Buying a condo can be a great option for first-time homebuyers, as well as retirees who have decided to downsize from a large single family home to a maintenance free lifestyle that a condo provides. For a number of people, it can be a better, more affordable alternative to a single family home. And at the same time, still giving you ownership over an asset that will appreciate in value over time.
Condo complexes offer a wide variety of amenities which can include; a pool, fitness area, party room, park, playground, dog area, heated parking, and 24 hour security with doorman. Keep in mind however, the more amenities a complex offers, the higher the assessment fee may be. Based on your lifestyle you can choose which amenities are most important to you, and ones you can live without.
Here are things to consider before jumping into buying a condo.
What is a Condo?
It’s important to know exactly what a condo is. A condo, (short for condominium) – is likened to an apartment unit. But unlike an apartment, you own the individual unit that sits within a multi-unit complex. The owner holds title to their individual unit but shares ownership of the common areas with other owners.
The common areas are managed by a homeowners association, and the association establishes a fee that owners pay that cover their expenses and budget. The fee is also based on the size of the unit, so owners of larger units tend to pay a higher fee.
As a side note: What I just described is a standard condominium. However, there are also properties that are classified as a condo. A townhouse for example can be classified as a condo. When buying this type of townhouse, you’re taking ownership of the structure and the land that the structure sits on, but any land surrounding the property is common area. So if you want to add or change anything within the common area you’ll need to get permission from the homeowners association. This is something to keep in mind.
Homeowners Association Rules and Regulations
Since each complex has a homeowners association, it makes sense that each association has its own set of rules and regulations. Therefore it’s important to learn as much as you can about what those rules and regulations are before you finalize your decision on which condominium to buy to make sure you can abide by the rules that are in place.
Here are the 10 important questions to ask before you buy:
1. What are the rules regarding renovations?
You find a unit that you are interested in but you’d like to make some changes to the interior. You may consider opening up some walls to give the unit an open concept floor plan. Or a kitchen renovation that would entail moving some plumbing.
Although, owners own everything in the unit from the walls in, the homeowners association may have restrictions in place regarding major renovations. Ask your real estate agent to find out if what you’re planning is possible before you buy. Because if not making the renovations is a deal breaker, you would not want to find out later when it’s too late.
2. Can the condo unit be rented?
Before buying a condo, you’ll want to know if the homeowners association allows the unit to be rented. And if so, does the association have a rental cap in place and has that cap been met.
This information is important for several reasons. If you are financing the unit, the lender may be looking for a low owner to renter ratio per their lending guidelines. Another reason could be that if you’re a first time home buyer, and down the road when you decide to move, you may want to keep it as an investment. Or you may decide that you prefer to buy in a complex that is all owner occupied.
3. Are there any upcoming special assessments?
A special assessment can be charged to the condominium owner when a major repair is needed to the buildings, such as a new roof. Or to any of the common areas, such as a concrete walkway or patios. It’s important to ask if they have any future plans for these repairs and if there is enough in the reserve fund to cover them. Knowing up front will eliminate any surprises of a special assessment a year or two down the line.
4. What is the pet policy?
If you’re a pet owner, check to see if the homeowners association allows pets. Some are pet-friendly, some are not. Several associations will allow cats but not dogs. If they do allow pets they may have a restriction on the number of pets allowed, the pet’s weight, and they may have a restriction on the dog breed. So before going out to look at places, mention it to your real estate agent that you are a pet owner and they’ll show you complexes that are pet-friendly.
5. What does the assessment fee cover?
Assessment fees are paid monthly to the homeowners association. A portion of the fee goes to the reserve fund, and a portion of the fee covers the upkeep and maintenance of the buildings, and amenities. As well as common insurance. In some cases, the fee also includes some of the common utilities.
6. Is the parking spot included with the condo unit?
In my area it’s safe to say that parking is included with the price of the condominium, however in many major cities you’ll have to pay extra for a parking spot, if you’re even lucky enough to find one that’s available. So if parking is important to you, consider if outdoor parking will work or if you prefer indoor parking. This will help you narrow down the complex that offers the parking of your choice.
7. What are the amenities?
Amenities can include things like, a pool (sometimes indoor & outdoor), a tennis court, a volleyball court, fitness area, sauna, party room, park, playground, dog area, heated parking, and 24 hour security with a doorman. Knowing the amenities you’d want, along with the location and your budget, will help you find the perfect place.
8. Is the condominium complex FHA approved?
If you’re pre-approved for FHA financing, you’ll want to make sure the complex is FHA approved. Your mortgage broker can help you determine whether or not the complex is FHA approved. You can also search for FHA approved condominiums here.
9. How often is the interior/exterior maintained?
While you’re out touring the multiple condominium units be observant of the condition of the common areas. Are the hallways and lobbies clean? Is the elevator clean? Is the landscape kept up? Find out how often these areas are cleaned, and maintained. This may seem like a minor detail but this minor detail does have an affect on the value of your condo. The way a complex and amenities are maintained will either have a positive impact, or negative impact on the value of your condominium. Therefore this is important to know before you buy.
Buying a condo can be a great option for you, but it’s important to be armed with all the information about the unit and complex to help you make the right decision on which one will best fit your lifestyle and budget.
Additional Condo Buying Resources:
What is A Condominium Homeowners Association (HOA) – this article goes into detail about what exactly a homeowners association is. It shares the positives and negatives, and helps you decide whether or not a homeowners association is right for you.
Should You Buy a Condominium or a House? – this article will help you determine by comparison if either a condominium or house is right for you.
Benefits of Owning a Condo – this article lays out the many benefits of owning a condo. As well as some questions to ask prior to buying a condo.
Selling a Condo – The Extra Steps – this article shares the difference in selling a condo versus a single family home. It gives you in detail all the additional steps you need to take when selling your condo.