How to Buy a Condo: Evaluate the Project, Read the Fine Print & Work with an Experienced RE Broker

Vacation condominiums next to marina in Myrtle Beach. South Carolina.

Myrtle Beach, SC is a golfer’s paradise.

Buying a condominium is not the same as buying a single-family home or fee-simple townhouse. If you wish to search for a condo near where you are right now online, key in “condos for sale near me,” “condos for sale,” “townhomes for sale,” and “townhouses for sale.” To get a sense of the market for a new area where you would like to live, key in terms like “condos for sale toronto” or “condos for sale in houston.” Always use quote marks around the condo terms you are searching for to make the search more exact.

Condominiums for Sale

Condo ownership is defined as a type of property ownership that involves many dwelling units. In the case of condominium ownership, an owner of a condo owns his or her own unit, but the common property areas are owned in common. If you were to live in a skyscraper in a big city, which was set up as a condo, you would own your own apartment. The roof, hallways, lobby area on the first floor, basement, elevators, entry and exit to the property and all amenities, such as swimming pool and spa, gym or workout area, are all owned in common by you and every other condo owner in that skyscraper. All of you together are responsible for all of the upkeep in the building, replacements when things break, the taxes, hiring workmen—everything!

When you go to the closing on your new condominium unit, you will get a deed–just like you would if you purchased a single-family house. Although rules will vary, when you buy a condo, you own it fee-simple. What does fee simple mean? Fee simple is considered the highest form of real estate ownership and means that you can use the property in any way you see fit, subject to zoning rules, and sometimes deed and subdivision covenants.

Fee simple ownership is not restricted in any time sense and can be passed along to your heirs. A fee-simple condo can be sold as you see fit to whomever you see fit. When you buy a co-op, for example, you do not own it fee simple, in fact, when you buy a co-op you do not buy real estate at all, rather, you become a shareholder in a corporation that owns the property. Because you are a shareholder in the co-op, you are given exclusive rights to use a housing unit. Co-ops can become a real pain in the neck when you are trying to buy or sell a unit. President Richard Nixon wanted to buy a co-op in New York City after he resigned as president and the co-op board turned him down. He eventually purchased a 15-room house in Saddle River, New Jersey…fee simple by the way. The famous actor, Paul Newman, tried to rent a co-op and was turned down by the board. They felt he would probably have a lot of parties; probably attract a crowd. Co-op boards have that kind of power because of the type of ownership, but when you own a condo fee simple, you have more freedom to sell the unit to Richard Nixon if you like.

Condos for Sale: The Condominium Master Deed

Even though you can own a condo fee simple, just like a single-family house, you might own the interior walls of the unit, but not the exterior walls. In a single-family home, you own every wall and every piece of timber in the structure lock, stock and barrel.
There is a lot of legal forms in all types of real estate ownership; this is particularly true in condos. The condominium has what is known as a master deed (sometimes it is called the declaration of condominium or condominium declarations). This master deed is recorded with the county in which the condominium was built where all deeds and easements are recorded.

This deed includes the name of the condo; the legal description of the land and buildings that are part of the condo complex; a description of each individual condominium on the property as well as a description of where it is located on the property; a description of the swimming pool, clubhouse, manager’s office—all common areas associated with this property; the allocation of how each condo’s voting is distributed; all sorts of restrictive covenants governing the use of the unit; and how the condo decides what to repair and replace and when to do it. There will be what’s known as CC&Rs, which are known as covenants, conditions and restrictions. These CC&Rs may restrict pets in all units or perhaps may allow just certain types of pets, such as dogs and cats.

Much to Consider with Condos for Sale

There is a lot to consider when buying a condo, especially for the first-time buyer, but there is always a lot to consider for all buyers of condos.

Here are key tips when considering buying a condo for the first time or the fifth time:

Does the Condo Fit You?

Do you and the condo fit well together. That may sound like a funny questions, but it is very, very basic to answer before you sign on the dotted line. Condos are different from single-family homes, as we mentioned above (and as we will continue to mention below), and that is important for you to understand and appreciate. You live in close proximity to your neighbors, which is true in any multi-family development, but it seems to be particularly true in garden apartment type settings in suburban areas. In urban high-rises, where construction is sturdier and the wind and the sounds of the city continually add to the ambient noise level, it is often impossible to ever hear your neighbors (except maybe the apartment door slamming when they bring the trash out to the trash shoot or leave for work in the morning). In that low rise setting, usually of wood-frame constructions, there is often a lot of noise; a lot of life going on. True, the rules of the association may require “quite hours,” but there can still be a lot of noise. Is this something you can tolerate or want?

Hire a Condo-Experienced Real Estate Broker

You never want to venture into the condo sales waters alone without the life raft of a qualified, experience real estate agent with long experience in condo sales–even the smart buyer of condos who is on his or her third, fourth or fifth condo will work with a broker. He or she can save you the agonies of making a huge financial mistake that could take a long time to resolve. The experienced broker is great at detecting “red flags” that can and will hurt you down the road and steer you away from them.

One red flag could be the contract that you have to sign with the homeowners association, which states that you understand and will abide by the rules and regulations of the condominium. Sounds simple, doesn’t it? But signing this document is not like signing a lease document from Honda or Subaru or another car maker for a new car, because Honda or Subaru will never tell you that your 8-year-old cat, Mittens, is not welcome in your condo unit or that you cannot barbecue out on your deck or make any noise that disturbs anyone after 8 pm at night. Honda and Subaru will never tell you that it is against regulations to rent out your condo.

Financing the Condo

When it comes to financing a condominium, that too is different from a single-family home. Not every financial institution allows for the purchase of condominiums and the bank where you do your banking may be one of them, so it is important for you to shop around for a financial institution that will finance your condo. This is important to do before you actually start shopping for a condo and frankly, if you are pre-approved for a certain level of financing, it will give you weight and heft when you go to negotiate a price. If you see a condo that you want in the $500,000 range and you have been pre-approved for this amount, you might get a motivated seller to move lower on his or her price if he or she feels that they have a real buyer at their doorstep.

Condo financing often works differently than getting a mortgage on that single-family home. Lenders will want a 20 percent down payment in most cases from you. If you see a $500,000 condo that you want, the bank will expect you to put down $100,000 inn that case and take out a loan for $400,000. That’s just the way it is. You may have a different relationship with your credit union at work that might be more supportive of your efforts. You might find a motivated financial institution who needs to place money. You might have a fantastic credit rating and everyone will want to do business with you to help you finance the new condo you want to buy.

What’s Included in the Condo Price?

Yes, we know, the condo includes bathrooms, kitchen sinks, etc., etc. But after that it can become very, very sticky. What we are talking about when we say what’s included in the price is parking and storage to name two items. These are two critical things that could wind up not only annoying you, but costing you extra money.

What exactly is the situation with parking at the development where you want to buy a condo? We once heard a great saying that “good judgement is based on experience, and experience is based on bad judgement.” We bring this up because the first time we purchased a condo, we never even considered the issue of parking or storage (there was only storage available at a steep price). But heck, we thought, there is plenty of parking out back, we are sure there is parking for us…but we did not ask.

Frankly, it was a big mistake. There was one parking space available out back for us and it had a “reserved parking” sign on it. Parking was extraordinarily tight. If we had an overnight guest, then we had to drop their car off at the local municipal parking lot and then ferry them back in our car. Parking was so tight that people continually used each other’s parking spaces. Every time we came home from work, there was someone parked in our space. We complained to management and by the time the condo manager came around (7:30 pm, after he finished his dinner), the car had usually left (we were parked at the curb because we did not want to use someone else’s parking space and inconvenience them when they came home from work). If it were still there, the manager was concerned about calling a tow truck and having it hauled away because it could be damaged and the homeowners association could be sued.

We failed to look into the parking situation closely. There was a condo not far from this one that offered covered parking and out back surface parking so that the residents could park in the garage in a reserved space and visitors could park in the surface parking in the back. Things seemed to be a lot easier there. The second thing we did not look into was storage. The other condo with covered parking also furnished each resident with a storage area–the place we purchased did not and we have to rent space at a local storage facility for $50 a month.

Do You Know What Your Association Fees Are?

Condominium association fees are another thing that can grab you and hurt you when you can least afford it. Besides a great real estate broker, it is important to have an attorney. Yes, yes, you and I can look at a document from the homeowner’s association and get the monthly, quarterly and annual fees. That’s easy. But here’s the problem: while the association is assessing all owners for insurance and maintenance, they also need money at some point for larger expenses, such as installing a new roof. You and all of the other owners are responsible for that new roof.
The homeowners association should have reserve funds for major repairs, such as the new roof. Yes, they should have, but do they? You or your representative, needs to look at that reserve fund to see what type of shape it is in–before you buy.

You need to know your monthly fees and you need to know what they cover. Most importantly, you need to know what is excluded. Yes, the fees will include insurance and maintenance, but is lawn care, the fitness center and the swimming pool part of the monthly fee you are paying for, or are those separate? What about the tennis courts and the use of the clubhouse? Are they included? This cuts two ways: if all of these items are included in your monthly fee and you could care less about using them, then you will feel you are paying extra for stuff you do not want. On the other hand, if these items are not included and you are an avid swimming, tennis player or like to work out every day, you may feel cheated and nickle-and-dimed having to pay extra for all of these things in addition to the high monthly fee you are paying.

You need to understand about special assessments at the condominium and if there is any big special assessment coming up. If a condominium is planning to have a special assessment to pay for a project at some date in the future, they need to tell you about their planning before you buy so that you can decide whether or not you can afford it. Once again, this is a reason to hire a lawyer: you need to understand the fine print before you buy.

No Making Your Own Rules at the Condo

A person’s home is his or her castle, except when it comes to the condo. The one thing about condo living is that you must abide by the rules of the condo or you will run into trouble with the homeowners association. There are documents that offer all of the rules that you are required to follow. Some or a lot of them, you might not like. Unless you are good at sitting down and going over and understanding all of the rules, you need to employ an attorney who will be able to quickly advise you.

There are rules on pets, quiet hours, etc. What may be important to you is whether or not you can rent your unit in case you need to move for a job or other reasons. If the condominium has rules that you cannot rent out your unit, you could be stuck for a lot of money if you have to leave the unit vacant while paying all of those monthly fees. It is our view that you need to read these rules carefully, if they do not furnish you with enough financial and social freedom that you desire, but a unit in another development.

How Does It all Get Done at the Condo?

Who does the maintenance work on the property, cleans the buildings and the rest of it. Find out before you buy. Are you responsible for any of this? Are your neighbors? Things can get pretty tacky if all of this is not spelled out and if it is not spelled out, move on to the next condo deal. If a management company is handling all of this for the homeowners association, see if you can get online reviews on the management company. You will be paying a lot of money. You need people on the other end of the telephone live who are quick to respond, responsible and concerned.

Condo Price Appreciation

Condos usually do not appreciate in value the way single-family homes do. After owning a single-family home for 10 years, you will likely be able to walk away with more net profit than you would from a condo. Then why buy a condo? Why doesn’t everyone buy a single-family home? The reason is that a good, smartly run condo offer you great lifestyle options that often you cannot find in a single-family home. Being part of a condo immediately puts you into a social structure where you can hopefully meet people and develop new friendships. When buying a second home somewhere, it makes a lot of sense to choose a condo because while you are away, there are people there to watch the condo and keep your unit secure. Many condos in second home or resort areas also have a policy of renting out units when the owners are not there. This is a way for your to supplement some of the expenses on the project.

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