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Redfin's Sam Khosh Answers All Your Real Estate Questions

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[Get answers about co-op buildings like this one. Photo by Flickr user NCinDC]

On Friday, Curbed introduced you to Sam Khosh, the Redfin realtor with a passion for showing others the answers. Today, he has answers to the questions that were weighing on your collective minds. If you meant to ask a question and never got it out, send it to our tipline and we'll pass it on to the next realtor who takes part in this series. If you're wondering about which neighborhood to invest and what's involved in changing a building from co-op to condo, read on.

What D.C. neighborhoods do you think have the best long-term shot at value? (Not necessarily newest and hippest, but longest-lasting...)

There are many variables involved when predicting long-term value. Are you looking for highest return or highest assurance of a steady return? If you want long-lasting, steady value, consider established neighborhoods. Homes in areas like Capitol Hill, Georgetown, Dupont Circle, Kalorama and Cleveland Park are likely to hold their values. Over time, these neighborhoods have seen steady, modest price growth. Of course you pay for that assurance, which means there is less potential for big, short-term gains.

If you are looking for the highest return on investment, then look to up-and-coming neighborhoods with development plans. The D.C. real estate market has changed drastically over the last couple of years. Neighborhoods like Shaw, LeDroit Park and Bloomingdale, Eckington, Petworth, NoMa and Navy Yard have seen significant growth and price increases. This has begun to trickle into bordering neighborhoods such as Fort Totten, Brookland, Brightwood, Trinidad and Kingman Park.

When it comes to predicting long-term value, there is no crystal ball. But you can do your homework by reviewing commercial and residential development plans and reading the latest news. Local businesses are a sign of a vibrant community and larger cornerstone retailers indicate long-term investment in the neighborhood.

Consider transportation. Convenient access to downtown and proximity to a Metro station will help maintain home values in the long run. While a new restaurant can open quickly, it can also close quickly. A Metro station is a permanent feature.

As with any financial investment, the higher the risk, the higher the reward. The risk you run when trying to be one step ahead of the market is that the market can cool and development plans can be put on a hold or cancelled indefinitely. In a dynamic real estate market, there is a risk of hysteria. D.C.
has experienced some of that. In a frenzy to buy into the next hip neighborhood, some buyers paid more than a home was worth. Your agent should be able to advise you about the true market value of a property so that you can make an informed decision.

The neighborhood you chose will ultimately come down to your personal risk tolerance and what you are looking for in a home.

My co-op building is considering converting to condos and we would like to find out what costs are involved and if it will increase the value of our homes. Do you have any insight on that?

Condos do tend to sell for more than co-ops in our market, however this is often due to buyers' confusion about co-op structure and financing. Converting from a co-op to a condominium is a complex and costly process, which is why it is fairly rare in D.C. and New York, the two largest co-op markets in the country. I'm not a lawyer or an expert in this area, but most of what I've heard about the process indicates that the legal fees, administrative hurdles and overall hassle associated with the conversation would likely overshadow any modest value added to the individual homes.

In a co-op, owners own shares of a company, which owns the real estate. In a condominium, the owners own the real estate directly. Converting from co-op to condo requires completely dissolving the corporation and creating the new condominium by-laws from the ground up. The costs can vary based on a number of factors, including the number of shareholders, the amount of the underlying mortgage, and the personal finances of the individuals involved.

The process is likely to take several years and requires a lot of effort on the part of shareholders. The New York Times wrote a helpful piece on the process and you can find additional resources from and Habitat Magazine. Here are a couple of challenges and issues to consider:

· Reaching consensus: Depending on the size of your co-op, getting the necessary share of approvals per your by-laws could be a significant hurdle in and of itself. If your co-op is small and the majority of owners want to convert, the process is likely to be quite a bit smoother.

· Paying off the underlying mortgage: If your co-op has an underlying mortgage, the co-op corporation will need to be pay it off in order to convert. Depending on the terms of the underlying mortgage, pre-payment fees could be levied. Individual shareholders individual owners would need to trade in their share loans for mortgages, and pay their share of any underlying mortgage.

· Understanding the tax implications: According to, "Depending on certain variables, conversion could trigger substantial tax ramifications for both the co-op and its shareholders." You'll need to consult with real estate attorneys and accountants to determine the tax consequences for co-op and individual owners.

While a difficult prospect, conversion is not impossible and may make sense in some situations. You can also consider if altering your by-laws to give shareholders more flexibility would be a better and easier alternative than a full-scale conversion. If you are serious about this option, your co-op should speak with a real estate attorney to discuss your specific situation. There are firms, such as the Hutton Group, that specialize in this process.

Why do some buildings, including many in Southwest D.C., often have such high homeowners association fees?

Condo and co-op fees can vary significantly from building to building, which is why it's an important consideration before making the commitment of buying. Fees typically also include landscaping and custodial services for common areas, trash removal and master insurance policy. They also maintain a reserve fund for capital expenditures. In some cases, condo fees cover utilities, internet and cable, which is an important consideration when planning your monthly budget. Likewise, many condos in the area have pools and gyms, which are appealing to some buyers who hope to cut out their gym membership expense when the buy a condo. Of course, a high condo fee can also be a sign that there is an issue with the condo's finances. It may be an indication that the condo association has had problems with other condo owners falling behind on their payments.

In co-op buildings, it is important to remember that the monthly fees cover property taxes for the building. Unlike in a condo, you will not get a separate bill for your property taxes. So if you calculated the monthly property tax rate, the monthly payment may seem more reasonable.

If you're alarmed by a co-op or condo fee, certainly ask the listing agent for information. If you go under contract on a condo in D.C., the seller must provide you with the full documents, which include financial information, community bylaws, and information on upcoming assessments. You'll have three days from the time you receive the documents to review them. During that time you can void the contract if any information is concerning or unsatisfactory to you.