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In today’s market, when it’s hard to find just the right home because of low inventory and strong competition, more buyers than ever are considering condominiums as an alternative to single family homes. Condos are also a popular choice for many people because they offer a low-maintenance lifestyle and often come with amenities like a pool, gym, clubhouse or other features. There are also some potential tradeoffs when buying a condo, such as condo fees and rules and regulations. Today’s article will focus upon things that buyers should keep in mind when considering the purchase of a condo.
Condo Fees: Let’s start with the most important thing that comes to mind for most buyers. One of the biggest expenses associated with owning a condo is the monthly condo fee. This fee covers things like maintenance, repairs, and insurance for the common areas of the building. Make sure you understand how much the condo fee is and what it covers before you buy. You don’t want to be surprised by a high fee that you can’t afford. Fees can range from $75 all the way to $500 or more per month. When looking for a condo, it’s a good idea to compare the monthly fee with those of other similar associations in the area. It’s also important to be aware that your lender will take your condo fees into account during the underwriting process for your loan. If the fees are too high, your lender may determine that your income level is not sufficient to afford your monthly mortgage payments.
Eligibility for Financing: Not all condos are eligible for certain types of financing, such as FHA loans. If you’re planning to use financing to buy your condo, make sure you check with your lender to see if the condo is eligible for the type of loan you want. If you have an FHA pre-approval, but the purchase price of the condo is significantly lower than your pre-approval amount, you may consider asking your lender if you could be approved for a lower amount with a conventional loan, which would eliminate this concern as well.
Rules and Regulations: Condos often have rules and regulations that govern things like noise levels, pet ownership, and renovations. There may also be rules about whether or not you can rent your condo out. Make sure you read and understand these rules before you buy. In Wisconsin, we have the right to rescind an offer to purchase within 5 days after receiving all of the required disclosure documents. This is a very powerful element of real estate law in our state. The buyer is not required to specifically state what detail contained within the documents they object to. They only need to provide a written notice of objection to the seller. This is something to keep in mind if writing in competition vs other buyers. If at all possible, it may be recommended to obtain all the available documents and review them before submitting an offer. If you are comfortable with the details of the documents, you may consider waiving the future rescission rights in your offer to put the seller’s mind at ease that you won’t be backing out in a few days.
Financial Strength of the Association: The condo association is responsible for managing the building and collecting the condo fees. It’s important to make sure the association is financially stable and has enough money in reserves to cover unexpected expenses. You can ask for a copy of the association’s financial statements to get a better idea of their financial health. Each condo association will have a reserve fund, which is more or less a savings account set aside for big projects. Naturally, the larger this fund is, the more prepared the association will be for eventual repairs or renovations. Having too much money in the reserve account may not be a good thing, however. It could indicate that the association has been reluctant to spend money when needed, or that the fees are too high. Furthermore, large amounts of money are often in danger of mismanagement or fraud, and must be earnestly guarded against both. When in doubt, ask questions.
Amenities: Condos often come with amenities like a pool, gym, or clubhouse. Make sure you understand what amenities are included with your condo and whether you’ll have to pay extra for them. Also, consider whether you’ll actually use the amenities. If you’re not a swimmer, for example, a pool may not be a big selling point for you. Also, if you’re likely to use certain amenities regularly, you’ll want to know the rules associated with that use. Things like kids playing unaccompanied at the pool, or allowing guests to use the fitness center are details that you’d rather know in advance.
Parking: Parking can be a big issue in some condo buildings. Make sure you understand how many parking spots come with your condo and whether there are any restrictions on who can park in them. If you have more than one car, make sure there’s enough parking available for you and any guests you may have. If your guests come to visit you and park their vehicles in an unauthorized area, you can bet your last dollar that someone from the association will complain. Again, understanding these things up front can save a lot of inconvenience.
Some condos have one or more parking spaces that are actually deeded separately, which means they possibly may be sold independently from the condo itself in the future. Be aware that you may be responsible for additional taxes for these deeded spaces.
The Condo Itself: Finally, make sure you take a close look at the condo itself. Check for any signs of wear and tear, such as cracked tiles or peeling paint. Make sure the appliances are in good working order and that the layout of the condo works for you. If you’re not comfortable with the condition of the condo, it may not be the right one for you. A general rule is that anything from the walls of the condo inwards are the responsibility of the owner, and the rest is the responsibility of the association, but there are plenty of exceptions, and you’ll want to know the specific rules of any property you’re considering. If you like the condo but will want to make some alterations, it’s important to find out in advance what level of remodeling or construction is allowed by the association as well. Have your Realtor check with the listing agent if you have specific questions.
Buying a condo can be a great choice for many people, but it’s important to do your homework before you make a purchase. Consider all the factors above and make sure you’re comfortable with the condo and the condo association before you sign on the dotted line.
Do you have questions about buying a condo? We’d love to hear from you!
