First, let’s define a condo since they are frequently confused with apartments. A condo is like an apartment that you own, right? Kind of. But there are some fundamental differences between apartments and condos.
The main difference between condos and apartments is that apartments are a collection of rental units within a multi-unit building, which is owned by a landlord. A condo is a single unit that is owned inside of a multi-unit building. Structurally, apartment and condo buildings can appear the same.
Unlike apartments, condo owners collectively pay condo fees into a homeowner’s association – typically monthly – to cover the association’s operating expenses and maintenance of any shared spaces such as any common hallways, the roof, landscaping, snow removal, etc. No two condo associations are the same. Depending on how the condo documents are drawn up the ownership percentages in common areas, association fees, rental or pet restrictions will all differ from association to association.
There are many benefits of buying a condominium – some of which can include less maintenance, security, amenities and affordability. In the Jackson area, snow removal alone can be the best reason to own a condo! Most associations will handle snow removal, making it much easier for second home owners to come and go as they’d like without having to worry about plowing out a driveway after being out of town for a while.
Here are 5 tips to consider when buying a condo:
Here are 5 tips to consider when buying a condo:
- There are nuances for financing – when obtaining a mortgage, your lender will most likely want to see the association’s budget, reserves, insurance policy and additional documentation showing that the seller is up to date on their condo fee payments. These are all documents your real estate agent can help you obtain.
- Consider the association’s restrictions – some associations have pet restrictions (such as no pets, cats only, dogs under 50lbs, limited to 2 dogs, etc.) or rental restrictions (no rentals of any kind, no rentals under X number of months, no Airbnb rentals, etc…). Your agent can help obtain the “condo documents” which may outline any such restrictions.
- Check out common areas – in a condo you’re within close proximity to your neighbors. You’ll be more likely to share walls and common areas such as hallways, staircases, doors, mailbox areas, outdoor areas, etc. Check to see how well kept the common areas are to get a glimpse of what you may be in for. It could be a sign of a poorly run association, or one that has issues with politics. Is there flaking paint on the exterior? Make sure you know of any planned expenses or if the association will be doing an assessment to cover upcoming expenses. If there will be an assessment, is it the responsibility of the buyer or seller to cover this? These are all questions a good real estate agent knows to ask and will ask on your behalf!
- Consider HOA fees – HOA, or homeowners association fees, are probably close to what you may be paying to live in a single family home but you wouldn’t necessarily pay monthly payments towards. Many association fees can include water/sewer, master insurance for the structure and electric for any common areas. Any excess left over after paying those expenses will go into the “reserves” for other maintenance projects. (more on reserves below). Other variables may be common laundry areas, snow or trash removal and landscaping or heating for common areas. It is up to the association to decide what expenses they would all like to incur. If the condo is part of a new condo conversion the association fees are essentially suggestions by the developer as the association’s financials are needed for financing reasons. Once the units sell and the association is formed the condo fees can be adjusted according to actual and planned expenses. For condos of varying size condo fees are often determined by the proportion of the building each unit owns. If the association has a pool, gym or other amenities you will probably be charged a higher HOA fee. Your agent can help clarify what is included in any association fees.
- Look at the financials – aka the condo budgets, reserves and assessments – condo associations should have operating budgets for the year. There are usually standard, anticipated expenses such as electric for common areas and water charges. The association may have some planned, deferred maintenance projects like painting the exterior of the building or repairing or replacing a roof. The “reserves” are the surplus of funds the association has in their operating account to cover any incidental expenses. An “assessment” occurs if the association does not have enough money to cover expenses.
A good buyers agent will help walk you through all of these important considerations. If you’re looking at buying a condo and need a buyers agent, we can help!