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A beginner's guide to condominiums
A beginner's guide to
condominiums
The condominium market has been rising steadily for the past few
years. According to the National Association of REALTORS ?
condo values rose more than 22 percent between 2003 and 2004,
and the median value of condos ($193,000) rose to just above
that of single-family homes ($184,100) in mid-2004. While this
trend is not guaranteed to continue, the condo market has
regained the momentum and importance it had in the initial condo
boom of the 1980s.
Condo buyers generally fall into three groups: first-time buyers
making the jump from renting; people looking to buy a second
home that they will use part-time; and retirees who are trading
in high-end homes for the low-maintenance lifestyle a condo
provides.
A condominium can be a great purchase under the right set of
circumstances, but some people still dismiss them as glorified
apartments. If you're not comfortable living within condo rules
and restrictions, and in close proximity to others, then a condo
is probably not the place for you. Before you buy a condominium,
make sure you understand exactly what is involved in condo
living.
What exactly is a condominium?
A condominium development can take the form of apartment-style
complexes, townhouses or converted multi-family dwellings. What
distinguishes it from other multi-tenant buildings is that the
developer has legally declared it a condominium, and individuals
can purchase units in the building or complex. In most states,
this means that the development falls under specially designated
laws and regulations applied to condominiums.
When purchasing a condo, the owner buys the title to his or her
individual unit, up to the walls, but not including them. A
common description of a condominium is a "box in the
air."
Common areas of the development, such as stairwells, dividing
and outer walls, fitness centers and rooftop gardens, are under
shared ownership. Each unit owner holds an interest in these
spaces. In order to manage the maintenance and repair of the
shared common areas, every condo development has a condominium
association, also known as a unit-owners' association. The
association is elected by condo owners and makes communal
decisions in the interest of the community.
Condo costs include:
- down payment, mortgage and
property tax.
- condo fees, otherwise
known as maintenance fees. Condo fees are paid by
every resident to help with the maintenance of the building,
pay the salaries of groundskeepers, concierges or handymen,
and provide luxury facilities such as a pool, gym or rooftop
garden. Condo fees are paid monthly and are subject to
change.
- special assessment fees.
These fees may be requested when an unexpected repair or
planned modification exceeds the cost of the condo fees
collected.
Rules to live by
Condominiums are governed by a set of rules called Covenants,
Conditions and Restrictions (CC&Rs). The rules vary from one
condo development to another. They may impose restrictions on
pet ownership, noise levels, remodeling projects, and renting.
The CC&Rs are enforced by the condo association. It's a good
idea to read the CC&Rs to make sure that you are comfortable
with them before you purchase a condominium.
More about condo associations
and fees
The condominium association budgets and determines the condo
fees for all units. Condo fees are typically determined by the
size of your unit, how many units are currently occupied, and
the projected expenses for building maintenance and repair.
Condo associations vary in their organization and expertise.
Some questions you may want to look into are:
- does the association maintain a reserve of funds to pay
for unexpected and potentially expensive repairs? This will
help you determine whether you are likely to get hit with
special assessment fees.
- has the association maintained the building in good
repair? Do they handle repairs and maintenance before they
become big problems? Before buying, it's a good idea to get
an inspection done on the unit you're interested in, as well
as the entire structure, to identify any potential problems.
- does the association have plans to add any facilities,
such as a swimming pool or gym, in the near future? This
could cause a sudden increase in your fees. Ask to see the
minutes of the last few condo association meetings, which
should reveal any such plans.
- does the development have any pending legal actions? Are
there any disputes between owners, with developers or with
the association that you should know about?
- what is the association's reputation in the building? Talk
to other owners for comments or complaints about the
association's activities.
A word about developers
Developers do not generally retain a long-term interest in a
building, but the work that they put into it is important. A
home inspection can turn up major structural flaws in the
building, but don't rely on this alone. You should research the
developer's track record, and find out if there have been any
problems with its previous developments. Also find out if the
developer is still in business and whether it is financially
stable. If the developer is no longer in business, your condo
association may have little or no legal recourse if major flaws
are discovered in the property.
Use our free mortgage payment calculators:
1.How much do I have to earn?
Not sure how much money you'll have to earn to afford your house payment and accompanying expenses?
2.Mortgage payment calculator
Want to know how much your monthly payment is for your mortgage?
3.Bi-weekly mortgage calculator
Want to know how much time and money you'll save paying off your loan on a bi-weekly payment plan?
4.Additional payment calculator
How much do you save by paying more or making additional payments than your initial mortgage terms?
5.How much can I borrow?
Want to know how big of a mortgage you can take on?
6.Should I pay discount points?
Not sure if you should pay discount points on your mortgage loan?
7.How much will I save by refinancing my loan?
How long will it take to recoup the costs of refinancing my home mortgage?
8.How much will my tax deduction be?
Want to know how much your home mortgage will save you in taxes?
9.APR calculator
To find out the annual percentage rate of your loan, enter the loan amount, interest rate, points, other costs and year-length term.
10.Interest only monthly payment calculator
To find out the monthly savings you could gain from an interest-only payment plan.
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