Six tips for condo buyers
Just 5% of all homes bought last year were condominiums, according to the 2019 Profile of Home Buyers and Sellers by the National Association of Realtors. But in urban areas, condos continue to be a popular option for first-time buyers and empty-nesters, both of whom appreciate the low-maintenance lifestyle of condo ownership.
Buying a condo requires a little more vigilance and thought than buying a single-family house. We asked a real estate agent and a lender for tips that condo buyers should consider:
1. Expect extra fees
Condos come with additional fees. One of the largest expenses, in addition to your mortgage, will be your condo association dues. Jen Horner, a real estate agent with RE/MAX Masters in Salt Lake City, suggests in an email that condo purchasers find out how much you will pay in monthly condo dues and what the fees cover within the community. Do these fees seem reasonable in return for the maintenance and amenities that are offered?
"Condo fees generally cover the maintenance of the common areas, utilities such as sewer and trash, security and external building maintenance," Shelby McDaniels, channel director for corporate home lending at JPMorgan Chase, writes in an email. "In addition, whether the fees are paid monthly or annually, you will still be required to pay property taxes and need to carry homeowner's insurance to cover your contents and your internal structure."
2. Check on the condo association's reserve funds
If the association doesn't have enough reserves, it is not uncommon for condo communities to issue a special assessment for emergencies and/or much needed capital improvements, Horner writes.
3. Mortgages for condos may involve some additional steps
For condos, the condo association/complex must also be approved for a full loan approval to be issued, McDaniels writes. This may require additional paperwork, approval from the condo association and even some additional costs paid before closing.
4. You may need to make a bigger down payment or have extra cash in the bank
"Lenders sometimes have extra requirements for condo buyers," McDaniels writes. "You'll want to ensure you have a budget that will be able to accommodate it. Given these considerations, getting preapproved will be a critical step in the condo-buying process. Once you've been preapproved, you can shop confidently using your budget as a guideline."
5. Condo ownership comes with rules
It's important you understand what your unique responsibilities are to the overall community and what rules the condo association has in place, McDaniels writes. "For example, if you are a pet owner you will want to ensure pets are welcome before you decide on a specific condo complex," McDaniels writes.
6. Think about the best placement of your condo within the community
f you're looking at a high-rise condo, decide if you prefer first-, middle- or top-floor living, Horner writes. "Top floor condos are typically considered the best location in regard to noise reduction, isolation from neighbors, safety and better views," she writes. "However, how many floors up will you be traveling? Are there only stairs or is an elevator available within the building? Middle-floor living may allow you to minimize your heating bills by being sandwiched between the bottom and top floors. However, if the sound barrier is weak, noise from above and below could be an issue."
Consulting a real estate agent and a lender with condo experience can help you make an informed choice about the building and the individual unit.