How different is a condo?

[axxy]

I've bought a house before, but never a condo.  What differences should I be aware of?  What should I do differently, than I would when buying a house?

[StartingOver10]

Buying a condo is added risk in that you give up certain things to live in a property with community elements.

The number one difference in purchasing is the condominium documents and financials.  Make sure you get a complete copy of the condo docs immediately upon entering a contract. Or before you enter a contract if you can get the docs. Allow yourself enough time to review during the inspection period. If you don't like either the financials or the rules and regulations or other aspects of the condominium, then make sure you can cancel without penalty. The normal condo rider allows 3 days for review of the documents on a resale and 15 days if you buy a new construction condo from a developer.

One of the biggest things I see is many people have no idea what documents they are supposed to receive. You are supposed to get:

1) Declaration of Condominium

2) Bylaws

3) Articles of Incorporation

4) Rules and Regulations (official Rules and Regulations not the summary format)

5)Copy of year end financial information and budget for next year if approved

6)A filled out copy of the condo questionnaire (Frequently asked questions and answers)

#6 will show you if there are lawsuits and special assessments too so it is important.

You have to be very careful when buying a condo. Check to make sure the condo financials are sound. If you don't understand them, take them to your accountant. Today in certain areas of the country the condo associations are 'running in the red' and you may not want to get involved with the condo if you know that critical piece of info.

When structuring a purchase of a condo, allow yourself enough time to review all of the above - so many people don't look at the documents until after purchase and that is not a good thing.  Know what you are purchasing. Not all condos have the same rules. Not all are financially sound. Not all are created the same at all...do your due diligence.

PS - it is tempting to skim the documents and not pay a lot of attention to this step of reviewing the documents and the financials, but don't skip it or treat it lightly. You can search the net for info on condo commandos and condo horror stories. Two quick examples: I saw a condo last week and the association was so badly run that they are $200,000 in the hole on a $1.5 million dollar annual budget every year - and of course, the only place they condo mgmt can go to for more money is the condo owners. Saw another one where the association has First Right of Refusal and they use it to prevent people from buying other than two investors that own the (now) majority of the units in a 400 unit complex. They are actively pushing current individual owners out. So please do your due diligence so you don't get stuck in something like the above.

[USF813]

I own a condo and if I had to do it over again I wouldn't. When I bought mine, and i'm sure this is still the case, the credit union wouldn't finance if there was too many renters in the complex. We've had quite a few forclosures and short sells and as a result, HOA fees aren't coming in and they've greatly reduced services. My HOA fee has gone up almost $100 in less than 10 years. I don't even know if i'll be able to refinance should HARP3 pass. One positive is insurance is usually less expensive because you aren't insuring the structure, just the interior and belongings. In 2004, we had damage from two hurricanes to the roof and it took forever to get the association out to fix.....at first they tried to pass the buck on us but I fought them tooth and nail. In my area, you can get a pretty good deal on a condo, but the association fees and association in general in a PITA to deal with. Unfortunately, buying a free standing home isn't much better because it's very difficult to get homeowners insurance, and when you do it's incredibly expensive. For instance, I have Liberty Mutual. They do write condo policies in Florida, but not freestanding home policies. IF you do go the condo route, don't buy anything more than five years old, and try to buy in a skyscraper vs. a complex.

In hindsight, I should have included it in my BK in '09 and walked away. But I was too proud to be a homeowner to do that. I am considering short selling it if I can't refi and being done with it.

[mortgagelaca]

Houses

• Private yard.
• Maintenance outside is always required.
• Not required to ask anyone if you want to paint your outside door or put on a new light or a new mailbox.
• No condo fees.
• You are responsible for all insurance costs.
• You have total control (within the law) of what you can do to your property

Condos

• Generally freedom to do what you wish inside (within the law and your condo agreement), but outside you normally need permission from the condo board for many changes and/or improvements.
• Monthly condo fees that usually include water and sewage, and generally in the case of apartment style condos heat is also included (if it is hot water heat, watch out for electrical heat).
• Exterior maintenance including snow removal and landscaping is taken care of by the condo association (from your monthly condo fees).
• Insurance that covers the exterior and the building structure itself are part of your condo fees (but you will need your own personal insurance for the interior and personal affects, much like renters insurance).

[lithium78]

My DW and I nearly bought a condo, but during the inspection we discovered that the basement was completely filled with black mold and the sellers had chosen to try to hide this from us.  In addition, when we called the Condo President to talk about the HOA and the neighborhood, it had really been the sellers who chose not to identify themselves.  Very shady.  We ended up cancelling the contract and buying a house instead.

Condos seem like a great way to save some money, but they have a lot of disadvantages.  You have to live by other people's rules and you don't have the freedom to do what you want with your own property.  You also have to deal with the drama that comes from sharing a building with other people -- many of whom have controlling personalities and sometimes really negative behavior.  

In the future, I would only be interested in a condo if I was retired and unable to keep up with the maintenance on a house anymore.  Otherwise, I prefer living my life as I see fit with minimal interference from others.

[djacks]

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@StartingOver10 wrote:

Buying a condo is added risk in that you give up certain things to live in a property with community elements.

The number one difference in purchasing is the condominium documents and financials.  Make sure you get a complete copy of the condo docs immediately upon entering a contract. Or before you enter a contract if you can get the docs. Allow yourself enough time to review during the inspection period. If you don't like either the financials or the rules and regulations or other aspects of the condominium, then make sure you can cancel without penalty. The normal condo rider allows 3 days for review of the documents on a resale and 15 days if you buy a new construction condo from a developer.

One of the biggest things I see is many people have no idea what documents they are supposed to receive. You are supposed to get:

1) Declaration of Condominium

2) Bylaws

3) Articles of Incorporation

4) Rules and Regulations (official Rules and Regulations not the summary format)

5)Copy of year end financial information and budget for next year if approved

6)A filled out copy of the condo questionnaire (Frequently asked questions and answers)

#6 will show you if there are lawsuits and special assessments too so it is important.

You have to be very careful when buying a condo. Check to make sure the condo financials are sound. If you don't understand them, take them to your accountant. Today in certain areas of the country the condo associations are 'running in the red' and you may not want to get involved with the condo if you know that critical piece of info.

When structuring a purchase of a condo, allow yourself enough time to review all of the above - so many people don't look at the documents until after purchase and that is not a good thing.  Know what you are purchasing. Not all condos have the same rules. Not all are financially sound. Not all are created the same at all...do your due diligence.

PS - it is tempting to skim the documents and not pay a lot of attention to this step of reviewing the documents and the financials, but don't skip it or treat it lightly. You can search the net for info on condo commandos and condo horror stories. Two quick examples: I saw a condo last week and the association was so badly run that they are $200,000 in the hole on a $1.5 million dollar annual budget every year - and of course, the only place they condo mgmt can go to for more money is the condo owners. Saw another one where the association has First Right of Refusal and they use it to prevent people from buying other than two investors that own the (now) majority of the units in a 400 unit complex. They are actively pushing current individual owners out. So please do your due diligence so you don't get stuck in something like the above.

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Good advice. I didn't consider any of these things when i bought mine in 2008, but I was very fortunate. I've been very happy with my condo. Values were very high before the housing crash and took quite a hit during the crash, but have increased substancially with the housing market improving. I believe I made a good investent and have nothing but good things to say about the association. It's true you have to live by their rules in regards to the exterior, but many neighborhoods with freestanding homes also have associations. My condo is a duplex type only sharing one wall with one neighbor and an attached garage because I wouldn't have it any other way. Great for people with a busy lifestyle. Also, I don't mind doing interior work to my home. But as far as snow removal, mowing, or external maintenance, I don't mind paying my association dues for that. An even worse scenario was when I owned a mobile home, I had to pay outragious lot rent fees and was still responsible for everything outside and still didn't have my property taxes to claim on my tax returns. Was really nice getting a new roof put on my place this past spring and painting done on the exterior without even requesting it or having to take out a home equity loan to afford it.