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What Is a Condo? Condo vs. Apartment vs. House, Explained

September 30, 2020

what is a condo

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Table of contents: 

  • What is a condo?
  • How condos work
  • How much are condo fees?
  • What is an assessment?
  • Condo vs. apartment: What’s the difference?
  • Condo vs. house: What’s the difference?
  • How to buy a condo
  • Questions to ask a condo board

 

What is a condo?

What is a condo? Short for “condominium,” a condo is a private residence within a larger building or complex.

The first condo in the United States was built in Salt Lake City in 1960, according to Matthew Gordon Lasner, author of “High Life: Condo Living in the Suburban Century.” Since then, this residence style has truly taken off. Currently, there are approximately 17 million privately owned condominiums in the U.S.

Condos might look like a lot of other types of real estate you may have heard of—like apartments, co-ops, or townhouses—but condos have their own distinct features, rules, pros, and cons. Here’s what condos are all about, and how they’re different from other structures in which you can live.

How condos work

Since a condo is part of a larger residential structure (although “detached condominiums” also exist), condo residents typically share certain common areas and amenities with their neighbors.

So what does this mean for a condo owner? It means you and your neighbors might park in a common parking lot or garage. You might use the same rec room or roof deck, or bump into one another at the condo complex’s swimming pool or gym.

Furthermore, these shared areas and amenities are enjoyed by all condo members without the need to maintain them on their own. Instead, condo owners pay dues to a board (typically made up of elected condominium owners) who then handle the hiring of landscapers, pool cleaners, and other professionals for anything that must be maintained or fixed, from faulty elevators to gopher infestations in common areas.

How much are condo fees, and what do they cover?

Average condo fees range from around $100 to $700 per month, although these fees can go much higher based on what amenities they cover. If the condo complex has high-end shared features such as a swimming pool, gym, and spa, condo fees can be several thousand per month.

what is a condo
Some condo complexes come with swimming pools.

typhoonski / Getty Images

Generally, condo fees pay for the maintenance of any amenities outside your personal living space that you share with your neighbors.

“Condo fees are your percentage share of the costs to run the building as a whole,” explains Janice Pynn, president of Simerra Property Management.

And in case you think your condo fees are too high, know this: No one pockets a cent of your checks or is getting rich off condo dues.

“They are not a profit source for building management; in fact, each building is registered as a nonprofit corporation,” Pynn points out. In other words, these fees go solely toward enhancing the value of your real estate, which is a good thing!

Here are the services and amenities you can expect your condo fees to cover:

  • Interior maintenance: Condo owners share the cost of maintaining common building areas like parking structures, storage rooms, laundry rooms, game rooms, fitness centers, saunas, and hallways, as well as mechanical systems like heating, cooling, electric, gas, plumbing, and elevator maintenance. If a crew comes regularly to clean the common spaces, its fees are also included.
  • Exterior maintenance: Condo owners also share the cost of exterior common areas like fences, walls, gates, pools, landscaping, and window cleaning, and seasonal expenses like snow removal, winterizing, and cleaning out rain gutters. If a gardening crew comes regularly to take care of the landscaping, its fees are also included.
  • Security: This could range from cameras at the entrance to full-time guards patrolling the grounds. If visitors have to be buzzed in to the building, this system will be covered by your condo fees.
  • Utilities: Most developments’ condo fees cover utilities such as water, sewer, and trash. Some buildings even include heat, electricity, cable, and Wi-Fi. Remember that the more utilities covered, the higher your condo fees will probably be.
  • Insurance: Most condo fees include a homeowners insurance policy that covers exteriors and shared common areas. Depending on where the condos are located, the insurance policies might also cover flood and/or earthquake damage. The nice thing here is that condo owners need only to purchase insurance policies that cover the interior of their home and their possessions.
  • Reserve fund: There are expenses that don’t come up on a monthly, or even an annual, basis that will need attending to, so a well-managed condo board will charge owners a certain amount per month that will go into a reserve fund. It would cover things like paving, reroofing, replacing water heaters, exterior painting, hallway and lobby flooring and redesign, and more.

What is an assessment?

In addition to your monthly condo fees, special assessments might arise. Every once in a while something big (e.g., a roof or an elevator) gives out, and there aren’t enough reserve funds to cover it. In that case, the condo owners will have to pay an extra fee for these additional expenses, typically tacked on to the usual monthly condo fees in small amounts until the assessment is paid off.

At times like these, it’s best to remember that, as with any type of homeownership, unforeseen expenses arise, and making the necessary repairs is in your best interest. In other words, you get out what you put in.

In addition to collecting dues, a condo board also enforces rules and regulations that owners agree to abide by when they purchase their condominium. The board can regulate everything from the size and number of pets you’re allowed to the ages of the people living in your unit. Retirement condo communities, for example, can legally require that all long-term residents be over the age of 55.

So if you’re looking into buying a condo, make sure to study up on the condominium association rules (called covenants, conditions, and restrictions, or CC&Rs) and fees.

Condo vs. apartment: What’s the difference?

While condominiums and apartments might look exactly the same—a residence in a larger building—the key difference has to do with who owns the property. Condos are homes you can buy, own, and sell when you wish. Apartments are places you can rent, but do not own.

Another key difference between a condo and apartment has to do with property’s maintenance and repairs. With a rental, the apartment’s owner—often called a landlord—is typically responsible for any maintenance and repairs inside the unit as well as out. So for instance, if a renter’s faucet drips or they’ve got pest problems like mice or roaches, all they need to do is call the landlord to come fix the problem.

Condo owners, in contrast, are responsible for any repairs or maintenance inside their unit.

Condo vs. apartment: Which is better for you?

Whether you should buy a condo or rent an apartment can be a tough decision, since each scenario comes with distinct pros and cons. For instance, renting an apartment is great if you’re not sure how long you’ll stay in the area, or don’t want the hassles of maintaining your residence.

Buying a condo, however, makes more sense if you plan to stay in an area for at least a few years, and are willing to maintain your property (by paying repair professionals or by doing the work yourself).

Here are some other factors to consider.

  • Cost: Condos are meant to be purchased. Even if you get a mortgage, condos will typically require a down payment (typically anywhere from 3.5% to 20% of the price of the property). If you lack a chunk of money to offer upfront, then you’ll probably have to rent, which typically requires lower upfront costs (like first and last month’s rent and one month’s security deposit). That said, depending on the inventory available in a particular area, the monthly costs of renting vs. owning could be similar. As such, it’s worth comparing these two options with an online rent vs. buy calculator.
  • Home equity: Probably the main advantage for being a condo owner over a renter is that condo owners gain equity in their real estate over time. As they slowly pay off their mortgage and owe less on their property, they own bit more of their condo free and clear, month by month. Once the mortgage is fully paid off (which can take up to 30 years), they own the property in full. This is in stark contrast to renting, where you pay your landlord rent every month but do not gain equity.
  • Freedom: Condo owners are able to make changes to the property from painting the walls to renovating the kitchen. Meanwhile, renters are not allowed to make any permanent changes without their landlord’s permission.
  • Housing quality: Since homeowners tend to care more about their property than renters, condos tend to be better built and maintained than rentals.

Condo vs. house: What’s the difference?

But what if your real estate debate is whether to buy a condo vs. house? Take a look at the differences between these two popular residential options, and the benefits each can provide to you and your family.

  • Price: Condos are usually more affordable than a house, and are thus great starter homes for younger home buyers. To figure out how much you can realistically spend, try using an online home affordability calculator.
  • Location: If you want to be in the heart of the city, condos will be more prevalent. Single-family homes at around the same price could be found, but likely farther out from metro centers, which might entail a longer commute.
  • Privacy: Having complete privacy is possible in a single-family house, while condo living means neighbors will be quite close. Condos may not offer private outdoor space.
  • Freedom: Many condo communities have strict rules about everything from paint choices to the hours when you can take out your trash cans. As a result, a condo complex isn’t a great idea for fiercely independent homeowners who don’t want anyone telling them what they can and can’t do with their property. Single-family home communities tend to be more lenient.
  • Maintenance: With a house, the homeowner will have to take care of any maintenance, whereas condos include maintenance fees that cover landscaping and (sometimes) exterior maintenance on the unit. As such, condominiums are often ideal for people who want to own a piece of real estate but don’t want to worry about yardwork and repairs.
  • Budget: How much do you want to spend on the property? Condos are usually more affordable than a house. Give this point considerable thought. The last thing you want is to overextend financially. Try using an online home affordability calculator to help pinpoint a budget.

How to buy a condo

what is a condo
Condos are often more affordable than houses, which attracts first-time home buyers.

ablokhin / Getty Images

We totally get why people buy condos: They’re cheaper and require less maintenance than a traditional house (no mowing the lawn). Plus, they’re often stacked with cool common amenities from pools to gyms. What’s not to love? Yet while condo living might seem carefree, buying one is not necessarily a simple task.

Here’s how to buy a condo, how it’s different from buying a house, and a few insider tips to pave the way to ownership.

Consider your unit’s surroundings

While the condo unit itself is a key consideration, it’s also important to carefully check out the environment around it—particularly when it comes to noise. Remember, you’ll be sharing walls with your neighbors, and perhaps even ceilings and floors.

“I always suggest my buyers book a showing during typically ‘louder’ times of the day, such as dinnertime when kids are home, to see how well the walls actually dampen the noise,” says David Nelson with the Imperial Home Team in Minneapolis. He also recommends asking a few of the neighbors about general property noise, such as how loud the traffic and surrounding neighborhood are, and if they can hear their neighbors through the walls.

The unit you choose can play a large role as well.

“End units share fewer walls than those in the middle, which can lessen neighbor noise,” says Nelson. Of course, that’s also one of the reasons why end and top-floor units are more coveted—and often pricier—but if you’re sensitive to noise, that could be money well spent.

Check out the condo board and association

When you buy a condo, you’re buying into the entire community—including its rules on everything from when and where it’s OK to let your dogs off the leash to whether RVs are allowed in your driveway. Most states will have a designated rescission period to peruse relevant documents. During this period, you’ll want to carefully read through the community’s covenants, conditions, and restrictions, or CC&Rs, as well as penalties for not following them.

“When a buyer agrees to the association documents, he or she is automatically bound to the condo board’s rules,” says Nelson. These typically entail parking space allowances, regulations related to pets, and homeowner responsibilities for repairs and maintenance.

“If there is something in the association bylaws that you as a buyer don’t agree with, and it is still within the rescission period, you can back out of the home purchase and usually get a full refund of any earnest money,” says Nelson.

Prospective condo buyers should also do their due diligence on the condo association’s finances, because this will affect your odds of getting a loan (more on that next).

Secure condo financing

In some cases, it can be trickier to secure a mortgage for a condo than a traditional home because the health of the condo development hinges on multiple owners paying their bills. Your mortgage lender is apt to conduct a thorough review of the condo complex as a whole, including documents relating to the overall health of the building and the condo association. The good news is that you can consider this an extra layer of due diligence to protect your own investment.

Prep for your condo interview

Sure, you’re checking them out, but they’re checking you out, too. Once your offer is accepted, many condo associations require prospective buyers to interview with the condo board. Don’t worry: These interviews must comply with all regulations against unlawful discrimination—the goal is to ensure that you can afford the home and fully understand condo rules. This is also your chance to ask questions about any of those rules, and also get a feel for some of the people you’ll be living with—so consider it less of a firing squad and more like a first date.

Questions to ask a condo board

“One of the biggest considerations when purchasing a condo is who manages it,” says Nelson. That’s why, before you sign on the dotted line, you should arm yourself with these questions for the condo board to make sure it’s the right fit for you.

  • What are the fees? Most condos have a monthly fee that can range from $200 to $400 (an upscale development with tons of amenities will cost more). Ask the board exactly what that fee covers—after all, you’ll be shelling out month after month, and year after year. What’s usually included is anything outside your condo, from cleaning public areas to removing snow to maintaining the community pool. Owners themselves generally pay for whatever is inside the walls of their condo, like painting and appliances. Make sure what you’re getting is on par with what you’re paying for, says Nelson. And always ask if the board sees the fee rising anytime in the near future, and how much it’s risen in the past.
  • Can I see the financial statements? A condo’s financials should be an open book (or, more accurately, a spreadsheet). And don’t worry if you’re not an accountant. You should quickly be able to determine if a condo’s income and expenses match up—a red flag would be more money going out than coming in. Also eye the condo’s reserve funds to see if it’s healthy enough to cover any unforeseen expenditures. If not—and the pool pump breaks—that could result in more money coming out of your pocket to fix the problem via an assessment (see our next point).
  • Are there any upcoming assessments? Assessments are periodic, one-time payments made to the association above and beyond the monthly fee, usually to cover capital improvements or repairs. So if the association plans to replace all the windows in the common areas or add a gym, you could end up blindsided by a huge extra bill—unless, of course, you ask ahead of time.
  • What are the rules? Each association has its own unique bylaws and regulations, which all buyers should review before their purchase, as they have to live by them afterward. So make sure you read every single one. Many of the rules are mundane, dictating where residents or guests can park. But some condos have rules that can range from no holiday decorations on your front door to limits on hours for barbecuing. Another biggie in condo rules is whether a homeowner is allowed to rent out their home, and for how long. While you may not want to rent it out, the ability to do so—or not—could affect your resale value. Did we mention that you should read the rules? Read the rules.
  • Are there any pending lawsuits? Lawsuits are a potentially huge financial drain on any condo board that loses in court. And even if there are no pending suits, a quick check of a condo’s liability insurance to make sure it’s up to snuff can’t hurt.
  • Who is the caretaker? Properties generally have a manager on-site to oversee day-to-day tasks. An employee who has been with a condo for a long time is generally a good sign your calls will be answered in case a maintenance issue pops up.

The post What Is a Condo? Condo vs. Apartment vs. House, Explained appeared first on Real Estate News & Insights | realtor.com®.

‘I Thought I’d Bought a Home, Then the Coronavirus Hit’

May 11, 2020

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Buying a home had always been part of my life plan, and in February, I thought I was almost home free: I’d made an offer on a condo in Philadelphia, and that offer had been accepted. All that was left was to close the deal, which I figured would be the easy part.

Then a little thing called the novel coronavirus came along and threw everything for a loop.

While it’s an unusual time to purchase real estate, I ultimately decided to move forward. But it wasn’t easy, and a lot of the usual steps of the home-buying process had changed. Here’s how I navigated this new reality in real estate, and what I learned along the way.

When I put in my offer, everything was normal

When I first submitted my offer on Feb. 26, everything was business as usual. At that point, the coronavirus was still little more than a side note on the evening news. The thought never crossed my mind that the virus would soon have a significant impact on my transaction.

In fact, for a little while, things seemed to be going my way.

To start, after submitting two previous offers that hadn’t panned out, I had finally managed to snag a unit in my dream condo building, an updated complex in Center City. Plus, of all the units I’d seen in the building—and there were many—this was the sunniest and most spacious.

In addition, the transaction was moving smoothly. I chose to waive my inspections in order to keep my offer competitive. My appraisal had also come back looking more than satisfactory. We seemed to be moving along just fine toward settlement, scheduled for the end of April.

Woman holding keys
I got the keys to my new place.

Tara Mastroeni

How COVID-19 put my real estate deal on hold

But by March 19, Pennsylvania’s governor had declared real estate a nonessential business, meaning that all brokerage offices had to close and real estate agents had to work from home.

Since that time, the real estate industry in my area has been in a state of upheaval. The Pennsylvania Association of Realtors® followed governmental orders and provided guidelines to keep both industry professionals and home buyers safe, but as the virus spread, those guidelines seemed ever-changing.

For me, as a home buyer, this lack of certainty, while understandable, sent me into a tailspin of anxiety: Would my real estate deal even come through?

Originally, I wasn’t too worried. I was told by my real estate agent (who is also my mom) that an exception was going to be made for closings of existing transactions. In addition, her broker was intending to put precautions in place to keep everyone safe, including putting buyers and sellers in different rooms and requiring everyone to use a separate pen.

However, by March 23, the point was moot.

The governor had issued a stay-at-home order for Philadelphia and five of its surrounding counties. Since Pennsylvania doesn’t currently allow for remote closings, that essentially left my home-buying journey in limbo.

How we moved my real estate deal forward

Even though my closing was up in the air, I still did everything I could to move forward as though my settlement were going to take place. Fortunately, my lender was able to work remotely, so I was still able to communicate with my loan processor to gather the paperwork I needed to send my file to the underwriter.

However, because this situation is so unusual, I was left with questions that no one knew how to answer. For example, what would happen to my interest rate if my settlement got pushed back and went beyond the date of my rate lock? Even if I could close the deal, would I be able to move in if the city of Philadelphia was still under lockdown?

Condo view
The view from my new balcony

Tara Mastroeni

In the end, I lucked out. Even though real estate is still considered nonessential in Pennsylvania, the governor did eventually issue guidelines that allowed some transactions to move forward. In particular, any contract that was signed before the stay-at-home order—which included mine—could close.

Inside a coronavirus-era closing: What’s changed

Once I knew my closing could proceed, it was simply a matter of figuring out how to do it while keeping everyone safe.

For example, since my condo building was allowing only owners to enter the building, I had to do my final walk-through alone without my real estate agent. I did, however, use FaceTime with my mom so she could view the space and point out any red flags. Thankfully, nothing cropped up.

My settlement was also much different than it would have been if COVID-19 hadn’t cropped up. Instead of having my whole team of professionals there to support me, it was just me and the title officer at his office. He sat at one end of a long conference table, and I sat at the other. We both wore masks and gloves, and did everything we could to avoid getting physically close to each other as we passed paperwork back and forth. The home seller didn’t even come to the closing; he’d signed his paperwork the day before so he could avoid the office entirely.

Although I was nervous to be in an office building, the exposure levels seemed low enough to be tolerable, certainly much less than I’d typically face entering a grocery store. In other words, it was worth the risk.

I’m now a homeowner, but my journey isn’t over

Once everything had been signed, sealed, and delivered, I faced yet another challenge: figuring out how to actually move into my new home.

While moving is considered an essential service in my state, since no one is allowed in the building except for me, I would have to handle the move all on my own. However, since I have a physical disability, that’s pretty much impossible.

My condo association assured me that it was working on a plan to ease these restrictions so I could move in. Until then, I will be living with my parents—and paying a mortgage on a home in which I can’t live.

Even in the best circumstances, buying a home is a long process. With coronavirus, it’s even longer and more complicated than ever. Patience is key. Even though this is not at all what I pictured buying a house would be like, when I look back at all that’s happened, I still think: Was it worth it? Absolutely.

The post ‘I Thought I’d Bought a Home, Then the Coronavirus Hit’ appeared first on Real Estate News & Insights | realtor.com®.

Should I Buy a Condo? The Pros and Cons

July 25, 2019

should i buy a condo

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If you’re a potential buyer in the real estate market, you may wonder, “Should I buy a condo?” Condominiums are generally less costly to purchase than houses or townhouses, and they can offer conveniences you might not otherwise be able to afford. In fact, some buyers who are priced out of single-family homes in high-priced markets may qualify only for mortgage loans on condos or co-ops.

Condominiums can be a good investment, especially if they allow you as a buyer to enter the real estate market. Qualifying for financing is much the same as getting a mortgage for a single-family home. If you are purchasing condos as investment properties, you should be able to find a lender as well.

Yet there are caveats to condominium ownership. Here are five things to think about before you take the plunge.

You don’t own the land

A condo building is a building or complex consisting of multiple apartments that are individually owned. The entire building is owned by an individual or a property management company, but condo unit owners do not hold the title to the land on which the structure sits. This means the value of the property you own will consist solely of your condo.

Don’t confuse a condominium with a co-op. With a condo, you own a specific part of the building structure, and the use of common areas. With a co-op, or housing cooperative, you own a share of the real estate. As a real estate shareholder, you have the right to live in a certain unit.

On the pro side, living in a condo means you have use of the real estate, but you won’t be spending your weekends mowing the lawn.

On the con side, you can’t change the landscaping and you have to share the common areas with other owners.

Increased amenities, decreased maintenance

Condo communities may offer amenities and common areas (e.g., pools, a garage, or tennis courts) that you may not otherwise be able to afford if purchasing a townhouse or standalone house.

Additionally, condos can relieve you of the need to manage the building maintenance and any amenities. Some interior issues such as plumbing and electricity may be managed by the complex’s community association. You still own your unit, however, so you can decorate and personalize more than you are allowed to as a renter.

If you’re used to fixing things yourself, however, you may not always want to wait for the association to do the job, or get pre-approval before you call a repairman. Also, the association may make a special assessment for large projects, which you may not always agree with.

Built-in social network

Socially, condos can be great owner-occupied properties for singles, couples, and families. Your proximity to your neighbors and access to shared areas mean there will be greater opportunities for you to meet new people.

On the other hand, you’re likely to have less privacy when you’re sharing walls and building access. Neighbors might be able to hear your conversations or see when you come and go.

Before buying, check to see if the other condo owners are friendly and seem likely to be people with whom you would get along. Make sure the building is constructed to minimize noise. If you’ve always lived in a single-family residence, consider renting a condo or apartment before you buy.

Homeowners associations can be bureaucratic

This is obviously a case-by-case situation, but some condo HOAs can be difficult to deal with or have high monthly association fees. Some HOAs can be politicized and hold you accountable for any perceived infringement of rules. Most associations will impose building maintenance fees, whereas in a single-family home you pay for expensive renovations or maintenance projects at a time when you can afford them.

Of course, more single-family homeowners also live with HOAs now, so HOAs are becoming harder to avoid. Ask around about what it’s like to live with an HOA before you join one.

Always take the time to be familiar with the association’s fees before you buy. You could also look at the minutes of the community association’s meetings to see if there are outstanding maintenance issues that are likely to be expensive.

If you are considering purchasing an investment property, be certain that the condo association will allow you to rent out the condo unit on a short-term or long-term basis, before you buy.

Be wary if there are many condos for sale in the building

Unless a condo community is a brand-new construction looking to welcome its first group of condo owners, you might want to think twice about purchasing in a community with many properties for sale. This could mean that there is a high level of dissatisfaction with the building and living conditions.

If more vacancies appear and things spiral downward, the association may fall behind on upkeep, and lose its reserve fund. More buyers avoid the condo complex. Lenders may even refuse to make loans for new purchases, or they may require a larger down payment. Even if all goes well now, you may have a difficult time when you want to sell or refinance.

If you do find your dream home in a community that seems slightly abandoned, try to chat with a resident or two when you tour the condo to see if there are any red flags.

Ultimately, keep these questions in mind: Do you like the condo’s size? Is it in the right neighborhood? Is the building properly maintained and are the amenities to your liking? Can you comfortably afford the mortgage, including homeowners association fees? These considerations will point you in the right direction of a condominium that has everything you want in a home.

The post Should I Buy a Condo? The Pros and Cons appeared first on Real Estate News & Insights | realtor.com®.

What Is a Condo? No, It’s Not Just a Fancy Apartment

June 15, 2019

what is a condo

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What is a condo? If you ask most people to explain, they’ll tell you, “It’s like an apartment or townhouse, but you own it.” Or, “It’s like a home, but without a yard.” Both of these descriptions are mostly true, but there’s a lot more to the condominium meaning and the condos versus apartments debate, especially if you’re trying to decide where you should live.

What is a condo?

A condo, which is short for “condominium,” is a private residence owned by an individual homeowner or family in a building or community with multiple units or townhouses. Although they are usually part of a larger high-rise building, “detached condominiums” also exist.

What all condos have in common is that they share common areas—such as yards, garages, tennis courts, swimming pools, rec rooms, or gyms—with other units that the condominium owners don’t have to maintain themselves, making home upkeep that much easier.

For this convenience, owners pay dues to a board—typically made up of elected condominium owners—who handle the hiring of landscapers, pool cleaners, and other professionals for anything that must be fixed, from faulty elevators to gopher infestations in the common areas. This is much the way a homeowners association, or HOA, functions. (Leaky pipes and plumbing and/or roof repairs fall into more of a gray area, but generally if it’s outside the walls of your unit, it’s the board’s responsibility to fix.)

Matthew Gordon Lasner, author of “High Life: Condo Living in the Suburban Century,” adds this twist to the meaning: The first condo in the United States was built in Salt Lake City in 1960—and since then, this residence style has truly taken off. Currently, there are approximately 17 million privately owned condominiums in the U.S., which may have you wondering: Should you be a condo owner, too?

Should you consider condo ownership? Here’s how to decide

You can see why condominiums would be ideal for people who want to own a piece of real estate but don’t want to worry about yardwork and maintenance. The condos versus apartments conundrum is often an easy choice for retirees, young adults without kids, or anyone who would like to own property in more densely populated areas where detached, single-family homes just cost way too much. You might also be looking for a coveted amenity or the services of an HOA or property management company. There’s also more of a community to be found in a condo association compared with an apartment building.

And the advantage of buying a condominium over renting an apartment or townhouse? One, condos tend to be better built and maintained than rentals and they likely have an attractive amenity package. Plus, condo owners or unit owners will gain equity in their real estate over time—so why not invest your money in a home rather than throw it away on rent?

“Mortgage interest rates in today’s market are extremely low. Most individuals seeking a $2,500-a-month apartment or townhouse could easily afford a mortgage of $500,000. Monthly payments would be similar if not the same,” points out Jessica Peters, a Realtor® with the Peters-O’Brien Team at Douglas Elliman. “Depending on the area and whether or not the buyer is savvy, the unit would appreciate during the length of residency. Whereas in a rental, there is no opportunity for a return on investment.”

Condominiums vs. apartments: The deciding factor

On the other hand, a condo complex isn’t a great idea for fiercely independent homeowners or tenants who like their own privacy and space, and don’t want anyone telling them what they can and can’t do with their real estate. That’s because in addition to collecting dues, a condo board or HOA also enforces rules and regulations that owners agree to abide by when they purchase their condominium. The board can regulate everything from the size and number of pets you’re allowed to the number, the color of your townhouse exterior, and the ages of the people living in your unit. Retirement condo communities, for example, can legally require that all long-term residents be over the age of 55.

So if you’re looking into buying a condo, make sure to study up on the condominium association rules (called covenants, conditions, and restrictions, or CC&Rs) and extra costs such as HOA fees or association fees. Also, be sure to check out each amenity before you contact a real estate agent or commit to a purchase.

The post What Is a Condo? No, It’s Not Just a Fancy Apartment appeared first on Real Estate News & Insights | realtor.com®.

What Is a Special Assessment? Condo and Co-op Buyers Beware

November 28, 2018

What is a special assessment? It’s an added fee that can crop up for owners of a condo, co-op, or home belonging to a homeowner’s association (HOA).

Trust me on this: As vice president of my own condominium’s board of directors, I can assure you no one likes getting wind of a special assessment—which, put plainly, is a charge that homeowners must pay to fund a renovation on the property or to replenish an underfunded reserve.

Even just uttering the words “special assessment” makes my neighbors cringe! Let’s take a look at why.

What is a special assessment?

Most condo or HOA homeowners pay monthly fees. These fees typically range from $100 to $700 per month, but they can vary greatly based on what they cover. Some fees only cover exterior maintenance, while others are more comprehensive, and may also cover utilities (water, trash, sewer) and even security guards.

Typically, a portion of the condo fees is allocated to the association’s reserve fund—essentially a rainy-day fund for larger, occasional expenses such as paving, re-roofing, replacing water heaters, exterior painting, or hallway flooring.

Yet unexpected expenses can also occur. Every once in a while, something big gives out, like a roof or an elevator, and homeowners insurance may not cover the costs.

If your association’s reserve fund is low or depleted when disaster strikes, you and your fellow homeowners will have to pay a special assessment. In some instances, assessments are tacked on to the monthly condo fees in small amounts until the debt is paid off; in other cases, the assessment is a one-time charge that must be paid by each homeowner as a lump sum.

If you live in a well-run condo association or HOA, your community should have enough cash set aside in reserve funds to cover emergency repairs. But, alas, not every condo board is managed well.

Naturally, this raises the question: How much money belongs in the reserve fund? Unfortunately, there’s no magic number. It can range significantly depending on a number of factors, such as the number of homes in the community and their ages.

The good news? There is a formula, so to speak.

Many condo boards order an annual or biannual “reserve analysis study,” where a qualified engineer performs an architectural and engineering study of the entire complex—including a projection of the remaining life of items like the roof, boiler, or elevator—and reports back to the board with a recommendation on how large the community’s reserve fund should be. Though it’s not an exact science, this professional estimate is generally a good benchmark.

How much is a special assessment?

The fee depends on the cost of the repairs. For example, let’s say your condo building’s roof caves in and the board immediately needs $30,000 to install a new roof. If there are 40 unit owners, each owner would be required to pay about $750. Often the precise fee will vary, depending on the size of your condo or house. Generally, the larger your property is, the higher your portion of the assessment will be.

What’s my likelihood of receiving a special assessment?

If you’re searching for clues for whether a special assessment is in your future, you’ll want to review your association’s financial statements. These documents which will show you how much money is currently in the reserve fund. If the fund is relatively low, you may be at risk of a special assessment in the event of an emergency expense.

Also, take a look at the governing documents of your development. These are called “restrictive covenants”—also known as the Declaration of Covenants, Conditions, Restrictions, and Easements (CC&Rs), and they usually outline procedures that the association must follow in order to levy a special assessment. In some cases, the entire community (not just the board of directors) votes before there’s an assessment.

In addition, some states have laws that restrict the amount of money an HOA can collect in special assessments in a calendar year.

Can I protest a special assessment?

Technically, you can protest a special assessment by filing a complaint with your board. However, if you don’t have buy-in from your fellow homeowners, your request is likely to be denied, in which case you’ll have to pay the fee. Also, bear in mind that rejection rights usually don’t apply to assessments for projects that are necessary for the health and safety of residents.

Your best odds of a successful outcome is when there’s a special assessment on the table for an unnecessary project, like adding a swimming pool or a fitness center, in which case, other unit owners may have your back in helping you revoke the assessment.

The bottom line

Special assessments are an inherent part of being a homeowner in a condo or HOA. No one likes them, but sometimes they’re necessary—and you just have to cope with the circumstances.

The post What Is a Special Assessment? Condo and Co-op Buyers Beware appeared first on Real Estate News & Insights | realtor.com®.

How to Buy a Home Fast—Even Before the Holidays!

November 2, 2018

Need to know how to buy a home fast since you’re hoping to be settled in before the holidays? Then the pressure’s definitely on at this point! If you have any hope to host your Thanksgiving feast (or at least Christmas dinner) in your new digs, you’ve got to get the ball rolling on a home purchase, pronto.

Yet anyone who’s ever purchased real estate will tell you the home-buying process can be drawn out, complicated, and rife with endless paperwork—and the potential for problems to arise at a moment’s notice. While all that may be true in some cases, there are certain strategies that can speed up the home-buying process.

Follow the advice of these experts, and you’ll be putting out your new welcome mat in no time. Honest.

Home in on the right kind of house

If you’re hoping to move in a hurry, here’s a word from the wise: Avoid homes that may entail an interview with their boards—namely co-ops.

“Co-ops can take six to eight weeks to get a board interview scheduled, finalized, and approved,” notes Phillip Salem, an agent with Triplemint Real Estate. And since many folks may be traveling over the holidays, there could be further delays.

Also avoid bank-owned homes or foreclosures, which generally take much longer to close.

A far faster bet is to focus on condos or new developments.

“Closings in condos and houses in new developments, even with financing, can happen in as little as three to four weeks,” says Salem. “Most new developments have preferred lenders who are already approved for the building and ready to go.”

Get pre-approved for a mortgage

You may be tempted to check out as many open houses as possible, but it’s more important to be strategic. Don’t waste precious time touring homes that are well beyond your budget. With that in mind, your first step should be finding out exactly what you can afford.

“Get pre-approved for a mortgage by a local lender—rather than big banks or internet lenders—who has a track record of closing on time,” advises Aaron Hendon, a real estate agent with Keller Williams. “Most can swing a 21-day close, and that’s critical.”

Ray Duran, regional sales manager at Quontic Bank in Miami, says this step allows buyers to determine their budget based on what the lender will extend.

“Unless you are so wealthy that you’re going to buy your own [home] with a big pile of cash, you’re going to need a home loan,” Duran says. “Whether you decide to go to a bank or credit union, your lender will need to qualify you to see how much you can afford to buy.”

Cara Ameer, an agent with Coldwell Banker, adds that this step also sets you apart from other buyers.

“Being pre-approved puts a buyer in a position of strength, as it will put the seller and their agent at ease, knowing that the buyer has done the heavy lifting upfront,” she says.

Get your documents in order

“To speed up buying a home for the holidays, buyers should start putting together all of the documents and paperwork that are usually required during a home loan review,” says Duran.

Generally, a home buyer will need the following:

  • Federal tax returns for the past two years
  • Supporting information (e.g., W-2, 1099, or other tax forms) for the past two years
  • Two months’ worth of statements from any checking and savings, 401(k), retirement, and other accounts
  • Pay stubs for the past month

 

“The more legwork a buyer can get out of the way before starting their home search, the easier it will be to go under contract and close on a home in time for the holidays,” says Ameer. “There will always be one more thing that is needed with the loan application process, but it is much easier and faster to track down one document here or there versus having to provide stacks of documents within a few-week period.”

Work with the right real estate agent

Working with a proactive real estate agent who knows the area, as well as how to leverage technology and social networks to make things happen, is key.

“Having the right agent can make all the difference in sealing the deal, particularly in a time-critical situation,” Ameer notes. “They will know how to connect the buyer to the right inspectors, contractors, and other professionals involved in bringing the transaction to closing.”

Once you have the right agent in your corner, don’t be afraid to let the pro know what you want.

“Send your agent listings you find on the internet so that he/she can get an idea of exactly what you like,” says Jeannette Burke, an agent with Realty Executives in Sparta, NJ. “He can also evaluate each property and check the taxes, underground oil tanks, whether the house is bank-owned, pretty much everything.”

Consider shortening contingency deadlines

While buyers should almost never consider waiving any home inspection or financing contingencies, they can offer to shorten the time frame on those contingencies to effect a faster closing.

“This will also be appealing to the seller,” Ameer says. “The buyer should work with their agent to propose a realistic time frame that can be met considering the entire scenario. For example, if it’s normal to provide 10 days for all due diligence in a purchase situation, offering to complete it in five to seven days may be looked at more favorably by the seller and more realistic. In order to close within 30 days, loan approval may be needed in 20, which is why having all loan documents in place with the lender before writing an offer is key.”

Depending on the nature of the issues found during home inspections, buyers could negotiate a credit toward their closing costs in lieu of repairs being done by the seller, saving valuable time.

Stay on top of everyone

“Once under contract, you want to press all appropriate vendors—inspectors, appraisers, lenders—to stay on track,” says Hendon.

Suzy Minken, an agent with Berkshire Hathaway, agrees. “From the initial offer stage all the way through closing, there is a considerable amount of ‘elapsed time,’” she says. “If you consider how many people are often a party to the home purchase transaction—seller, buyer, two attorneys, two real estate agents, mortgage lender, home inspector—then it’s easy to understand that there is a lot of time when someone is waiting to get an answer to a question or a document. And when there is a tight window of time, it’s critical that communication between all the parties moves smoothly and swiftly.”

Do some groundwork on moving, too

You may be focused on your new home, but don’t forget about your current space, where your belongings will need to be packed up.

“Interview movers and make sure they are available for a move before the holidays,” suggests agent Maria Daou of Warburg Realty. “If you plan on painting or any kind of cosmetic work, get quotes and make sure the person doing the work will be available.”

Selling a home as well? Tune in tomorrow to learn how to sell a home before the holidays!

The post How to Buy a Home Fast—Even Before the Holidays! appeared first on Real Estate News & Insights | realtor.com®.