by Brandon Scott
Buying a home is an extremely personal decision and, rightfully, for many people the chores of owning a property can be off-putting. Condominiums, commonly called Condos, are typically the default for those buyers. To set the stage, let’s define condos as a housing option complete with individually owned units centrally located, commonly in a single building, and governed by an association. Let’s be clear, this definition is narrow but should cover the bulk of traditional condos. Legally a condo can be almost anything, it’s really at the discretion of the developer and how the lots are defined with the city or county.
For me, having a condo is like owning your apartment, which in part is the concept. People want the convenience that condo communities provide, or proximity to a city center, transportation and limited responsibility for yard work. Now, individual owners own the space within their four walls and have access to whatever common spaces that are available. For that access, you’ll be charged a condo association fee. This fee is the cost associated with the communal aspect of living in and managing the conditions of the property. These fees will vary based on the condo community, in fact, there are some condo communities that are self-maintained that still charge a condo fee. Beyond yard work, the fee can cover a host of other bills or amenities, like water and snow removal to pools and a workout facility. And, let’s not forget that condo communities have a full and involved board and set of rules. With the backdrop set about condos, in part, let’s dive into what you should know and consider when buying a condo.
First, the rules and the by-laws of the condo are king. Each condo community comes with their own rules, also known as covenants. These rules govern the property and impose certain limits and identify any practices that every member of the community must adhere. This may sound more ominous than it really is, but stay with me, covenants can include everything from parking and visual requirements of the property to the number or percent of owners that can rent their home. When it comes to any condo community, it’s very important to review the condo association documents and covenants. Unfortunately, there is not a general repository for the documents before you buy the property. Rather, these documents are ordered from the condo association and provided to you for your review as part of purchasing a home in that community. So during the buying process, I’ll request those for you as your agent. Fun fact, many condo associations charge to produce/replicate and send out condo documents. Who do you think pays that fee? Yea, not the buyer.
Second, condo health. This may sound weird but hang in there. A condo is made of an association, which not only includes by-laws/covenants, but also includes the condo board. The members govern the business of the association to include accounting, expenses, grounds maintenance, and condo fee payment amount. A well-managed board can make the different between a positive and a negative owner experience. It is hard for your agent to have this level of detail, so I recommend speaking with owners in that building. Also, learn if there are monthly meetings and, if your timing is right, try to attend before the close. Another option is to find out the members on the condo board and reach out to them directly. Getting an idea and feel of whom they are will also give you invaluable insight into the community that you’re joining. Remember, when you buy a condo you are not just buying a unit but you are buying into a very close-knit community. I don’t mean to suggest you’ll know all your neighbors, but compared to detached owners, you may see your neighbors more often like using the elevator or stairs to access your respective units. Condo health is also important for long-term value and appreciation. If your association ensures that every, or most, owners are paying their condo association fees that means better control over their delinquency rate. Condo delinquency rate is very important for two reasons a) a high delinquency rate could eliminate certain types of buyers, such as FHA because the rate is too high and considered a higher risk for an FHA loan, b) even many conventional lenders shy away from making loans in a condo community with a high delinquency rate and may require more cash up front and limit the use of down payment assistance programs. Beyond the delinquency rate, property/capital investment should be another area of consideration. Consider this, if you move into a community and notice all of the homes need to have their roofs replaced you may see an increase in your condo fees, if that’s considered an association capital expense.
Third, the scope of fees and services. The fees and services offered by a condo can and will vary. Typically, the more amenities offered the higher the fee. It’s important to ask your realtor what the condo fee is and what amenities are covered as part of it. In some instances, you may find that some or all of your monthly utilities are covered as part of your condo fee. While that is the exception and not the rule, you never know until you find out. Also, identify if parking is included or a separate cost. For some condos, parking is paid for and the space is a separate cost from the unit, or the two entities are not deeded together as one property.
Finally, approvable. Not all properties are created equal and this runs true for condos, especially if you are using federal programs. While a community may be defined as a condo it may not be approved for financing via conventional or a government back loan, such as a VA home loan. Additionally, it can depend on the lender restrictions, so disclose to your lender that you’re interested in a condo in advance. Another approach is to have your realtor confirm if there have been other recent sells in the building. The realtor can see the type of transaction which will give more insight into the status of the property. One last resource is the Housing and Urban Development office, or HUD, that offers a list of approved condos that you can research here.
Condos are a great option no matter what phase you are in life. And there is certainly a condo that will me your needs but it is important that you’re not blinded by the simple beauty of a renovated or new property build. It’s important that you investigate your rights and the responsibilities as a future resident of your new community. Remember your realtor is and should be your first resource to help your navigate the waters and ensure you have a seamless transaction. I look forward to being your resource for all of your related Real Estate needs and questions.
Brandon Scott is a licensed real estate agent in Washington, DC, Maryland and Virginia. His license hangs with Coldwell Banker Dupont-Logan, DC. He’s been involved in the mortgage finance industry for the last 16 years in various fields. You can reach him by email at [email protected]. Subscribe to his YouTube Channel at RealTea DMV