Are you a first-time condo buyer who does not know much about condos and aspects related to them? If yes, then you are not alone. There are a large number of people out there who don’t know much about condos and therefore hesitate while buying one. But fortunately, with this guide, you will get a complete understanding of what a condo is, how to buy one, the pros and cons associated with it, and much more.
So, get ready to dive in and explore all the details related to condos. Let’s start with the meaning first.
Also Read: Buyers Guide
What is a Condo?
Technically speaking, a condo, also known as a condominium, is a privately owned residential space in a community or a building with multiple units. The critical features of a condo are shared common amenities and areas such as tennis courts, pools, lawns, and much more. While the space inside your specific residential unit is yours and yours alone, the things and amenities like tennis courts, pools, and lawns are always shared.
The condo is a large property divided into single units for the purpose of sale. In the case of a condo, the ownership is slightly different from that of buying an apartment. A condo is located in a residential community or building but the unit is privately taken care of and managed by the landlord of the property. This landlord of the property has no say in the functioning and management of the larger unit or even the plot of the land on which his/her condo is built upon.
When it comes to managing a condominium, a homeowners association, generally known as HOA, comes together and does the needful. The HOA can also be referred to as condominium management, consisting of a group of owners that oversee pool maintenance, lawn maintenance, etc. For all these maintenance services, the condo owners are required to pay a certain fee.
More commonly referred to as condominiums, condos are a famous housing option in the developed western markets. In India, they are a perfect alternative to the co-operative housing society model which is pretty popular in Maharashtra.
How Does Buying a Condominium Differ from Buying a House?
The option of buying a condominium seems to be attractive to many home buyers. The key difference between buying a condo and buying a house is the kind of ownership you receive. With a condominium, you get sole rights to the whole interior space of your residential unit but the shared elements like land, fences, grounds, walls, etc are owned in common with the other condo owners in the complex. Conversely, with a single-family house, you are the only owner of the building and the land on which the house sits on. This is known as “fee simple” ownership.
In addition to this, condo owners can’t remodel wherever they wish whereas, single-family houses can easily be remodelled and the house owners are free to make alterations in their house to suit their personal taste and needs. If we talk about the documentation process, the condo documents are complex and long and homebuyers usually complain about not understanding them.
Lastly, the responsibility of maintaining a single-family house lies solely with the homeowner whereas the responsibility of maintaining a condo complex is shared with other owners. But for this, you as a condo owner have to pay a certain amount monthly which covers routine maintenance, hazard insurance, and management of the association.
No matter which kind of residence you buy, condo or single-family home, the property should be inspected thoroughly. Also, insist on a complete termite inspection and make sure to check out the neighbourhood as well.
As you have got to know the difference between buying a condo and buying a house, let’s now move on to the factors that one must consider while buying a condominium.
Factors to Consider while Buying a Condo
Though there are a lot of factors to consider while buying a condo but some top ones are as follows:
1. Location, location, and location
The three most crucial factors to take into consideration while buying a condo are location, location, and location. When choosing a condo, you need to choose a location that matches your requirements. Also, you likely would not live in a condo forever, therefore you will think about its long-term resale value as well and here again, location plays an important role.
2. Condo laws and rules
Generally speaking, condominiums don’t come with the same relaxations and freedom as that of a single-family home. Condominiums tend to have a certain set of rules and regulations in order to impose restrictions on the residents. Pet and noise restrictions are common in a condo. In addition to this, you might not be allowed to renovate your unit without prior permission. So, you need to research the rules and regulations of the condo you wish to buy so that you won’t face any difficulty later.
3. Amenities
Amenities are the perks that people love. Some of the common amenities that are offered in a condo are a gym, swimming pool, party room, guest suites, etc. Amenities differ from one condo to another, therefore it is vital for you to consider the condo’s amenities and whether you will make good use of them. In fact, the more amenities a condo offers, the higher the condo’s fees will be. So, make sure to take that into consideration, too.
4. Size of the condo
As a final pointer, the size of the condo must be considered before making the buying decision. You must find out the square footage and ensure that the furniture at your existing house will perfectly fit in your new condo. If you are satisfied with the size of the condominium then you can make the final purchase decision. If in case you don’t find the size of the condo satisfactory then continue searching for a spacious condo.
Wondering about how to buy a condo? The upcoming section of this article has an answer!
Also Read: 10 Common Real Estate Questions by First Time Home Sellers
7 Steps to Buying a Condo
Here’s a series of steps on how to buy a condo!
Step 1: Get a pre-approval
Before you start finding the right condo for you and your family, it’s important to determine your budget. Since condominiums have shared ownership, they are considered to be riskier than single-family homes. This is the reason why getting pre-approval for a loan is necessary. For this, you will need to submit a list of documents that involve:
- Income and employment records (2 years worth)
- Tax returns
- Rent payments
- Record of monthly debt payments
- Asset and bank statements (60 days worth)
Step 2: Begin your search
Although you can find a condo on your own, using an agent can also prove to be helpful, especially if you are a first-time homebuyer. Agents not only assist you in finding the right property but also help you submit an offer, negotiate price, and work through the paperwork. But one thing to note is that, if you are taking the help of an agent, make sure you do some research about them beforehand. Also, to help the agent find the right condo for you, you must discuss the amenities you are looking for, your budget, the kind of community you want to live in, the rules of the HOA, and much more.
Step 3: Make an offer
When you find the right condo as per your needs and expectations, it’s time to make an offer. Make sure not to hesitate while negotiating. Most sellers initially set a high price, knowing homebuyers will wish to bargain. In order to increase the chances of negotiation, carefully research the average prices of the condos and properties in that area. If the home seller does not accept your offer, they might make a counteroffer. If not, then you must check whether there are other segments the home seller can cut back on like processing fees or closing costs.
Step 4: Apply for a condo loan
After analysing the price that you will pay for the condo, it’s time to apply for the condo loan.
At this point in the condominium-buying process, your loan officer will give you a list of all the necessary documents that you need to provide.
Step 5: Meet the HOA or condo board
Like lock and key, HOAs and condos go hand in hand. So, you cannot have one without the other. Each condo has an HOA or Home Owners Association, where each condo resident pays a monthly fee that is used for the upkeep and maintenance of the common areas. HOAs are the governing bodies that enforce condo rules like the size of dogs allowed in your unit, noise levels in the common area, etc. Once you are done with finding your right condo, you will need to be approved by the HOA. For this, you will be required to submit an application along with a full financial statement involving everything from your income and expenses to assets.
Step 6: Get a home inspection
A home inspection is not compulsory but it is always suggested. A home inspection is carried out by an inspector who makes an official assessment of the physical condition and structure of the condominium. The home inspector will check basic features like wiring, plumbing, etc. Lastly, they will give you a report on the condition of the condo and will let you know if any repairs are required. It is absolutely okay to ask for some cashback credit in order to pay for any repairs.
Step 7: Sign the document
Finally, you are at the last stage of buying a condo. Once you reach this stage, you have made it to the last lap officially. As soon as you and the seller agree on the terms of the contract, an official document will be drafted and verified by a real estate attorney. During this stage, your condo loan will be finalised and you will be required to put in all the necessary paperwork for the final signing.
Also Read: Documents to Carry While Buying a Home
Advantages and Disadvantages of Buying a Condo
Buying a condo comes with certain advantages and disadvantages that must be considered before buying one. So, let’s have a brief look at each one of them.
Advantages:
1. Low maintenance cost
The first benefit that comes attached with buying a condo is that you don’t have to worry about maintenance costs because they are very low. All the exterior maintenance in condominium communities is handled by the HOA. These costs involve lawn care, driveways, exterior siding, etc. Property tax also tends to be lower here.
2. Potentially lower price
Depending upon the location of the condo, they can be a less expensive and affordable way to buy a home rather than investing a large chunk of money in single-family homes. The affordability of condos in certain areas makes it an ideal fit for first-time homebuyers or for the ones who have limited down payment savings.
3. Access to first-class amenities
Depending on the condominium community, you may have complete access to first-class amenities like a business centre , dog park, pool, grilling area, clubhouse, covered parking, etc. And the best thing about these amenities is the cost of enjoying these perks is shared between all the residents.
4. Opportunity to be social
Finally, the last but not the least benefit that a condo offers is the opportunity to be social. Some condominium associations organise social events like barbecues, pool parties, etc. that allow you to socialise with others. Moreover, you might also be in close proximity to neighbours and are more likely to meet them personally. But this will only be advantageous if you are interested in socialising with others.
Disadvantages:
1. HOA fees and rules
One of the major downsides of living in a condo community is that the rules of the HOA can be restrictive, regulating everything from what kind of items can be stored in the patio to trash pickup. Breaking or non-follow up of HOA rules can result in penalty or foreclosure in certain cases. Also, the fees of condo associations tend to rise over time.
2. Risk of investment
In a condominium, you and your neighbour will own the same property together. So, if anyone or more than one owner fails to pay their dues timely, the entire condo community can suffer the financial risk. Furthermore, if any of the condominium owners go into foreclosure, the units could change hands at an overpriced discount thus affecting the property value of every condo owner.
3. Reduced privacy due to many renters
As condominiums share common elements like hallways, lobbies, and amenities, a condo unit might not be a suitable fit for you if you value your privacy. As a condo resident, you will be sharing ceilings, walls, and floors with adjoining owners. Sometimes, noise can also become a serious issue. So, if you value your privacy then a condo is not a suitable option for you.
Is Buying a Condo a Great Idea?
Yes, buying a condo can be a great idea but it also depends upon what your requirements are! Prices of condos are cheaper than that of single-family houses and most condos come up with luxurious amenities for their homeowners.
If you are at that stage in life where you don’t have much time to do upkeep or take the maintenance responsibilities, a condominium can offer you a low-maintenance environment.
So, you might still decide a condominium is the right choice for you. Millions of people have! However, it is important for you to know what to expect before you buy.