our roofing and related projects?

I have gotten comments or have heard comments during association meetings from people who tell me they are unit owners and who have no interest in where this community will be in 5 years.  I assure you, each and every buyer is thinking about that future.

If this association is unwilling to express and articulate our commitments, then perhaps potential buyers and even some unit owners may conclude that we have no commitment, that we have no plan and that we may not know where we are going. It really makes no difference that some of us may know what we know i.e. members of the board of managers, that we have a plan, if we are unwilling to put it into writing and present it to potential buyers. Owners are permitted to attend association meetings. Interested buyers or visitors don't qualify. Even if they did, who is going to wait for the next association meeting to get answers to questions? What is more important? Initial impressions? Price? Performance?

In my personal situation, before purchasing, I wrote a long letter with a series of questions not answered in the governing documents, by-laws, financial data and other information I was given. This was mailed to the business manager and we discussed each item, point by point. I then drafted a reply confirming our entire conversation. That was instrumental in convincing me to purchase at BLMH. Why not prepare such a list with answers to present to potential buyers?

With human beings, there is always the temptation to think that "the grass is greener on the other side of the hill." Our competitors include newer associations and single unit homes. They also include "plain Jane" communities, converted apartments, etc. The benefits of BLMH include acres of green space, quality construction using cedar, brick and mortar. The construction methods can reduce unit owner energy expenditure. The roofing project started in 2009 included additional energy saving enhancements, and quality materials and methods which will result in increased appeal and longer roof life; that means a prospective buyer shouldn't have to brace themselves for a new roofing project until 2029 or so. Our buildings are constructed of real plywood, real wood beams and trusses and wooden 2 by 4's and so on.  We do not have some of the problems linked to newer construction; for example, the defective wallboard per the Consumer Product Safety Commission, etc.  Purchasing here is purchasing a quality, award winning product.

Sounds good, doesn't it?  But if we don't tell anyone, they'll never know. Some unit owners at BLMH may not be aware of this either. But prospective buyers have a different perspective. They are not familiar with our property. True, it would be comforting to say "we have just completed our roofing project". We can't; so that is where commitment and assurances come in. There is an expression "Nature abhors a vacuum", which I include to mean that if one doesn't create something to "fill the gap", that something being an expression of who we are, then we allow the potential buyer to decide what to put there. Which would you prefer? Make a commitment or take whatever shows up?  I suggest allowing buyers to make up whatever it is, isn't working very well for unit sales.

We live in very uncertain times. I would expect our board of managers realizes that and takes pro-active steps that are commensurate and are in step with the reality we live in.

We can't responsibly redo the property to comply with the wishes of buyers "I'd buy your unit if you faced the lake" or if "that tree wasn't obstructing the view of the waterfall" or "if you had an elevator" or, "if you had a new entry door". I certainly hope the board doesn't fall into that trap; i.e spending association fees to pursue buyers whims. To any buyers who are on the cusp but have a specific issue, as a seller I would say, "Make an offer and put your specific requirement as a contingency in the contract". The owner can then take that to the board for approval and discussion of whom pays for what.

But we can do some marketing and that benefits every seller and potentially all unit owners, at very reasonable cost. We do produce a color newsletter for 336 unit owners about 6 times a year (the even months) See Ref. (7). I've been told during association meetings that this is "only a little bit" of money.  So a marketing tool should be easy. Don't misunderstand me I'm not suggesting that we hire a marketing firm; I'm suggesting that our in-house experts on the Board do this.

I guarantee that if I were a seller, I'd be doing some really creative things that go well beyond the normal "dress up and hire a realtor" regimen; something that goes beyond cleaning, painting and adding a new counter top, etc. However, I also know I would not be selling my unit; I would be selling my association.  I would produce some of the documents I am proposing. But I can't do that alone and I can't speak for the board. They are as always, the group that must make the commitment.

I did my part by putting this out here. Let's see what the board does. I'll be sending a copy of this directly to them. Of course, if our board chooses not to act, then they are acquiescing the "high ground" to our competition. As I keep saying "it's all a choice". What choice will our board of managers make? You will know soon enough.

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References, Errors, Omissions, Comments:

1. I can't say if we have more or fewer units for sale than surrounding condos and the area in general. Our association does know price performance and similar metrics and has monitored this for all of the nearly 10 years I have been here. During the association meetings I have attended, there are brief conversations on this subject in the presence of unit owners. I have friends and associates who have homes for sale. I am aware of the unusual problems they have been experiencing.
2. The real estate agent was personable and gave me a nice hand out. I told the agent that I was familiar with the property and that I was obtaining information for a relative who was considering relocation to the area; my spouse and I are very interested in having them move here. In an earlier post, I put a little more info about that visit.  After the walk through, my spouse discussed the unit and what we had seen with our relative.  That relative has a buyer for their home and is very much "in action". It remains to be seen if they will come to Wheaton; they are reviewing all of the options. In their case, those options include "to relocate, or not to relocate."
3. Do we want potential buyers to "fill in the blanks" and make up something or do we want to guide them in this process and create something about this association? If the potential buyer comes to a wrong conclusion because of the limited information available to them, what are the consequences? If they decide we are "unworthy" the consequence is another lost sale. If they decide we are "worthy" we get a new owner. If they purchase with unrealistic expectations, they will become a dissatisfied unit owner. What are we attempting to create here?
4. If I were in the market to sell, I'd do everything I could to "look outside the 9 dots." I would also look at alternatives. 
5. Here's a "what if" game, Don't use my numbers as typical. They are examples only. What's the monthly mortgage payment on $190,000 with 10% down and 6.1%? It's $1,036 per month. A unit owner says "I can't sell because the buyer says my fees are too high." Really? So how could I offer a buyer a fee decrease? I could drop my selling price. But how much would be required? Let's see how great a decrease in principal would be required to accommodate a $25 reduction in the monthly mortgage payment. A $25 reduction in the monthly mortgage is $1,036 - $25 = $1,011 monthly mortgage payment. To achieve that, I would have to drop my selling price to $185,460. This calculation was made using the New York Times "Rent versus Buy" online calculator.  Would I do that? Could I do that? Would I be willing to drop my price 2.4% in order to sell? That's a question only the seller can answer. 
6. This post is another on my reoccurring and continuing theme which is really a perspective on setting priorities and an inquiry into the real duties and responsibilities of the board of managers. Would you consider what I am presenting here to be consistent with the "fiduciary duties" of the board? Would all unit owners benefit from this?  
7. Reference (7). I got a comment from an astute reader and made these corrections or expanded the information. Thanks for the feedback. After a conversation about this post, I also made a few changes, all noted by this reference.