Purchasing Condominium: What You Should know!
According research conducting by National Association of Realtors (NAR), Condominiums (condos) most popular for first-time buyers, in residential real estate market, especially for single women. Retirees and Empty – Nesters prefer condos, instead of upkeep costs, from previous single-family homes. Last few months of 2005, medium price of a condo: $229,000 up 61.6 percent, from 2002. Final quarter of 2003, average price for condo: $174,700 vs. $171,600 for single-family home. During same year, sales of condos reached, almost one million units, which is 9.5 percent increase, from 2002. Toll Brothers (One of the top leading home builders in the United States) Vice President Doug Yearly said, regarding condominiums “…both urban and suburban … promise to make up an increasing share of the company’s output.” However, as interest rates have climbed during 2005, recent sales volume of condos, have fallen by 10.4 percent, since the record level, in June 2005.
Previous apartment buildings, hotels, and offices, are converting to condo ownership. The condo conversion process, takes less than one year. Depending on the time necessary, required to improve the property or units. Money is allocated for upgrading exterior, and common areas. Also, upgrades include, interior amenities, such as granite counter tops, wood floors, carpeting, bathrooms, and more. Condominiums are generally, offer for sale, first to existing renters, then to prospective new buyers, less than ten to fifteen percent discount, of the market price. Often, new buyers permit, current renters to continue live, in the condo, at least a year, and pay rent. During good economic times, buying a condo has many benefits: Equity appreciation, low interests rates provide variety of mortgage plans, interest rate (mortgage) and property taxes are both deductible against income, and maintenance fees cover, major upkeep costs, including landscaping. Sometimes, maintenance fees include cable service or other amenities. However, as interest rates climb, condo market becomes over-saturated or maintenance cost rise, conversion becomes less economical or profitable. Most importantly, consider before purchasing a converted conversion unit, how old is the building. Older buildings, repair costs are more frequent, and roof replacement, maybe necessary. If condo Association does not have sufficient reserve funds, for necessary repair work, then owners maybe liable, pay for an assessment.
Condo Owners beware Condominium Association(s), maintains insurance, which covers only the common area, such as walkways, pool, hallways, roof, basement and other areas, for damage and liability. However, condo owners should purchase, their own insurance, which will cover any liability, inside their condo. The insurance coverage should include burglary, guest injury, damage by flood (Flood insurance is a separate policy.), and fire. Ways to reduce, condo insurance premium: Install Hurricane shutters, Alarm system, have fire extinguisher, raising your deductible, age of building (Older building may cost more to insurance), and paying balance, instead of premium payments. Your insurance company, offer you a discount, if you purchase, other types of insurance coverage. In 2000, according to National Association of Insurance Commissioners, average condo personal insurance policy was $230/year. Condo Insurance policy should include, assessment coverage, saving assessment costs, in the future. The condo Association insurance will pay, a portion of unexpected expenditures. Also, condo owners should periodically update their insurance coverage, as content value increases, repair costs increase or replacement cost increase. Major insurance companies, Allstate, State Farm, and Homesite (www.Homesite.com), offer condominium insurance.
When renting an apartment, the landlord is responsible to fix any electrical, plumbing or make repairs inside. However, owning a condominium, owner is responsible, all inside repairs. Recommend, purchasing a service contract, for home repairs, including electrical, plumbing, and air conditioning. Also, coverage should include: Appliances, cleaning air conditioning unit, and nominal charge, for replacement cost, saving money, in the future. Also, service companies, may offer a discount, purchasing an appliance or replacing the air condition unit, if you don’t have replacement cost, in your contract. Not having a service contract will cost more, hiring a handyman or professional contractor.
Tips purchasing a Condo and Living in the Community
Presale or buying ‘off the blueprint’ condos, offer best value, since those are sold at discount, from actual market price. However, this maybe risky, when real estate prices are moving down.
Presale condominiums require a deposit, which is refundable, most of the time. Some model condos, maybe available to view.
Older aged condos require more repairs or replace existing appliances, and air conditioning unit.
Check electrical outlets are working.
Read Condo documents: Recent financial statements issued by the Association(s), regarding maintenance charge, budget, amount in reserve, and assessment cost. Reading past two years of ‘minutes,’ provide a review of any scale improvements and any assessment charge. Check amounts in reserve, and amount collected for the reserve, sufficient to cover future projects or else an assessment, maybe levied against condo owners. Sometimes, unfortunate circumstance, from hurricanes or other events, could cause unexpected costs, for the association, and insufficient reserves, have condo owners pay an assessment. In 2005, after hurricane Wilma, many condo Associations in Florida, did not have sufficient funds in reserve for damage costs, despite some insurance coverage.
Beware maintenance cost, usually increases (Almost each year), which reflects increases for insurance, taxes, management fees, and other variable costs, for the Association.
Some Associations require approval, from board of directors, before moving into the condo. Sometimes a background check is done, preventing any criminals, moving into the community.
Beware of late fees or legal consequences, when maintenance charge is paid late or delinquent. An Association may place a lien on the condo or eventually seek foreclosure in court, for non – payment.
Some condominium Associations have restrictions regarding age, and owning pets.
Each condo owner has assigned parking location, and separate area for guests.
Entrance to pool area or Clubhouse, may require having a key or some type of security devise.
Condos are priced higher, every floor above the ground. Average price increase $2,000 – $14,000 per floor. Premium cost attributed to better view.
Condo Associations sometimes, have rules and regulations regarding: How many people may live in a condo, limitation for renting or subleasing, number of visitors permitted, what is permissible in patio or sun-deck or party room, limitations for barbecuing, limitation operating a home business, and consequences for excessive noise, which may lead to eviction. Some Associations are more restrictive, especially in elderly communities.
Check for sufficient lightening in common areas and near the front door.
Check all windows open / close and lock easily.
Observe landscaping is clear of any debris, and sidewalks are clean.
Some gated condo developments will have a guard on duty.
Disputes with condo Association, sometimes can be resolved through arbitration or mediation
However, further disputes can be resolved in court.
Condominium owners share common walls with neighbors above, below and next door.
Condo owners that have complaints or problems should contact the Association management company or any member of the Board of Directors.
Condominiums governed by an Association, similar to a corporation, with a governing body, which overseas business. The Board of Directors elected, by unit owners. The number of Board of Directors determined by Article of Incorporation, and Bylaws, within the Association. The Directors create the rules and regulations, for enforcement within the community, oversee funds being properly budgeted (Sometimes a management company is hired to oversee, aspects of the Association budget. However, checks have to be signed, by President or down the chain of command) and protect property value, of the Association. Sometimes, Board of Directors will organize committees aid in decision making for various projects, such as replacing roof tiles or election committees.
In the state of Florida, the Florida Department of Business and Professional Regulation, regulates condominiums. According to statues of the department, Associations of more than fifty homes, with annual revenues of $100,000 – $200,000, must have their financial statements compiled, by a Certified Public Accountant (CPA). Associations with $200,000 – $400,000, in revenue, have to be reviewed by CPA annually. Also, revenues over $400,000 must be audited. Additional statue includes: Notice of Board of Directors meetings, must be send to condo owners, not less than 14 days, prior to the meeting date.