Tuesday, June 8, 2021 / by Teresa Dipeso
Are you thinking about buying a condo? What is the best advice when buying a condominium at the Shore? Start with understanding right away that it is much different than purchasing a single-family home!
Buying a condo offers some advantages – proximity to the beach, affordability, less maintenance and more. But buying a condo is not the same as the purchase of a single-family home.
With single-family homes where there is no HOA, you are the king of the castle. With a condo, you must follow the rules established by the condo board.
Understanding the differences and the particular things you should look out for when making your purchase is important if you want to be happy after the closing.
For this reason, I have put together some of the best tips for buying a condo.
Let’s take a deep dive into what you need to know.
What is a Condo?
A “condo” is short for a condominium. Condos are individually owned units within a community of other units.
Condominium owners jointly share common areas within a community such as hallways, garages, elevators, parking areas, tennis courts, and pools.
Individual units in a condo building can be sold, whereas an apartment cannot.
At the Shore, many condos near the beach are what we call "condo-tels". These are former hotels/motels converted into private condo ownership. These buildings are often season, open April-October, weather depending. The reason for this is simple: many of these buildings were originally built without heat! Seasonal properties are generally less expensive than "year-round" units. Understanding how you intend the condo makes a big difference. Do you want to come down in late fall/winter? You'll want a "year-round" condo.
Get Clear On How Buying Condos Is Different
Owning a condo is like a cross between owning an apartment and owning a home. With condo-buying, all of the owners need to work together to maintain the buildings and the community.
The benefit of this arrangement are great – you typically have fewer maintenance needs than you would with a separate home, and condos are often cheaper than a comparable size home.
Townhouses are similar to condominiums as well.
However, you also have to depend on the other owners and the condo association to address issues they are not always good at doing.
Keep in mind the condo association is the lifeblood of your neighborhood. Without a healthy condo association, you will more than likely have a rough experience.
Spend some time talking to your Realtor about what you should expect owning a condo and the things you should look out for when buying. Your real estate agent should help you avoid any surprises.
Here is a great list of questions to ask before buying a condominium. Your Realtor should be able to help you get these questions answered before you even consider writing an offer.
- How much are the condo fees, and what exactly do they cover?
- Is this a seasonal or year-round condo?
- Is the neighborhood professionally managed, or is it done by the owners themselves?
- Are there any special assessments coming up shortly, and if so, how much?
- Are there any pending lawsuits against the complex?
- What is the policy on renting condos in the neighborhood? Having a rental income is vital to some folks.
- How many units are currently owner-occupied, and how many are rented?
- What is the parking policy? Do I own my space? Are there parking lots or designated guest parking?
You Will Pay HOA Fees When Buying a Condo
As a unit owner in condo developments, you will be required to pay HOA fees. Usually, they are a monthly fee, but at times they can be paid quarterly in some condominium developments.
Monthly dues can vary bases considerably on what amenities are offered. The dues always cover your exterior insurances (fire, flood, liability) and common area lighting/heat/etc. A rare few don't carry flood insurance, making the property a cash-only deal.
Some condo communities have amenities such as tennis courts, a swimming pool, or fitness centers. Amenities such as these can drive up monthly payments considerably. Condo fees at condo-tels often cover some or all of your utilities.
Before making a condo purchase, it makes sense to decide which kind of perks you don’t mind paying for. There is no sense in paying for monthly maintenance fees on things you will never use.
Are The Condo Fees Reasonable?
It is a good idea to check the condo association fees before scheduling a showing. Some condo developments have outrageous condo fees due to mismanagement of funds or major repairs that have been recently completed.
There also could be a special assessment whereby potential buyers will be required to pay an additional condo fee for some designated expense.
For example, maybe there are older condo buildings where the roofs need replacement. Homeowners association fees could be temporarily increased to pay for the installation of the new roofs.
Do You Plan To Rent?
Many second-home owners at the Shore decide to rent their property to generate some extra income when they can't come down themselves. The rental market at the Shore is massive. It's very easy to pick up rentals at the Shore and it can be quite profitable! So, when looking to buy a condo, consider if you want to rent at all. If yes or maybe so, look for condos that you would want to rent yourself, or at least those that you could imagine someone wanting to rent!
Research The Condo Association Before Purchasing a Condominium
One of the best tips for buying a condo is understanding the financial strength of the neighborhood! The condominium association is in charge of keeping things together in your community.
When buying condos, you need to make sure buildings are in good repair, that the grounds are maintained, and that members uphold their end of the bargain.
The truth is most HOAs are run very well and responsibly. But, it's always good to do due diligence.
Verify The Condo Reserve Fund
One of the most critical tasks when buying a condo is understanding the condo community’s financial health.
Each association has a reserve fund, a pool of money collected from members that are supposed to go towards repair costs. But each association handles reserves differently, and not all are as financially sound as others.
As your Realtor, I'd be happy to provide you with the stats on the association’s health and if the current owners are paying their condo fees. These are all services you can come to expect from a top not Realtor.
Have Your Own Emergency Fund
Condo ownership is often less expensive than homeownership because costs are shared among members. But remember, this is not like renting an apartment. You will still need money to cover your share of costs, and there will be many things that you have to pay for on your own.
The association will not help you replace your refrigerator, for instance.
This means you need to have an emergency fund. How much is up to you, but the more money you have in it, the easier you will weather surprises after buying your condo?
How Will You Finance Your Condo Purchase?
If you will use FHA financing, but the condo development does not have FHA approval, you will need to look at another loan program. There are numerous mortgage programs to choose from. A conventional loan is the most common form of financing when making a condo purchase. If the property does not carry flood insurance, it will need to be cash. But again, this is very, very rare at the Shore.
Of course, just like purchasing a home, you will need to have a good credit score to buy a condo. A condo loan is no different in that respect.
Your lender should help explain what loan programs will work best for your purchase. I'd be happy to provide you with a list of local lenders who understand the nuances of Shore properties. Just ask!
Check on Maintenance When Buying Condos
The general arrangement with condo associations is that they will take care of maintenance for the common areas. But one association’s idea of routine maintenance may not be the same as another. Some condos may be pristine, while others are a lot rougher.
You should find out your responsibility and what falls on the condo association on the same line of thinking. For example, some condo associations take full responsibility for things like deck or patio maintenance. Other times this is not the case at all.
Another gray area can include roofs and windows. These are obviously costly repair items that you will want to know who is responsible for, especially if they are nearing their life expectancy.
Go Big For Resale Value When You Buy a Condo
You may want only enough space to be comfortable in. But when it comes to reselling the condo, you will find that two and three-bedrooms are easier to sell in most cases.
Studios and one-bedrooms might be all you are initially interested in, but if you want to sell later, you might want to go for something a little bigger.
From an investment standpoint, also look at the appreciation potential between the two. Going with multiple bedroom condos may be a wiser choice from a resale and investment standpoint if you can comfortably afford it.
With Condo Buying, You Should Ask About Storage
Storage is a common problem in a condo unit. They are not usually designed for people with lots of things to store. Determine what your storage options are if you think this will be an issue. Some condos will offer storage areas or garages as an option. Many condos at the Shore offer storage, but not all.
Try For A View
If at all possible, you want to get a condo that has a decent view. This is important for two reasons. First, it is more enjoyable to live in a place where you can enjoy looking out the window. Second, it is much easier to sell a condo that has a view. Water views at the Shore are one of the biggest factors in pricing.
Make Sure You Hire A Realtor Skilled in Condos
The internet is a great way to search for ideas on buying a condo and on possible listings and general prices.
But there are so many things that need to be clarified – details on condo associations, hidden costs, reserve funds – that having a professional to help you is important.
I've been helping clients buy Shore condos for 25 years. Put that experience to work for you!
Finding Condos For Sale
The best way of finding a condo to buy is to hire an excellent local buyer’s agent who will not only help you find an excellent condominium but be your advocate as well. Search for Condos: Click Here!
Get a Home Inspection Before Completing a Condo Purchase
Some people think that it’s not necessary to get a home inspection when buying a condominium. This is not the case. You should still consider hire a professional home inspector when buying condos.
While issues found on the outside will be the condo association’s responsibility, any problems inside will fall on the individual unit owner to deal with.
It is not uncommon that you would find similar issues at a home inspection as you would with single-family homes. When the inspection report comes in, don't panic: it's the inspector's job to find things to report! Most are minor and cosmetic, and in this market, asking for the seller to make a big renovation is an easy way to lose out on the property. Be flexible, unemotional, and don't let pride or fear cause you to ask for too much or even walk away from a good deal. Big picture, it's not worth losing a great opportunity over something relatively minor. Especially with inventory so low.
A condo can be an affordable alternative to a single-family home at the Shore. Maintenance free living appeals to many Shore second-home owners.
Contact me today at 609-780-1434 to put my 25 years experience to work for you!