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Condominiums are simply a collection of units in a structure or structures. All property on the interior of the unit is yours with few limitations. Everything outside of the unit, however, is considered to be in the common areas and subject to administration by the homeowners association for condominium communities. When buying a condominium you are buying into a lifestyle. You really need to consider your personal circumstances to determine if a condominium is the best choice for you.
Low maintenance is a trade-off for shared responsibility.
The amenities that a condominium lifestyle can offer are irresistible. Where else can someone get a security guard, swimming pool, or an exercise gym only steps from their front door. The price for those conveniences and more is sharing. A condominium means shared walls and shared amenities. So the first thing you need to ask yourself is, "Do you like to share?"
A neophyte condo buyer needs to know that low maintenance obligations and security are offset by monthly assessment fees and adherence to the association's regulations. While a single family home would have to be maintained by the homeowner at his/her own expense, there is a corresponding freedom from regulations, unless the home is situated in a planned or gated community governed by a homeowner's association.
Look at the comps.
Comparables of other units don't tell the whole story. They typically don't offer much information about condition, an important factor when deciding what to pay for a home. Sellers use comps to price their units, so the value should be in alignment with other similar units that have sold or are being offered for sale.
Review the rules.
Condo owners are required to follow the rules of the association, even those they do not like, and the rules are not easily changed. For example, rules governing pets or decor often are a make-or-break issue for buyers considering a condo.
Look at resale.
Every home that is bought must one day eventually be sold. When your buyer is thinking condo, you need to understand the drawbacks to some association rules. Some condo associations have regulations that require that units can only be sold to owner/occupants. That may sound wonderful on the surface, but it could seriously restrict the buyer when it comes to resale. Limited buyers always cause housing prices to drop. Renters constitute about 50 percent of the population. Thirty percent of condominiums are bought by investors. Are you comfortable excluding such a large segment of the market from purchasing your property upon resale?
Get to know the association.
Some associations simply spend too much money or don't spend it wisely. Excessive association fees will restrict the resale price of your unit. Know the average fees charged in your area. Your sales contract should always specify that the contract is subject to receiving the condominium declaration, by-laws and budget. You should have ample opportunity to review the condominium documents during the approval period.
Another important topic that deserves your attention is the condominium's management structure, including the board of directors and the day-to-day manager. It is important to investigate the health of the condo association prior to buying. Buyers should not be afraid to call and talk to the association president. Request a history of assessment charges for the last five years. If the condominium is professionally managed, call the management company and ask questions about its role and objectives. It's also important to understand what your monthly assessment paid to the association will cover, because that can vary widely. Assessments typically cover maintenance costs, water and sewer charges, insurance, garbage pickup and specifics such as snow removal. But while some associations also include heating and air conditioning costs in the assessments, others don't.
Perhaps even more vital is getting a clear picture of the association's financial situation. Look at the reserves for major improvements and repairs. Are the assessments charged sufficient to cover the annual operating overhead? The association should not be operating at a deficit regularly although there may be times when you must make allowances for unplanned but essential expenditures. Also, the association should be adding to its reserves every year. Look at an association's actual reserves and compare them to its plans for future improvements. Consider the age and condition of the building.
Purchasing a new residence involves many issues and condos may be on your radar. Before you buy, keep in mind there are disadvantages to condominium ownership.Back to Top
Condominium advantages include:
1. Condominiums are cheaper than stand alone homes. Universally, you will find the lack of a yard makes condominiums a cheaper buying option when compared to the rest of the real estate market. This makes condominiums a good real estate option for first time buyers, as they are often able to get into one when they otherwise would not qualify for a loan for a tradition home.
2. Condominiums are also excellent options after the kids are gone. Once kids are out of the home, you'll find the space in your home is no longer necessary. Many parents will downsize to a condominium and use the cash windfall from a home to take early retirement. This trend is occurring with greater frequency as the baby boom generation begins to retire.
3. Condominiums are also excellent options for people that travel a lot. If you have to travel for work, you know the problems that can arise from having a home sitting empty for weeks or months on end. Burglaries, graffiti and so on are natural results of leaving a home empty. With condominiums, it is much harder for someone to tell if a person is home or not. This makes condominiums very popular with pilots and certain sales people.
4. A detached home requires a lot of maintenance to keep it in good shape. A condominium also requires maintenance, but the homeowners' association is responsible for the upkeep. Generally, the constant attention provided through the homeowners' association makes condos a better long term maintenance option.
Condominium disadvantages include:
1. Parking – One of the biggest pet peeves with condominiums is parking. While this may sound petty, it becomes a big issue over time if a particular situation occurs. One would think a condominium comes with assigned parking. In many developments, however, this simply isn't the case. Instead, parking is on a first come, first serve basis. Over time, this situation can become extremely aggravating. With guests in the neighborhood, you may eventually find it difficult to getting parking!
2. Restriction – Condominiums are all about uniformity. If you prefer to express your individuality, the rules of a condominium may drive you insane. Since people live close to each other in condos, there has to be a number of rules to keep the peace. Many condominium associations, however, seem to go overboard with rules and one can often feel like a prisoner. You may be restricted from having pets, particular types of material in your units, renting to others, making noise outside during certain times and so on. Before taking the plunge on a condominium unit, you absolutely must read the rules and regulations for the association.
3. Association Fees – Homeowners' associations need money to keep the gardening up and so on. As a unit owner, you are responsible for paying monthly homeowners' association fees. Before taking the plunge, you need to make sure you understand the current fees. You should also look back in time to see how much the fee has risen over time. Paying an extra hundred bucks or so a month probably will not kill you, but what if the monthly fee is five hundred dollars?
The decision to purchase a condominium can be a complex one. Make sure you understand what you are getting into before taking the plunge.Back to Top