Buying a condominium can be a smart real estate move, whether you’re a first-time buyer, downsizing, or looking for an investment property. Condos offer the perks of homeownership without some of the maintenance responsibilities that come with standalone houses. However, they also come with their own unique considerations, costs, and potential risks. Here’s what you need to look out for before signing a purchase agreement.

Key Things to Look for When Buying a Condo

1. Homeowners Association (HOA) Rules and Fees

Condos are typically managed by a Homeowners Association (HOA), which sets rules and collects fees to maintain shared spaces.

  • Read the HOA bylaws carefully to understand what is allowed (e.g., renting out your unit, pet policies, renovations).
  • Evaluate the HOA fees – they vary widely and can significantly impact your monthly budget.

2. Reserve Fund and Financial Health

A healthy reserve fund is essential for major repairs and emergency expenses.

  • Ask for recent financial statements and reserve fund studies.
  • Look for signs of mismanagement or insufficient reserves, which may lead to sudden special assessments (unexpected one-time fees for repairs or upgrades).

3. Condition of the Building and Common Areas

Unlike buying a house, you don’t just inspect your unit – the condition of the whole building matters.

  • Check the state of elevators, lobbies, hallways, and parking areas.
  • Look for signs of deferred maintenance or structural issues.

4. Condo Association’s Management

Who manages the property can significantly affect your quality of life and the value of your investment.

  • Is the building self-managed or run by a professional property management company?
  • Talk to residents about their experience with responsiveness and service.

5. Location and Neighborhood

Just like with any real estate purchase, location is crucial.

  • Research local amenities, crime rates, school zones (even if you don’t have children – it affects resale value), and future development plans.
  • Visit the property at different times of day to get a feel for noise levels and traffic.

6. Insurance Coverage

Condo buildings typically have a master insurance policy, but this doesn’t cover everything.

  • Understand what the master policy covers vs. what you need to cover with your own condo insurance (HO-6 policy).
  • Consider loss assessment coverage in case the HOA passes on costs to residents.

Added Expenses to Consider

Owning a condo often involves more ongoing costs than buyers initially expect. Key expenses include:

  • HOA Fees: These can range from modest to several hundred dollars per month, depending on amenities and services.
  • Special Assessments: One-time charges to cover major repairs or improvements that the reserve fund can’t cover.
  • Utilities: Some utilities may be included in HOA fees, while others are billed separately.
  • Insurance: Your personal condo insurance policy is essential and can vary in cost depending on location and coverage.
  • Property Taxes: These are based on your unit’s assessed value and are paid separately from your mortgage.
  • Maintenance and Repairs Inside the Unit: You’re still responsible for all maintenance inside your condo.
  • Parking Fees: Some condos charge extra for parking spots or storage units.

Risks to Watch Out For

1. Poorly Run HOA

An HOA that doesn’t maintain the building or manage finances well can hurt your property value and lead to costly problems. You need to make sure that the HOA has at least 10% of all fees set aside in reserve for repairs. 

2. Litigation Against the HOA

If the condo association is involved in legal disputes (e.g., with contractors, residents, or developers), this can affect your ability to get financing and insurance.

3. Overly Restrictive Rules

Some HOAs have strict regulations that may not suit your lifestyle. Make sure you can live comfortably under the community’s rules.

4. Low Owner-Occupancy Rates

A high percentage of renters can lead to less community engagement, more wear-and-tear, and difficulty securing financing (some lenders prefer buildings with at least 50% owner-occupied units).

5. Market Volatility

Condos often appreciate in value more slowly than single-family homes and may be harder to sell in down markets.

Final Thoughts

Buying a condo can be an excellent choice for many buyers, but it’s not a decision to rush. Carefully evaluate the HOA, building condition, finances, and community rules before committing. Make sure you’re comfortable with the additional expenses and understand the potential risks. Taking the time to do your homework now can save you significant headaches and costs down the line.

Posted in blog and tagged , ,