The Potential Pitfalls of Buying a Condo
The Potential Pitfalls of Buying a Condo.
Condos are a great middle-ground between apartment living and a single-family home. A condo unit in the heart of a city can be a smart move to build equity while still getting to enjoy city life but that doesn't mean that it's free of risk.
When considering a condo versus another type of housing, not just single-family homes, it's important to consider everything that goes with condo living.
One of the biggest dangers of buying a condo is getting stuck with a bad neighbour.
It's no secret that condos share common areas within the same building. Whether you will like the condo experience or not can be greatly influenced by your neighbours.
Though condos are a long-term investment, one of the drawbacks of condos is that it's a long-term investment for other people around you too.
People in apartments are much more mobile but condo life means getting to know your neighbours for years. A toxic condo community or even just one bad apple right next door seemingly banging on the walls can make you regret the downpayment, legal fees, and closing costs you put down.
Most condos have conflict resolution practices as a last resort but there's no telling if these will work in the long run.
Getting in touch with the condo's board and the property management company to see how they handle complaints can help you figure out if the condo fits your needs.
If you're not careful, you could wind up paying more in condo fees than you expected.
In a single-family home, it's the homeowners responsibility to shovel snow, take care of landscaping, and more. All of these costs are taken on by the owner. They can hire people to take care of some of those things but at the end of the day, they need to micromanage those things.
Though condos tend to offer less space overall compared to homes, there is a distinct advantage in the fact that the owner is not expected to conduct maintenance themselves. Collectively, the owners hire people to take care of maintenance throughout the building.
However, if the other owners come together and decide to employ someone new or go with a different company than the one you would have liked for specific maintenance jobs, this could mean a bump in how much you pay monthly.
It's important to know how your money is being spent throughout the building and what hikes in the fees are expected. Inspecting common elements of the condo like the hallways and the yard can give you an idea of how close the building is to a major repair and how that might change your fees.
The closest equivalent in real estate is the fees imposed by homeowners associations. There are differences between a condominium association and a homeowners association but the terms are often used interchangeably.
In both cases, the group of people who own the property in common (in a condo it's the residents) come together to manage it and make decisions about how it should be run. The average HOA fee covers things like approving new paint colours for the exterior, what kind of plants to put in the front yard, or whether to replace the roof.
A condo owner is still responsible for the mortgage and their portion of the condo fees even if they're not living in the unit. This means that, if you go on vacation or take an extended work trip, your home will still need to be maintained.
It's important to factor this into your decision-making process when thinking about money in the long run.
Differences between a condo association and an HOA for single-family homes.
Single-family homes can sometimes be part of a homeowners association that requires HOA fees and can even require that some external renovations go through review by an HOA board. However, for many homes, HOAs (and HOA fees) are completely optional or even unavailable. For condos, monthly maintenance fees are unavoidable.
Aside from property taxes, once a single-family home is paid off, it has no recurring costs paid out to third parties if there is no HOA. When buying a condo, you need to account for enough money leaving your pocket every month for as long as you own the condo.
Property taxes are a fee charged by the government on property that is used to fund various public services. The amount of the tax is based on the value of the property, and it is usually paid annually. They tend to be more expensive for houses but not necessarily so. HOA dues are also usually calculated based on the value of the home.
An HOA community will be less tightly knit together than typical condo associations.
Make sure the condo association is well-managed and has a good track record.
Condo owners don't have to deal with things like snow removal or general landscaping, as these are paid for by monthly dues and taken care of by the condominium association.
However, an individual condo owner needs to be aware of what their monthly fees are going toward. Common property areas, ideally, should be maintained regularly to allow everyone to enjoy the building.
Many condos have great governing documents as well as a good system of written communication to relay important information. Still, some do not.
It can make things like unexpected repairs a pain to deal with because the other owners may not be willing to use the reserve fund to deal with the issues. In a well-run association, things run smoothly so that the community operates without a hitch.
You also need to think about the resale values of the units in the long run. Association dues could be financing projects that drive the price of the condo down instead of, for example, renovating the building's fitness centre.
Adding solar panels are a great idea but some owners may not want to change the exterior look of the building. Still, you need to understand that beyond your individual unit, the common areas are always subject to the group's approval.
When buying a condo, you have to look at how much you like the building but also take some time to see if the board members are making sensible decisions.
Always have an inspector check out the property before you buy it.
You might love the other condo owners you met and have a good feeling about the state of the building but having an inspector check out the property independently is a good idea nevertheless.
It's important to have it inspected by a professional to make sure there are no underlying problems with the property. Issues that may not be visible to the naked eye could cause costly repairs down the road, so it's important to know about any potential problems before you finalize your purchase.
If you can walk around common areas with them as well, it would help you understand what your future monthly fees could be going toward.
Getting into the right atmosphere.
Some community associations have deep roots in certain condominium buildings with several volunteers or like-minded people doing things in a recurrent convivial setting.
It's important to understand how well you would fit into the community. If you're someone that wants to have a very sociable relationship with your neighbours then it would be a shame to move into a condo that houses mostly introverted people. Vice-versa.
Finding the right place means that you can find people to tag along with you to the dog park or, on the other end of the spectrum, come to a quick agreement to say nothing but a couple of words when you bump into each other in the laundry room.
All in all, it's important to ask all the questions you can before taking the plunge.
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