With prices of single family homes continuing to rise and become less and less affordable, maybe it’s time to look at an alternative. It could be time to consider a condominium.
Condominiums (and townhomes) provide a great alternative to a Single Family home. They are usually more affordable, they allow you to start building equity, they provide tax benefits and they also allow you to escape that money hole known as paying rent.
Just as there are benefits there are also some things you need to become aware of. Purchasing a condominium is a paper intensive process. In addition to all of the disclosures, forms, and reports you receive in a traditional real estate purchase, you will also receive as much or more documents from the homeowners association which governs the condominium complex.
When you buy into a common interest development (individually owned lots or units along with common area spaces or parcels shared with other owners in the same development) you agree to abide by the rules set forth by the homeowner association. Before you complete your purchase, you will be given a set of governing documents that spell out all of the nuances of that particular association which defines the rights and responsibilities of the association and its owners. along with the policy for carrying out those rights and responsibilities.
These documents can include the CC&R’s (covenants, conditions, and restrictions) Bylaws, Operating Rules, Budgets and notes from recent homeowners meetings.
Required Reading
I would definitely recommend you spend some time reading these documents and not just automatically “John Hancock” your signature page. Here are a few things you might find out and more reason why you should read them:
Pet Policy
- – Will your new building be as Pet-Friendly as you hoped? You may not find out until you see what the pet policy is. It may spell out how many animals you may own and what size they may be.
Looking to remodel? – Want to update your bathroom or change the dimensions of your kitchen or perhaps replace those old and worn carpets with new hardwood floors? You need to read the CC&R’s. It should spell out the approvals necessary for you to create your new dream home. Some multi-story units will not allow hardwood floors because of the noise level increase affecting the unit below yours.
Rent your unit?
- – Again it’s good to know the policy before hand. I have seen some buildings that insist you occupy your unit for one to two years before you rent it. Also, many buildings have guidelines on the number of units that can be used for rentals. The reason is when a unit is going through the escrow process, the lender may require a condo certification from the Homeowners Association or management company. This document shows how many units are used as rentals and how many of the units may be delinquent on their association fees. If these are too high the lender may decide against making the loan, which would then be troublesome for all of the owners in the association.</ol?
Other Differences Between Condominiums and Single Family
The word assessment has somewhat of a negative connotation and can have a couple of different meanings when applied to a common interest development. Regular assessmentsrefer to the normal monthly fees you pay into the association which covers the typical recurring expenses. These can be water, trash, landscape maintenance and insurance. Special assessments refer to unbudgeted items and usually apply to unforeseen issues or things that arise from an emergency.
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For instance, this past season we had a lot of rain in the area and it caused flooding in a building in which we sold a unit. The board of directors levied a special assessment in the amount of $850 against each of the owners to cover their part of the repair. Sometimes these charges can be paid over installments, other times they are expected to be paid at once.
Certified Condominium Specialist
So as you can see, buying a unit in a Common Interest Development is much different than buying a Single Family Home. And like most things the more research you do to better prepare yourself, you lessen the element of surprise. Also when choosing an agent to represent you, look for an agent who understands and specializes in condominium sales, look for a Certified Condominium Specialist.
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