SHOULD I BUY A CONDO?

SHOULD I BUY A CONDO?

When most of us reach the point in life when we are ready to buy a home and settle down, the Condo option frequently enters the home selection equation.  Young singles and newly married couples, often with small children, are likely to find the Condo option very attractive.  

The living spaces are frequently newer than are the single-family homes in the same price range, amenities are more modern, and Condo complexes frequently include a clubhouse, pool, exercise facilities along with other attractive features.  Another big draw is the fact that Condo owners do not have to spend time and money directly on exterior maintenance and overall upkeep. 

Naturally, there are tradeoffs.  A Condo owner lives in closer proximity to their neighbors.  Homeowner association rules are by necessity more restrictive, limiting the owner’s flexibility.  

The next logical question is, why not choose a Condo over a single family home? 

Some buyers may find the living conditions a little too restrictive and the association rules too limiting.  Others may find the monthly association dues costly.  Much depends how well the homeowner’s association is managed and how well the governing board oversees that management process.

As a rule, older complexes tend lose value because they are not properly maintained over time.  Homeowner associations are notoriously underfunded.  Getting a majority of the owners to agree to dues increases or special assessments is difficult.  When funds are not available, maintenance suffers and the market value of the complex declines as the property’s condition deteriorates.  Those owners who would not pay for adequate maintenance frequently loose more because of the reduction in property value when they sell their units.

Understand that there are upkeep costs associated with the ownership of any property.  However, with most single-family homes, there is only one owner and that owner can decide how much time and money they wish to put into maintenance.  As a member of an owner’s association, the single owner has to go along with the majority-for better or worse.

When considering ANY purchase, one should think about what it will take to sell that property in future years.  Most families move every five to seven years.  Buying a property that will appeal to the future buyers is prudent.  Naturally, those buyers must be qualified.  As a potential buyer and, as a seller down the road, financing of the property must remain a critical concern.

Buyers should know that lenders tend not to like Condos.  This attitude results from past problems they have had with Condo loans. When they receive a loan application for a Condo, they require a Condo Cert. (a document providing essential data about the complex, the association, association management, association funding, reserves, owner occupancy ratios, percentage of owner’s current on their dues payments and other data).  Underwriters comb through this documentation carefully, comparing that Condo’s situation to their guidelines. They base most Condo involved loan denials on specific data provided in that document. 

Existing Condo owners report frustration and with lenders due to the difficulty, they have in refinancing their Condo units.  Once you own a Condo, you may be in the same position and your buyer may face similar problems when they try to obtain financing in order to purchase your unit.

There are a number of Condo complexes certified by the FHA.  These units are a better choice for those considering a Condo purchase because buyers may obtain a FHA loan to purchase a unit in that complex.   The danger here is that the complex must retain that certification or future buyers will have trouble obtaining a loan.

The FHA has recently revised its standards, making it more difficult to qualify.  This action, designed to protect investors, also helps potential buyers by weeding out the weak and substandard complexes.

They have recently advised us that only 8.4% of all Condo complexes are now certified and that the more stringent requirements are resulting is a reduction in the number of certified complexes.

The short answer to the original question is, caveat emptor (let the buyer beware).  INVESTIGATE potential Condo complexes carefully.

Go to the HUD web site:  http://entp.hud.gov/idapp/html/condlook.cfm  To determine if the complex you like is FHA certified.

Note that many newer single-family homes are part of a homeowner’s association with monthly dues and additional rules.  They too should be carefully investigated.  However, they tend to be less restrictive and lenders are more accepting of those properties.

Few older single-family homes have a homeowner’s association. Most will have CC&Rs (Covenants, conditions and restrictions-usually less strict than HOA rules).  Many will require updating, a process that may be undertaken over a long period as funds become available.  Some have been undated and are available in move-in condition.

The important thing to remember is that the prospective homebuyer should be fully informed so that they can make an informed decision that best meets their needs.  Find a Realtor who is patient and helps you make the best choice for YOU.

Enjoy your search!

Select this link to read the complete Realty Trac story:

http://www.realtytrac.com/content/news-and-opinion/new-fha-rules-doom-condo-values-5029