What to know before buying a condo?
There’s no denying that buying a condo is a smart investment for many, but owning one does come with its own share of issues and considerations. If you haven’t invested in a similar property before, you’ll be surprised by the vast differences between owning a house and a condo.
So, before you jump on the opportunity to be a homeowner, here’s a list of the things that you need to think about.
What is a condo?
But, firstly what exactly is a condo and how is it different from a typical house? A condo, short for a condominium, is essentially one unit within a much larger multiple-unit property. Like any other apartment, you obtain ownership of your unit, the land beneath it, and a proportional share of the amenities within the community. These amenities may include a gymnasium, parks with demarcated dog-walking areas, sports complexes, swimming pools, etc.
A dedicated association is set up for the maintenance of these public spaces. The members of this association are responsible for hiring a resource management company to keep everything in order. You may be required to pay a certain sum of money as maintenance fees on a monthly or yearly basis. The money collected is also taken care of repairs and regular upkeep.
Is a condo the right choice for you?
Condos are on the rise in urban settlements to keep up with the demands of increasing rates of urbanization and migration of village folks to modern metropolises. So, a condominium might be the perfect choice if you’re a city dweller who doesn’t mind being amidst the hustle and bustle of the city. But, a lot of these buildings may not have assigned parking and since you’ll be sharing common areas with other homeowners, your privacy may take a hit as well.
A condominium is also a great choice for a first-time homeowner who doesn’t have the means to be able to afford a significantly expensive single-family home. The other advantage to owning a condo is that it’s comparatively low maintenance. This makes them a popular choice among senior citizens who have planned out their retirement beforehand. Property taxes are lesser as
Owning a condo also means that you comply with a set of rigorous guidelines put forth by the Homeowners Association (HOA). These rules state what you’re allowed to do and what you’re refrained from doing as a homeowner. They’re quite extensive, covering even trivial matters like trash disposal. It might not be a smart choice on your part to invest in a condo if you find it hard to abide by these regulations. You run the risk of being fined or worse, sued in case you choose to disregard the specifications laid down.
Is it easy to avail of home loans for a condo?
As it turns out, it’s harder to get a loan sanctioned for a condo. Lenders are very hesitant in shelling out cash when it comes to condos and laying down a number of conditions. They may insist that a specific number of units be owner-occupied prior to you buying one of them. This number can be as high as 90 to 95 percent sometimes.
There may also be restrictions on the number of units you’re allowed to buy at once. Some lenders are wary of handing out loans to individuals who own more than 10% of the units in a specific building or apartment complex.
What are the additional costs you can incur?
Other than the maintenance fees that we discussed earlier, you may end up with additional costs in the form of homeowner’s insurance. While the Homeowner’s Association does end up offering insurance, there are some extra benefits to those from other merchants. For instance, Lemonade condo insurance takes care of legal and medical costs if someone ends up getting hurt at your place, as opposed to protecting just the dwelling and your personal property inside it. In addition to this, a homeowner’s insurance will also cover the living expenses incurred while you reside in a motel when your condo is destroyed by either a natural or man-made disaster.
Tips to finding the right condo for you
1) Have a clear idea of the amenities you want
Like we mentioned earlier, a condo does with a number of amenities like gymnasiums decked with state-of-the-art equipment, swimming pools, sports complexes like a tennis court or a basketball court, and parks to catch a breath of fresh air. Since you’re expected to pay a hefty amount for their maintenance, it only makes sense to pay for the services you’ll make use of. So, it’s recommended that you make a list of amenities that are absolute must-haves for you before you go hunting for your dream condo. But, this is a fine balancing act since the absence of one of them might affect the resale value later on.
2) Take a closer look at the association fees
While we’re on the topic of amenities and maintenance fees, it’s highly important that review the association fees and take a closer look at all that it covers. This step ensures that you save a significant amount of money in the long run as you’re effectively cutting down on additional expenses.
3) Conduct proper research on the resource management company
It’s not enough to just review the association fees, you’ll also need to research a little about the resource management company assigned for the regular upkeep of the property. Check if they have a website of their own and if there are any testimonials on it to back their claims. If you do have the time, try talking to their previous customers to obtain honest feedback on the services offered.
4) Hiring an experienced realtor
Navigating the intricacies of the property business can be hard for someone with little to no experience. So, it might be worthwhile to hire a realtor to do the hard work for you. They can help you to ensure that all the documents are in order and that the condo you’re buying is approved by the FHA. This step can go a long way in getting a loan sanctioned without any hassle.
5) Keep a close eye on special assessments
Special assessments refer to the extra charges levied on a homeowner when the condo association wants to fund a new project, like building an indoor badminton court for instance.
This decision is taken after a consensus is reached regarding its implementation by a majority of its members.
What you’ll want to do is obtain a copy of the financial statements of the association from the past couple of years. You may consult a lawyer or a financial expert for a second opinion regarding these reports. It is their responsibility to ensure that the finances are accounted for and determine if there are adequate reserves to fund projects, either current or future ones.