With low maintenance and high affordability, condos are an excellent choice for many home buyers.
Why spend the afternoon in the yard pulling weeds or mowing when you could just wander out to the community pool and relax? The decision is easy for many people, especially those who value their leisure time and freedom to travel.
Opting for a condominium in a neighborhood where the cost of property management and exterior maintenance is included with the monthly fee can help you avoid the drudgery of maintaining a single-family home. Adding to the appeal is the fact that most condominiums have an entry cost substantially lower than a single-family home, along with fun amenities, such as tennis courts, walking trails and playgrounds.
As with most of life’s major decisions, however, there are many details that should be carefully reviewed and analyzed before moving forward.
To help you make the best decision to fit your current needs and goals for the future, here is a list of some of the common mistakes to avoid when purchasing a condominium:
- Failing to review what is covered in the monthly Home Owner’s Association (HOA) fee. In some cases, an HOA fee can include water, sewer, trash, taxes and yard maintenance. HOA fees can even include golf course access, cable and internet. Before purchasing a condo, it’s key to understand what the fees are, what they cover and how often they can be modified by the board. A key point is that a monthly HOA fee can significantly reduce an individual’s purchasing power, since it adds to the liabilities that the home owner is responsible for each month.
- Choosing not to find out how the HOA board makes decisions. A poorly managed board can exert a range of adverse financial impacts. It is important to find out the processes and what governs the actions of the board, as well as whether an HOA is professionally managed or supervised by a group of neighbors - when politics and feuds come into play, poor decisions and conflict become inevitable.
- Finding out whether the condos are mostly rentals or owner-occupied. The percentage of rentals in a condo complex can be a roadblock for an individual seeking financing. Lenders like to see a lower percentage of renters compared to owners, since rentals are viewed as riskier investments. It’s also vital to check into whether a HOA allows property owners to rent out their units.
- Ignoring financial data from the HOA board. This goes along with making sure the HOA is professionally managed, although professional management is not a guarantee of financial solvency. Before making the decision to purchase a condo, you should review the amount of cash reserves the association has on hand to support major repairs and improvements moving forward. A poorly managed HOA without enough cash on hand to fix a roof, for example, could potentially levy a special assessment (read: extremely large, unexpected bill) against the homeowners to pay for the repair.
- Failing to research whether the owner or HOA pays for repairs. Some homeowners pick up the keys to their new condo with the misguided idea that the board will pay for interior fixes such as broken appliances, leaky faucets and water damage. That is usually not the case. Before moving forward with a purchase decision, it’s critical to understand exactly what parts of the neighborhood and property the HOA is responsible for, as well as all the rules and guidelines that pertain to the ownership of your home.
Although there are many benefits to owning a condo, such as a reduced cost of entry, the true cost of ownership can be higher than many people realize.
For more information about what you should know before making the leap and deciding to purchase a condo, please contact me at the number below.
Patrick Stoy (NMLS Numbers 39527 and 39166) has 16 years of mortgage lending experience. Patrick is CEO of Wilmington-based Market Consulting Mortgage, which he started in 2005 with a mission to build lifelong customer relationships by providing real value. To learn more about Marketing Consulting Mortgage, visit www.macmtg.com. Patrick can be reached at [email protected] or 910-509-7105.