Michael Zimmerman just listed apartment 3203 in the Imperial Plaza Condominium for sale. 

ONLY THE VERY BEST

Imperial Plaza Condominium
725 Kapiolani Blvd. #3203
Honolulu, HI 96813
MLS #1011284

View the 4-page Home Brochure

Virtual Tour 

(more photos below)

Perched high above the city, this home offers breathtaking, unobstructed, 180 degree daytime views of rainbows, ocean, harbor, city and the Ko’olau Range.  The next show begins as sunset approaches, creating a kaleidoscope of colors that change with each cloud that is gently moved across the sky by evening trade winds.  As the sun sets into the ocean, that illusive “green flash” is occasionally observed.  For an encore, city lights begin their dazzling appearance, only to be outshined by the moon and stars shimmering across the ocean.  With TWO extremely private outdoor lanais, one is able to enjoy a front-row seat for these truly spectacular events.

The design elements of the building make it feel like a home instead of a condominium.  The apartment is laid out in a way that creates entertainment areas that are completely separated from private living areas.  10 foot ceilings allow for massive windows and expansive views with warm natural light.  Even the laundry area is tucked away, out of sight.  The quiet and private design coupled with generous amenities provide the pinnacle of condo living.

Meticulously renovated in 2005, no detail was overlooked.  This home’s functionality and aesthetics were maximized by utilizing a warm color palate, high-end stone, iridescent glass, modern lighting, top of the line appliances, beautiful flooring and luxurious custom cabinetry.

The Imperial Plaza is a gorgeous copper-colored, art-deco inspired complex that consists of The Tower and The Townhouse (residential areas) and The Galerie (commercial offices and shops).  Located in Kakaako, the Ala Moana Shopping Center, Ward Centers, Downtown, Chinatown, Restaurant Row, Aloha Tower and Waikiki are all just minutes away.  The residential lobbies are beautifully furnished, have soaring 30 foot ceilings, amazing water features and original artwork designed by a famous local artist.  The recreation deck includes swimming pool, wading pool, hot-tubs, sauna rooms, clubhouse, barbeque grills, picnic tables and a dramatic water feature.

Don’t miss your unique opportunity to own this finely crafted two bedroom condominium.

• Stunning sapphire and turquoise blue ocean views
• Spectacular views of the harbor, city and Punchbowl
• 10 foot ceilings create open and spacious feeling
• Large windows and natural light brighten each room
• Master & guest baths have full tub and standup shower
• Master suite large enough for king-sized bed
• Gorgeous laminate floors
• Three central air conditioned zones
• Both bedrooms have abundant closet space
• Plenty of in-home storage
• Huge exterior storage locker
• Living area approximately 1308 sq. ft.
• Two private lanais total approximately 212 sq. ft.
• Two covered, assigned parking stalls

Please contact Michael Zimmerman if you have a specific question or visit my Featured Properties web page to learn more about this fine home.

This information is provided as a courtesy, is not a warranty and should be independently investigated by Buyers.  This information is deemed reliable, but not guaranteed.

Fannie Mae recently instructed lenders to adopt a new policy that includes a second review of an applicant’s credit report just prior to closing.  The reason is simple:  the credit profile of a borrower may have changed between the time of the initial credit report review and the closing date.

How will this impact the home loan?

The potential impact to a borrower who utilized credit to make significant purchases after the initial credit report may include the following:

• delay in closing
• increase of closing costs and/or interest rate
• a decreased loan amount
• denial of the loan

In the worst-case scenario, a change in credit may result in a loan being denied, even after an original approval was granted.

What should homebuyers do (or avoid)?

During the application process, borrowers should use credit sparingly and make sure they adhere to the tips provided below by credit expert Linda Ferrari of Credit Resource Corp:

• don’t do anything that causes a red flag to be raised by the scoring system
• don’t apply for new credit of any kind
• don’t pay off collections or charge offs
• don’t max out or over charge on your credit accounts
• don’t consolidate debt onto one or two credit cards

This list is not comprehensive, but it gives you an idea of situations that may create issues and may also be contrary to some ideas you have read previously.  Be sure to consult your mortgage professional if you have any questions or doubts.

The stock and bond markets have their own special relationship.  Often, while one moves higher, the other moves lower.

Poor economic news normally causes money to flow out of stocks and into bonds because investors see bonds as a safer investment when the economy is weak.  An increased demand for bonds drives bond prices higher, as with any item when there is heavy demand for it.  When bond prices move higher, bond yields (and consequently home loan rates) move lower.  So any movement of money into bonds typically helps home loan rates improve.

Conversely, strong economic news normally has the opposite effect.  When the economy appears strong, investors transfer money to stocks, hoping to take advantage of increasing stock prices.  Often this money is pulled out of bonds.  In turn, this causes bond prices to fall and home loan rates to rise.

“Don’t expect to build up the weak by pulling down the strong.”

- Calvin Coolidge

Event:  The 16th Annual Komen Hawaii Race for the Cure®

Date:  Sunday, October 17, 2010

Time:  7:00 AM

Location:  Kapiolani Park, Honolulu, HI

Race Length:  Coed 5K (3.1 miles) race and a 1-mile fun walk/run.

Course:  5K: USATF certified course (HI-07008-TLB), flat & fast.

Entrants:  More than 6500 male and female runners and walkers are expected.

Registration:  Online Registration is now open. View 2010 Komen Hawaii Race for the Cure registration information.

Packet Pickup:
Kewalo Conference Room at Ward Warehouse, 2nd Floor

Teams
Monday, October 11 from 3:00 – 7:00 pm
Tuesday, October 12 from 3:00 – 7:00 pm

Individuals
Wednesday, October 13 through Friday, October 15 from 3:00 – 7:00 pm
Saturday, October 16 from 9:00 am – 12 noon

On Race Day, there will be late registration and packet pick-up at Kapiolani Park from 5:00 to 6:00 am.

Race Day Schedule:  Sunday, October 17, 2010

4:00 am  Volunteer Check-in
5:00-6:00 am  Race Day Registration
6:00 am  Welcome/aerobic warm up
7:00 am  START, 5K run/walk
7:15 am  START, One Mile fun walk
8:00 am  Awards Ceremony, Entertainment Expo
8:15 am  Survivor Recognition and photo at Bandstand

Beneficiaries: Up to 75% of the net proceeds from the Race will go to fund local area breast cancer education, screening and treatment programs (view Grants) and at least 25% will help fund the Susan G. Komen for the Cure® Award and Research Grant Program.

The Hawaii Race will appeal to the serious and casual runner, but most importantly it will appeal to those that have been touched by the disease and those who recognize the need to combat it. Mothers, daughters, fathers, sons, friends and family members of those that have lost their battle to breast cancer and breast cancer survivors will be at the race running individually as well as part of corporate teams.

The Obama administration just reported the 2010 budget deficit will be $1,470,000,000,000.  That’s just for one year.  The administration tells us not to worry; the 2011 deficit will be a mere $1,420,000,000,000.

I just saw a television news report that said the U.S. government is borrowing 41 cents of every dollar it spends.  Let me say that again; 41 cents of every dollar it spends.  That’s like you earning $59,000 this year, but deciding to spend $100,000.  Could you really do that for one year?  Two years?  How long do you think this nation can do this?  What kind of leadership do we have in Washington?

Once the United States entered World War II, it took less than four years to defeat Germany, Japan and Italy.  We’ve been fighting in Afghanistan for nearly nine years.  I am more convinced than ever that we’ve chosen to conduct this war in the wrong way.  This enemy cannot be bought off with dollars, running water or electricity.

Summary
I find the Imperial Plaza sales trend a little troubling.  Look at the graph below and you will see just six apartments sold in the last year.  That rate is half the rate of many other Kakaako condos.  There are several floor plan choices for sale and many are located on high floors with a great view.  Five of the 13 apartments are huge (2000 sq. ft. or more) and have been on the market for a very long time.

The chart above shows the number of sales recorded each month vs. the number of apartments available for sale at the end of the month.  The number of apartments for sale has doubled in the last year.  In the last six months, Imperial Plaza averaged one sale every other month and at that pace, it will take 26 months to sell the 13 apartments listed for sale. 

The Imperial Plaza Condominium
725 Kapiolani Blvd., Honolulu, HI 96813
Built: 1991

Availability
Apartments in the building:  205
Apartments available for sale:  13
Average days on market to date:  140
Apartments listed for sale in the last 30 days:  3
Months of inventory available:  26.0

Sales
Apartments under contract in escrow:  1
Apartments sold in the last 90 days:  2
Average days on market:  15
Average price per square foot:  $521.30
Sales Price / List Price:  101%

Do you have questions about The Imperial Plaza?  If so, contact Michael Zimmerman for a no obligation consultation.  Please visit my web site to view Imperial Plaza apartments for sale or conduct your own Honolulu condo search.

The Honolulu Board of REALTORS® released the resale figures below based on data collected from its computerized Multiple Listing Service (MLS) system.  The number of homes and condos sold are for the year-to-date for 2010 and 2009.  The median prices cited below are year-to-date for 2010 and 2009 as well. 

Single Family Homes

Condominiums

*Median price means half the prices were above and half below the given price.

Today’s market conditions and record low interest rates make this an excellent time to make a move.  Please visit my web site to order special reports for buyers and sellers or conduct your own Honolulu real estate search.

Summary
Sales have been steady at One Waterfront Towers during the last seven months, but unlike other Kakaako condominiums, the inventory here has not declined.  Instead, it has increased.  The main objection owners and buyers share is the size of the maintenance fees and that a special assessment continues.   

Many apartments are for sale, so buyers have lots of choices.  1- and 2-bedroom condos spread from low to high floors, but some of the asking prices are impractical and are not supported by recent sales.  For buyers financing their purchase, it may be very difficult to obtain an appraisal that supports these prices.

One Waterfront Towers Condominium
415-425 South Street, Honolulu, HI 96813
Built: 1989

Schools
Elementary:  Royal
Middle:  Central
High:  McKinley 

Features
Located right next to Restaurant Row which includes Ruth’s Chris Steak House and it’s just steps away from Kakaako Waterfront Park. 

Availability
Apartments in the building:  302
Apartments available for sale:  16
Average days on market to date:  130
Apartments listed for sale in the last 30 days:  1
Months of inventory available:  9.6 

Sales
Apartments under contract in escrow:  1
Apartments sold in the last 90 days:  2
Average days on market:  184
Average price per square foot:  $547.49
Sales Price / List Price:  96%

What else would you like to know about One Waterfront Towers?  Please visit my web site to view One Waterfront Towers apartments for sale, request free reports for buyers or sellers or conduct your own Honolulu condo search.  If you’re thinking of selling your home, contact Michael Zimmerman for a no obligation consultation.

“I am for doing good to the poor, but…I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it.  I observed…that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer.  And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

- Benjamin Franklin

If you’ve bought or sold a home lately, you know that today’s Purchase Contract and accompanying addenda can reach 24 pages or more.  If you’re signing remotely or at home, a lot of faxing or scanning and emailing is required to return your executed documents.

I recently began using a secure electronic signature service called DocuSign.  This service eliminates the need for all that faxing or scanning.  With a just few clicks of your mouse, you can review and sign several documents in minutes!  At the end of the process, you receive a crisp clear PDF document with your signatures.

I was skeptical of the service in the beginning, but after using it the first time, I was sold.  I can say this with confidence; my clients love it.  It saves reams of paper, keeps documents clear and easy to read and it’s fast.  Best of all, the service can be used throughout the sales transaction for nearly every document such as counter offers, the Seller’s Disclosure, various document receipts and escrow instructions.

Watch a demonstration:

The current recession has created a few opportunities for Honolulu home buyers and investors.  One of those opportunities is the short sale.  Basically, a short sale results when the owner owes more to the lender than their home is worth.  For sellers, a short sale is a means to avoid foreclosure.  For buyers, a short sale may be a great investment opportunity, but each home must be carefully evaluated. 

Short sales are not without drawbacks.  For example, the procedure can be lengthy and frustrating because the lender must approve the sale.  Depending on the lender, approval can take up to six months.  In addition, the home may not be in good condition.  Think about it; if the home owners were having difficulty making payments, they may not have kept up with the maintenance.

Below are a few suggestions to help you get through a short sale purchase.  First, know what the home is worth.  I can provide a Comparative Market Analysis that will list the most recent sale prices in the neighborhood.  You may ultimately pay less than the home’s value, but submitting an offer that is too low will probably be rejected by the lender.  Second, be prepared and have your money ready.  If you will finance the purchase, do your mortgage homework before you enter the short sale process.  Last, be patient.  The process can be long and waiting it out, while tiring, is unavoidable if you want the purchase to succeed.

Summary
Nauru Tower sales have been extremely slow in the first half of 2010.  This is in sharp contrast to many of the competing Kakaako condo buildings which are experiencing strong demand.  Five 1-bedroom apartments are for sale and there is a nice assortment of 2-bedroom apartments for sale.  In addition, a rarely available parking space is for sale.

The chart above shows the number of sales recorded each month vs. the number of apartments available for sale at the end of each month.  As you can see, the number of apartments for sale has been rising in 2010 after declining through most of 2009.  In the last six months, Nauru Tower averaged two sales every three months and if that pace continues, it will take over 16 months to sell the 11 apartments on the market. 

Nauru Tower Condominium
1330 Ala Moana Blvd., Honolulu, HI 96814
Built: 1991

Features
Conveniently located across the street from the Ala Moana Beach Park and just one block from the Ala Moana Shopping Center and Ward Centers.

Availability
Apartments in the building:  302
Apartments available for sale:  11
Average days on market to date:  110
Apartments listed for sale in the last 30 days:  0
Months of inventory available:  16.5

Sales
Apartments under contract in escrow:  0
Apartments sold in the last 120 days:  2
Average days on market:  195
Average price per square foot:  $733.61
Sales Price / List Price:  93%

Would you like to learn more?  Please visit my web site to view Nauru Tower apartments for sale or conduct your own Honolulu condo search.  Contact Michael Zimmerman for a no obligation consultation if you’re considering selling or buying a home or investment property.

“It’s not tyranny we desire; it’s a just, limited, federal government.”

- Alexander Hamilton

How do you judge the validity of the Seller’s Disclosure you receive when buying property?  Here are some questions to consider when reviewing the disclosure:

1.  Is every question answered? 
All too often, sellers fail to answer all 90 questions.  Consider these possibilities:

• Questions may have been skipped as an honest mistake.
• Questions may have been skipped to avoid providing information.
• Questions may have been skipped because they are confusing and the owner truly doesn’t know how to answer.  This is a real possibility since many of the questions were written by attorneys and are not easily understood.

2.  Are there “yes” answers? 
Answering “yes” requires the owner to provide additional information on page 4 of the disclosure.  Did they provide the required amplifying information?  Was that information clear and complete, or did it avoid answering the question directly?

Example:  Question 69.  Has the roof been repaired or replaced?

Poor answer:  Yes, repaired in 2009.

Better answer:  There was a small leak in 2009.  A licensed contractor, Mr. XX, removed defective shingles, repaired the underlying roof and installed new shingles.  A 3 ft. by 2 ft. area in the attic was made slightly wet by the leak and was dried and treated with an anti-bacterial/anti-fungal solution to prevent growth.  Copies of the repair receipts and warranty are attached to this disclosure.

3.  Does the disclosure lack “yes” answers? 
If so, you should ask yourself if the owners took their disclosure responsibilities seriously.

Is it possible that no problems have been experienced with any of the appliances or plumbing?  Maybe, if the appliances are just a few years old.  But, who installed the new appliances?  If the current owner installed them, this should be noted on the disclosure.

4.  Are many of the questions answered “not to my knowledge”? 
Again, if so, ask yourself if the owners took their disclosure responsibilities seriously.

Example:  Question 58.  Is this property exposed to other types of recurring excessive noise (e.g. night club, school, coqui frogs, etc.)?  In my opinion, “not to my knowledge” is not a sufficient answer.  Excessive noise is either present or it’s not.  The owner should know, unless they’ve never visited the property.

5.  What do you do if you receive an incomplete Seller’s Disclosure? 
You may submit more probing questions to the seller that deal with what you perceive as problem areas.  You may or may not receive better answers, but it’s worth trying.  If time still remains in your home inspection period, you may wish to take another look at certain areas that concern you.

Summary
The sales trend at Hawaiki Tower is very similar to that of other Kakaako condominiums; a steady number of sales coupled with a corresponding drop in the number of apartments for sale.  One thing stands out like no other building; there’s just one Hawaiki Tower apartment for sale, and it’s a penthouse.  For the time being, the choices are very limited.

The chart above shows the number of sales recorded each month vs. the number of apartments available for sale at the end of each month.  The number of apartments for sale fell steadily throughout 2009.  Nine Hawaiki Tower apartments sold in the last six months.

Availability
Apartments in the building:  422
Apartments available for sale:  1
Average days on market to date:  17
Apartments listed for sale in the last 30 days:  1
Months of inventory available:  0.7

Sales
Apartments under contract in escrow:  5
Apartments sold in the last 90 days:  7
Average days on market:  58
Average price per square foot:  $719.75
Sales Price / List Price:  98%

Contact Michael Zimmerman if you have a specific question about Hawaiki Tower.  Please visit my web site to view Hawaiki apartments for sale, conduct your own Honolulu condo search or request special reports for home buyers or sellers.

Most annual condominium association meetings are held during the months of January through April.  Attending the annual meeting may not seem important, especially for those who live in a well-managed condominium.  However, if you are concerned with the way your association is governed or how your maintenance fees are spent, the annual meeting is a great opportunity to effect a positive change.  This is done by electing competent, independent-thinking directors who aren’t on a power trip and don’t have personal agendas.

Below are some lessons learned that may help you at your next annual association meeting.

Get involved.  If you are unhappy with the direction your Board and association are headed, do everything in your power to bring about change.  It’s easy to say you’re too busy, but every owner is busy with work, raising children or other interests.  You cannot afford to sit idly by and hope other owners will miraculously correct the problem.

Build a coalition.  Find concerned owners in the building who have similar goals.  This may take several months, but the sooner you realize you’re all in this together, the sooner you can take steps to alter the Board’s conduct.  

Be patient.  In most cases, the change you desire won’t happen overnight.  Depending on who is currently serving on the Board, it may take two years to elect the right team of directors.

Ensure the annual meeting is held.  To conduct the meeting in the first place, a quorum must be established.  Generally, that means over 50% of the owners must be present or have provided their proxy to the management company.  If the Association fails to establish a quorum, the annual meeting is canceled and rescheduled.  This is an expensive undertaking as notices must be mailed a second (or more) time to all owners.  Some associations require these notices be mailed via Certified Mail, further adding to the cost.  Who pays for this?  You do, through your maintenance fees.

Director nominations.  Your association may establish a nominating committee.  Notifying that committee of your interest to run for a director position may work, but check your association’s rules to be sure.  Sending out a “brag sheet” along with the management company’s annual meeting notice may not be sufficient either.  The one sure way to get someone on the ballot is to nominate them from the floor prior to casting votes in the election.

Vote for those you know and trust.  A strategy to effect change is to collect proxies from absentee owners and like-minded local owners who trust your judgment.  The goal is to amass enough votes so you can elect directors you believe will do what’s best for the association.  This is more difficult than it sounds.

Don’t be greedy.  Cumulative voting enables you to stack multiple votes on just one director.  The number of votes you control will dictate how to spread the total votes.  If you control a large percentage of the total votes, you may be able to elect more than one of your trusted candidates.  If you get too greedy, you may spread your votes too thin and fail to elect even one of your candidates.

You should also read Ten Reasons To Attend Honolulu Association Board Meetings.

What is a real estate appraisal?
It is an expert, unbiased opinion of the market value of real property.  The appraiser performs a detailed site inspection which includes visiting the property, recording room measurements and noting amenity information.  Since no two properties are identical, an appraiser considers the property location, comparable sales in the area, floor plan sketches and local building costs and labor rates.

Why get an appraisal?
If you’re financing your property purchase, the lender requires it.  The lender wants to ensure the property is worth what a buyer has agreed to pay for it since the lender, more often than not, is putting in three or four times as much cash as the buyer at the time of purchase.  The lender wants to take prudent risks.

What if the appraisal value is less than the purchase contract price?
This occurs more than it used to and can derail the buyer’s home purchase.  The lender will finance less than the buyer expected which means the buyer, if he/she still wants the property, needs to put in more cash than originally expected to complete the purchase.

A real life example:
A buyer agreed to purchase a Honolulu condominium for $500,000.  Let’s say the lender will finance up to 80% of the purchase.  That means the buyer will provide a $100,000 down payment and finance the remaining $400,000.  What if the appraised value is only $480,000?  The lender will finance 80%, or $384,000.  That means the buyer needs to contribute $116,000 as the down payment instead of $100,000.  Some buyers can manage this; others cannot.

“I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.”

- Thomas Jefferson

Summary
Despite nine consecutive months with at least one sale, and many months had more than one sale, the number of apartments for sale rose since my November 2009 Hokua report.  Yet, I am very pleased by what I see in the chart below.  The market is working.  There are enough buyers with the means to purchase apartments from owners who are ready to leave Hokua, whatever their reason.  In addition, there is a wonderful assortment of apartments for sale (almost all floor plans are available); almost everyone should be able to find something they like. 

The chart above shows the number of sales recorded each month vs. the number of apartments available for sale at the end of each month.  In the last six months, Hokua averaged four sales every three months.  If that pace continues, it will take 12 months to sell the 16 apartments available.  Specific sales statistics are listed below.

Hokua at 1288 Ala Moana Condominium
1288 Ala Moana Blvd., Honolulu, HI 96814
Built: 2006

Schools
Elementary School:  Kaahumanu
Middle School:  Central
High School:  McKinley

Location
Conveniently located one block from Ward Centers and just a few blocks from the Ala Moana Shopping Center and Nordstrom located on Kapiolani Blvd.

Features
P.F. Chang’s China Bistro and the Tango Contemporary Café are located on the bottom floor.

Availability
Apartments in the building:  246
Apartments available for sale:  16
Average days on market to date:  126
Apartments listed for sale in the last 30 days:  2
Months of inventory available:  12.0

Sales
Apartments under contract in escrow:  2
Apartments sold in the last 90 days:  3
Average days on market:  101
Average price per square foot:  $1315.52
Sales Price / List Price:  97%

Are you interested in learning more about Hokua at 1288 Ala Moana?  If so, contact Michael Zimmerman for a no obligation consultation.  Please visit my web site to view Hokua apartments for sale, order special reports for buyers and sellers or conduct your own Honolulu condo search.

Q.  What is the purpose of a condominium reserve account? 
A.  To accumulate funds required to pay for KNOWN future association expenses; typically building maintenance and equipment replacement.

Q.  How is the reserve account funded? 
A.  As mentioned in my post on Condominium Maintenance Fees, as large cost maintenance and repairs come up during a building’s life cycle, money is drawn from reserves to pay for the work required.  Theoretically, owners should “pay” for the wear and tear they cause each day while living in the condominium.  By “pay”, I mean set aside a portion of monthly maintenance fees for known future repairs.  Reserves can also be funded with a Special Assessment, however, that may be an indication that the association failed to properly fund the reserve account for some time.

Q.  What can reserve funds be used for? 
A.  Reserves are not a slush fund and cannot be used willy-nilly for nice-to-have pet projects.  Once funds are transferred to the reserve account, the funds and investment income earned on those funds must remain in the reserve account or be used only for the authorized reserve purpose.  Use of reserve funds for any other purpose requires Board of Directors approval.

Reserve philosophy.  Reserves can be handled very well or very poorly.

• Good example:  elevators are known to last 30 years and cost $1-2 million to replace.  This replacement should be planned and funded by setting a portion of maintenance fees aside for 20-30 years.
• Bad example:  an association may choose to set aside funds in the reserve account for hurricane damage.  While this sounds responsible, in my opinion, it isn’t because no one knows when or if a hurricane will damage their building.  A special assessment is the proper way to collect funds to pay for hurricane damage only after it occurs.

Q.  How much money should be in the reserve account? 
A.  The association should update the reserve study each year.  The study contains the list of items to be funded over the next 20 years, the year each item is planned to be repaired or replaced, the estimated useful lives and the estimated cost to repair or replace.  This study indicates the amount required to be in the reserve account at the end of each year for the next 20 years.

1.  Ensure the Board represents the owners.  Are they responsive to the owners they were elected to represent or serving their own narrow interests?  Board meetings may be an opportunity for owners to air their concerns and give the directors a chance to address these concerns.

2.  Determine if the Board is competent.  Watch the directors interact.  Do the directors have a clue?  Is there honest debate before a vote or is a predetermined path followed?  Are real facts considered?  Do they truly understand what the vote is about or do they just go through the motions without considering what they are voting on?  Listen to their reports.  Do they really make sense?

3.  Learn how your association’s money is being spent.  Is money spent on things that benefit only a few owners?  Are several bids considered prior to approving large expenditures?  Does the association’s budget set reserves aside regularly every month to replace costly equipment in the building?  How many owners are delinquent in paying their maintenance fees?

4.  Determine how the Board oversees the General Manager’s performance.  Does the Board hold the GM accountable for what goes on in the building or does it simply allow the GM run the building as he pleases?  The GM’s acts or failures to act can lead to association liability.

5.  Evaluate the management company.  Ideally, the management company should provide expert advice to the Board.  It should step in to prevent the Board from inadvertently harming the association, regardless of what the Board’s intentions were.

6.  Show the Board of Directors that you will scrutinize their actions.  If very few people attend monthly Board meetings and the annual meeting, the directors may lose sight of who they represent…each and every homeowner.  In addition, sunlight is the best disinfectant.  Conducting business in the open keeps the Board honest.

7.  Protect your interest.  Is the board actively managing expenses or blindly raising maintenance fees to make the budget balance each year?  A monkey can do the latter.  Large maintenance fee hikes will make your condominium unattractive to potential buyers and quite possibly limit or diminish its value.

8.  Meet your neighbors.  This is an excellent opportunity to meet and talk with other owners you occasionally see in the elevator, hallway or by the mailbox.  You share at least one common interest; making sure your property values are protected.

9.  Help establish quorum.  This only applies to the annual meeting.  If a quorum isn’t established, the meeting will be canceled and additional costs will be incurred by the association to reschedule.

10.  Vote for directors.  This only applies to the annual meeting.  This is the only chance you’ll have all year to inject fresh blood and a new point of view into the Board.  Make your vote count!

Many condo associations raised maintenance fees in 2010 to keep up with rising costs. As I wrote in my recent Condo Maintenance Fee post, an association’s largest cost components typically include electricity, employee salary & benefits, building equipment & grounds maintenance and insurance.

To keep the building to building comparison simple, I compute cost per square foot. For example, if someone owns a 1000 sq. ft. apartment and their maintenance fee is $750 per month, their fee per square foot is $.75.  It’s not possible to completely compare apples to apples because every building provides a different set of amenities. Here are the maintenance fee costs per square foot of living space for some buildings located in Downtown and Kakaako.

A client asked a great question the other day:  Why do some condos have a special assessment?

Three situations immediately come to mind.  The first is the condo association needs money to pay for a large unexpected expense.  Another reason is that the association failed to collect enough from monthly maintenance fees and set aside reserves to cover known future expenses.  The third possibility is the association has the option to save money in the long term by investing a large amount of money now.  Let’s look at some examples.

1.  Large unexpected expense – This is a real world example.  The association discovers that certain components in the building’s water lines are failing and they weren’t expected to fail at all.  In this case, the association must replace the components immediately or face a large number of flooding incidents.  These incidents may cause over $25,000 of damage per occurrence as water flows from one apartment down to many apartments below it.  In this case, it’s unlikely the association has money set aside to effect repairs since no repairs were expected.  A special assessment is the quickest and fairest way to generate the funds required to repair the water lines and prevent future losses.

2.  Failure to plan and set aside reserves - Some associations ignore reality and in some cases, Hawaii state law.  They consciously decide to keep maintenance fees to a minimum and this prevents them from setting aside funds that will eventually be needed to replace elevators, paint the building and replace multi-million dollar building equipment.  At some point, big ticket items fail and must be replaced, but the association doesn’t have enough money in its reserve account.  The choice is obtain a loan (which typically requires a majority of the owners to approve) or levy a special assessment.

3.  Invest money now to save money in the future – This is a real life example.  Not all buildings are energy efficient.  Some associations commission studies to determine if money can be saved by reducing energy consumption.  In many instances, large amounts of energy can be saved by installing efficient lighting and equipment.  Typically, the association hasn’t planned and saved money over the years to make a large outlay, so they levy a special assessment to pay for the investment in efficiency.  By spending money now, the association keeps operating expenses and maintenance fees down for years to come.

“It will be of little avail to the people that the laws are made by men of their own choice if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood.”

- James Madison

During my work with clients considering a Honolulu condo purchase, many ask the same question:  Condo maintenance fees seem high.  What do I get for my money?

One of the reasons for the question is that people who live in a single family home pay for their maintenance and repairs in a different way.  They pay as they go.  When it’s time for a new roof, they pay tens of thousands of dollars all at once.  When it’s time to paint the home’s exterior, they pay when the work is done or they may do it themselves.  When it comes to easier things like mowing the lawn or cleaning, many do a great deal of the maintenance themselves each week.

Contrast that with living in a condo.  The owners don’t maintain the commons areas (lobby, pool, hallways, etc.). That work is done by paid staff and depending on the complexity of the work, licensed contractors.  When it comes to very large expenses, like elevator replacement, money is drawn from reserves to pay for the work required.  Reserves are built up over several years by setting aside a portion of the maintenance fees collected each month.

To put things in perspective, the following are typically the largest high rise condo association cost components:

• Electricity – depending on fuel prices, can cost $125,000 – $175,000/month
• Salaries and benefits (General Manager, office staff, security guards, maintenance staff and cleaning crew) – depending on the number of employees, can be $85,000/month
• Building equipment and grounds maintenance – depending on building age, can cost $40,000/month
• Insurance – depending on the building’s loss history, can be $20,000 – $40,000/month