Condominiums - The Balance Sheet Price. Some people love the idea of condo ownership, and others hate it. Some who are not at all that thrilled with the idea may opt for it for one simple reason - in many places it's alot cheaper than a single-family detached home. This will be a difficult fact for you to accept if the only condos you are familiar with are developments with names like Country Club Haven and Rockerfeller Manor and have Jags and BMWs parked in front of them. Statistically, however, it's true. In some markets the average sales price of a condo will be 40 to 50 percent less than the single-family detached option.
Variety. Remember that the word condominium describes a form of ownership, not a type of building. Although the apartment-style condo is common, there are an infinite variety. They range from a very modest apartment building that has been converted to lavish single-level units built specifically as condos and clustered around a golf course.
Quality of Construction. Several years ago, as the condo concept became more accepted by homebuyers, a conversion feeding frenzy occurred. Let's say you owned an apartment building that with intensive management was barely returning a positive cash flow for you. An astute developer shows you how to convert the apartments to condos and sell them. The profit figures he projects take your breath away. You're convinced and you convert. So did a lot of other apartment house owners.
Consumer abuses occurred during the period, prompting many state legislatures to enact very restrictive rules on condo conversions. One of the biggest complaints had to do with quality of construction. "Paper-thin walls" was a complaint often heard. A tenant who pays $700 a month for an apartment might be slightly annoyed by the presence of a noisy neighbor. A purchaser who pays $100,000 for that apartment as a condo would likely be more than somewhat irritated by that same inconsiderate neighbor.
New construction, built specifically as condos, naturally gets much better marks. For example, when we moved to our present location, a local builder was just in the early stages of constructing a condominium project. We purchased a condo for a relative when it was in the foundation stage. Each individual unit had its own interior walls, separated by an airspace as opposed to a common wall. It was clear in all the planning and actual construction that these units were designed as homes, not as apartments. Since it was early in the construction process, my wife and mother-in-law could work with the builder to customize the condo. It turned out well for us, and the builder maintains that the nervous twitch he developed had nothing to do with the experience.
Condominium Owners' Association This is an association of elected condo owners who control and manage the overall affairs of the condo complex, including maintenance of the common areas, such as the required periodic painting of the exterior as well as such exotic functions as garbage pickup. Those things obviously cost money, and they seem to cost more money each year. You will be required to pay monthly dues to cover these expenses. By the way, if you buy a condo, the amount of these fees will be considered by the lender when qualifying you for the loan. Condo associations have some rather formidable power. For example, miss one of those dues payments and they can put you a lien on your property - and in a worst-case situation, actually foreclose on it.
This Tip was excerpted from:
The Homebuyer's Survival Guide, by Kenneth W. Edwards, Real Estate Education Company, 1994.
ISBN# 0-7931-0906-X |
