Rev. April 27, 1995
Reyem Affiar was relieved. After three months of searching, Affiar had finally found a condominium he was interested in purchasing. Although the condominium1 (described in Exhibit 1) was exactly what he wanted, Reyem was unclear about how much to offer for the unit. While he was willing to pay as much as the asking price of $169,000, Affiar thought he could conceivably buy the condominium for less (see Exhibit 2 for a description of the condominium purchasing process).
The next day, May 4, 1994, Affiar had a meeting with his real estate agent. At that time, Affiar planned to make an offer on the two-bedroom condominium at 236 Ellery Street. Reyem had data on Cambridge, Massachusetts condominiums sold in the past five years (Exhibit 3). [See Exhibit 4 for a map of Cambridge and Exhibit 5 for a map of the neighborhoods around 236 Ellery Street.] Affiar was hoping that an analysis of the data would provide him with insights on how to bid and perhaps save him thousands of dollars.
1A residential condominium or condo is a dwelling in which the units are individually owned. Condominium
complexes vary in size from as few as two units to as many as a hundred or more units. A condominium owner owns the space inside his or her unit and a proportion of the common space (grounds, hallways, stairwells, etc.). Each owner typically pays a monthly condominium association fee or condo fee to maintain the common space and in many cases cover the cost of utilities such as heat, water, and electricity. Professor George Wu prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
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Description of 236 Ellery Street Condominium
Five (two bedroom, one bath)
1040 square feet of interior space
Monthly Condominium Fee:
Annual Property Taxes:
Put on market:
April 11, 1994
Rent Control Status:
In the event that owner wishes to let condominium,
restrictions apply on monthly rent owner may charge.
Synopsis of the Condominium Sale and Purchase Process
In Cambridge, Massachusetts, the majority of residential condominiums are sold and purchased through real estate agents. The seller chooses an agent (the seller’s agent or listing agent). A professional appraiser assesses the value of the unit, using factors such as the quality of the condominium building and neighborhood, interior square footage, number of bedrooms and bathrooms, and the condition of the unit. The seller and the seller’s agent decide on a list price (or asking price). List prices can change to reflect changes in the housing market or level of buyer interest. The typical price change is a decrease in the list price, although there can be price increases as well. The seller’s agent advertises the unit and arranges for open house and showings to interested buyers.
The buyer typically works through another agent (the buyer’s agent). The buyer’s agent can show the buyer most units available for sale, including units listed by other agents. When a buyer is interested in a particular unit, he or she submits an offer through his or her agent. The seller’s agent communicates the buyer’s offer to the seller. The seller may...