They are a lifestyle: Well in my market anyway!
I have met many buyers who really wanted an Single Family Residence but inquired on a condo. They have images of grandeur that believe that since a condo is priced lower, they will have a lower payment. :record scratch hold the phone:
When you buy a condo, you are only buying a lifestyle. You end up paying for the amenities and and the lack of yard & exterior maintenance. You are also speculating on future returns as condos are more succeptible to price fluctuations than a single family residence. Condos are not good products to buy with 100% financing. In fact, underwriters do not like to see too much of the same type of financing in a single complex.
Construction defect litigation can lower your value because of rate hits and speculative association dues increases. Check into your state's laws in regards to construction defect litigation.
You pay for it in the form of association dues, rate hits and speculation - which in my market, can earn you on average 20% more buying power (and easily put you) in the Single Family Residence market.
When considering buying a condo:
It is important to read the association bylaws & financials. Read Ardella DellaLoggia's blog on this. Not only should you be careful and make sure you can live with every little law the community has, you need to pay attention to investor (rental) caps and the financials.
Weigh the affordability:
- Association dues can be astronomical. Make sure you check the cap on yearly increases. Find out what amenities and bills your association coves.
- While you may not have to pay for homeowner's insurance, you still need a renter's type of policy on your personal property. Sometimes that type of policy can cost you more than a homeowner's policy which includes personal property.
- Watch for rate hits: 100% financing, financing a condo and construction defect litigation can affect your interest rates. Be aware of this and get a rate quote from a knowledgable mortgage broker prior to even considering a condo.
Make sure you read the preliminary title report. Make sure the deeded parking is in there. Make sure the title insurance will cover issues that may arise against that assigned parking spot in the future- YOU ARE PAYING FOR THAT SPOT! Read Laurie Manny's blog about this!
If you are buying a condo simply because you feel you are priced out of your single family home market, make sure you interview Realtors who have product knowledge in your market so you can buy the right affordable product you are looking for!
All the Best,
Realtor®
Nevada Realty Solutions - Your Dream, Your Investment, You\'re Home!
8942 Spanish Ridge Avenue
Las Vegas, NV 89148
direct: 702-580-1783
fax: 702-995-8237
Renee@ReneeBurrows.com
http://www.ReneeBurrows.com
My wife's Association Dues were $300/month at her last condo! OUCH!
You have to love Southern California...
20% Down, Bought for $359,000
Principle,Interest,Taxes,HOA Dues = $2300/month for 900square feet of space...lol
Scott
We have some terrible fees in some condos due to the insurance crisis that Florida is suffering from. The trickle down effect of big insurance.
There are other little known factors involved in owning a condo. When you own a condo you are a part of a community and subject to the financial and structural stability of that community.
Here in Southern California we are in an earthquake zone. Does your HOA have earthquake insurance? Many did not when the Northridge earthquake devastated the San Fernando Valley and Los Angeles at a time when many owners had 2nds and 3rds on their properties and were upside down. When the dust settled and the condos were red tagged (condemned) one after the other, the banks were left holding the bag and the owners were foreclosed on. The things you do not read about in the news.
Poor construction is another factor. I am currently acutely aware of a complex that is struggling to survive due to poor construction. While they won litigation against the builder a really poor HOA board hired really bad attorneys and really bad contractors to do the work. The building was stripped down inside and out, and the contractor stripped the bank accounts too. Out of money the building stands there as a shell. Yes the residents still live there, it is appalling. They have no choice. Many of them are retired and on fixed incomes with no where else to go. Litigation's continue with the high hope that justice will be done and the money will come back to them. Unfortunately here in California when a general contractor has his license pulled or gets into trouble they can fold their company down and open right back up under a different name and in essense, just walk away. Some system, huh?
They cannot sell, no lender will close a loan. A couple of units actually sold in this complex in the last year. The current state of the building was not disclosed to the lender. Upon investigation it was uncovered that the appraisers gave the lenders pictures of the building prior to the devastation in order to get loan approval and close on the property. Can you say Bank Fraud?
These are rare cases, but as Adam Smith said "Let the Buyer Beware"!