If you’re a first-time homebuyer who’s considering buying a condominium, you should be prepared for some of the pitfalls and benefits that come with owning a condo.
Condominiums are popular among first-time homebuyers because they are more affordable, easier to maintain, and often in neighborhoods with better access to nightlife and activities. You’ll also often find amenities you would otherwise be unable to afford like a gym or communal pool and you won’t have to worry about lawn maintenance or snow removal.
However, not all condominiums are created equal. While condominiums can offer splendid housing for a mix of singles, couples, and families, some communities tend to be dominated by a single demographic. Management styles can also vary drastically, as can community restrictions and rules. Here are some important things you’ll want to consider and talk about with your real estate agent before you buy a condo.
1. Know where your monthly homeowners association fees are going.
Do your homework and compare building amenities with the homeowners association fees charged by various condominium associations. Many people assume that buildings with more amenities will charge higher fees. However, larger buildings have more tenants, and this enables them to spread the cost across a greater number of community members. You may find that smaller buildings with fewer residents and no amenities charge similar fees or higher.
Make sure you are aware of what your association fees are paying for. A certain percentage should be put into a reserve fund for repairs and improvements. Condominiums less than 10 years old should retain 10 percent and those 10 to 20 years old should allocate approximately 30 percent to reserve. You’ll also want to know if any of the residents are delinquent on their fees. If the community is mismanaging funds, you and the other homeowners could end up with a substantial bill if an issue comes up.
2. Understand each community’s restrictions and rules.
Make sure you review all of the condo rules carefully. Some communities do not allow pets while others have size, breed, and number of pets restrictions. Residents may not be allowed to plant flowers or have to abide by guidelines about window treatments. If you want an investment property, some condominiums prohibit renting your unit out. If you operate a home business, be aware that some condos disallow any business to be conducted in the unit. Be certain that there are no restrictions that you are unable to live with.
3. Compare insurance savings.
The homeowners insurance premiums for condominiums are usually significantly lower than those for single family residences of the same value. This is because the condominium association has a master policy that covers a portion of the building’s structure. Review the master policy with your insurance agent to determine if you are eligible for a discount.
4. Be aware of the lifestyle the condo caters to.
Living in a condo means you’ll be more immersed in the community than you would if you had a single family home. Therefore, you should do your due diligence regarding the lifestyle in the community and what your neighbors are like before you commit to a purchase. If you are raising a family, you may feel more comfortable in a community with other families than one that caters to recent college graduates. You may also consider introducing yourself to some of your prospective neighbors to see if they are the type of people you would get along with.
5. Take note of the conveniences and amenities the condo offers.
One of the biggest benefits of condo living is that the association is responsible for most repairs and maintenance. They ensure the lawn is mowed, snow is removed, and the grounds are landscaped. Any building repairs such as roofing or siding are handled by management as well. Many condos offer amenities such as gated security, a pool, gym, tennis courts, and playgrounds which are also maintained by the association. You may want to review the association’s meeting notes if possible and discuss the timeliness of repairs with current residents. If the management has a habit of procrastinating when it comes to making repairs, you’ll want to know before making a commitment.
6. Meet the management.
You should speak with the onsite managers personally and ask the other residents about their performance. An ineffective management team can make your life miserable. In some cases, you’ll find that the condominium is managed by the residents and they aren’t working with a management company. While this usually reduces the cost of HOA fees, you should consider whether or not you want to take on the additional responsibility.
7. Research upcoming changes in the neighborhood.
Be aware of any new developments planned in the vicinity of the condo you’re considering. If you’re buying a home because of the beautiful view of the river, you may be disappointed to find that a building project is underway that will block the view. Research the building’s proximity to shopping, dining, and other establishments you frequent, and find out if any new businesses are moving into the area. Take a look at the crime statistics for the neighborhood. The surrounding area can have a significant impact on your property value.
8. Know what your purchase includes.
Read the deed for your unit carefully so that you understand your responsibilities. There may be a patio or balcony attached to your unit. Find out if you actually own it and must take care of any maintenance and repairs or if it is maintained by the management. You will also want to know if there is additional storage for bikes, skis, or other recreational equipment. The number of parking spaces allowed may be an issue as well. If you own a boat, you’ll want to find out if there is space to park it.
9. Understand the differences between condo and single family home market values.
When performing a real estate market analysis, it’s important to remember that condominium home values are lower than those for single family residences. You are purchasing a part of the structure, but you do not own the land. In addition, HOA payments for a condominium are typically not tax deductible.
