Quick Guide to Buying a Condo

by on April 25, 2012Shannon O'Brien

They’re typically smaller than single-family homes and they require far less upkeep. Yet the process of purchasing a condo may be far more detailed than that of purchasing a house. You see, the more players there are in a real estate transaction, the trickier it becomes, and that is certainly true when buying a condo.

Some of the advantages to purchasing a condominium rather than a single-family home include the obvious facts that condos are typically less expensive and may offer more amenities. Let’s take a look at some of the other advantages.

Advantages of Buying a Condo

  • buying a condoMaintenance chores are greatly reduced for condo owners. Although there may be landscaping in front of your unit, it is typically (though not always) up to the homeowners association (HOA) to maintain it. The same holds true for the roof, fencing and other items.
  • The typical HOA maintenance fee imposed on owners includes paying for items such as water, trash collection and sewer fees. Insurance is also paid for by the HOA, bringing down the cost of living in a condo even more, although you will still need to insure the contents of your condo.
  • The appearance of the complex and issues such as noise and other types of disturbances are regulated by the HOA.
  • Condominiums may offer more security than a single-family home. Many have doormen, guards or gates at the entry. The proximity of neighbors also adds a certain level of security that may not be present in an area’s single-family home selection.

Potential Drawbacks of Purchasing a Condo

The proximity of neighbors, while listed as an advantage, may be a disadvantage for those who crave privacy. The HOA, while advantageous for many reasons, may be intrusive and dictate unreasonable restrictions. Condos tend to have less storage space than single-family homes, a concern especially for families with lots of “stuff.”

When you purchase a house, unless it sits on leasehold property, you are also buying the land beneath it. Not so with a condo. In most instances you will own only the space inside the unit and share ownership in the common areas of the complex. Your share of the common areas, however, does not grant you the right to alter them in any way. So, although you may despise the tree in front of your unit, you are not allowed to remove it unless the HOA approves.

The Condo Purchase Process

If you’ve purchased a house before, you’ll notice that the condo purchase requires far more paperwork. This is because the seller must provide the buyer with certain HOA documents, which vary by state. These documents may include:

  • Covenants, Conditions & Restrictions (CC&Rs)
  • HOA budget
  • Bylaws
  • HOA meeting minutes

Each document in the HOA package provides valuable information. The meeting minutes let you know the type of issues that the board deals with frequently and whether there have been discussions regarding raising fees or if they are considering special assessments.

By far, the most important documents are the HOA’s financials, especially the reserve balance, sometimes called “reserve funds,” or “reserves.”  This is money set aside to cover major repairs or for replacement or maintenance of common area elements, such as a broken sewer line. A well-funded reserve account ensures you that there will most likely not be future special assessments imposed on the owners.

Another red flag to look for in the HOA documents is the number of non-owner occupied units. There are several reasons that a large number of tenants make the condo less attractive. First, many lenders won’t finance a condo in a complex with a tenant ratio over 25 percent.

Next, tenants don’t have the same incentive as owners to keep the property maintained so an overabundance of them may tend to bring down the value of the complex.

Lots of tenants also means a noisier environment and heavier usage of common area amenities such as the pool and exercise equipment, according to Robert Irwin, author of “Tips and Traps When Buying a Condo, Co-op, Or Townhouse.” Irwin suggests looking for a complex with 10 percent or fewer tenant-occupied units.

If you have any questions about anything in the HOA documents, consult an attorney before signing an agreement to purchase the condo. Since these documents govern how you can use your unit and the future costs of owning it, you owe it to yourself to understand every word.

{ 2 comments… read them below or add one }

Lauren Miller August 26, 2014 at 6:04 pm

I am interested in buying a condo in Damariscotta, Maine. It has been foreclosed and is currently bank owned and the entire building is up for sale. The thing that concerns me is there are only nine of the twenty one units occupied. The others are up for sale but I know they have been for sale for at least a couple of years. The reserve account was 75 k, I do not know if that is sufficient or not. I think I need to get your guide on purchasing a Condo…..Any advice you can offer would be greatly appreciated. Thank you. Lauren Miller


Gail April 9, 2013 at 11:39 am

Dear Shannon O’Brien,In your April 25, 2012 article “quick guide to buying a condo” would you be willing to specify some of the “several reasons that a large number of tenants make the condo less attractive” other than the finance issue you mentions in the article. I am heading a committee trying to get our condo by laws changed to include a lease cap. It is a hard sell for some unit owners. Further information might provide other good reasons to include in selling the amendment. Thank you. Gail


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