Buying a condo may seem like the best decision for you and that’s great, as it suits many people. However, before you buy what you think is the ‘perfect condo’ for you, it’s important to know the mistakes you should avoid.
Knowing the following issues can help you sidestep potential issues as a condo owner.
Mistake: Not Finding Out if the Condo is Warrantable
This is a big one. If you need financing to buy the condo, it must be warrantable. If it’s not, Fannie Mae, Freddie, Mac won’t allow you to secure financing. If it’s non-warrantable, chances are the FHA, USDA, and VA won’t allow it either. That leaves you with only one choice for financing – a private lender. This may or may not be in your best interests since the loan will be considered ‘risky’ which means higher interest rates and fees.
Mistake: Not Knowing the Association’s Rules
Each association has different rules. If you don’t know what they are ahead of time, you might be unpleasantly surprised when you live there. Associations have rules regarding both the interior and exterior of your unit. You may need permission for certain things and you may even be unable to have certain things, such as certain types of dogs or a satellite dish on your roof. Ask about the rules and read the fine print before making a decision.
Mistake: Not Knowing How Many Investors are in the Building
If there are a large number of investors that bought units in the building, you may not like it. First, it’s hard to build a community when you have people coming and going from the various units. In addition, values tend to fall when many of the units are investment units. Renters don’t take great care of the units, which may lead to run down units and lower values. It’s also hard to make friends and create a sense of security when you don’t know from one minute to the next who is living there.
Mistake: Not Knowing What the Association Fee Covers
First, you should inquire about the cost of the association fee. You’ll need that information for your mortgage application as well. However, you should know what that fee covers. Are you paying for amenities you won’t use? For example, if it has a pool and a workout room, you may have higher association fees. If you’ll use those amenities, then it’s worth it. If you have no interest, though, you may be overpaying for something you don’t need.
Mistake: Not Researching the HOA Itself
How does the HOA run the building? Does it have good reviews? Is it receptive to homeowner feedback? Do they make changes often? How often do they increase the association fees? These are just a few of the questions you should ask. If the HOA doesn’t run the building properly, you could find yourself frustrated with the management. If they aren’t responsive, it can be hard to get anything done as you need approval for most changes when you live in a condo.
Mistake: Not Finding out About Special Assessments
Ask about the association’s history of levying special assessments. If they do it often, it’s a sign that they use poor budgeting practices. If it’s only once in a while and in an emergency situation, it’s acceptable and typically normal. While you want the association to be able to handle things like emergency roof repairs, you also want one that handles money correctly and has the savings to handle repairs, even emergency repairs.
Mistake: Not Looking at the Association’s Legal History
It’s important to note if the association is always in legal trouble. If they have a history of lawsuits, it’s not a good sign. You should find out the specifics of the lawsuits. Was it financial or was the association doing something illegal? Use the information you find to make a decision. One or two lawsuits are one thing, but if there are many in recent years, it’s a sign to look elsewhere.
Buying a condo is a great way to be a homeowner without the responsibility of a lot of exterior work. Condos are often less expensive too, making it great for first-time homebuyers or those looking to downsize. Avoiding the above mistakes can help you find the condo that’s just right for you.