So you are considering buying a house and looking at a lot of listings online for condos in your location. A condo is a viable living space, but not too many people are sure of how to describe these unit types, and it is not uncommon to mix up the definition of an apartment and a condo. However, a condo is a completely different type of living space with its own unique features, and here is what you need to know about them.
What is a condo? A condo, short for condominium, is a residential property unit that is owned by an individual or a family and is located in a building or complex. Condos come in a variety of sizes and designs and can be apartment-style residences, lofts, or even townhouses.
All condo owners within a complex share the use of the hallways, landscaping, driveway, pools, fitness center, lobby, and any other amenities that may be present, but they don’t have to carry out any maintenance tasks themselves. This is because the maintenance of these areas is carried out by the Homeowners Association (HOA), a body that all condo owners in the building are required to be members. These services are not for free, with members paying for upkeep in the form of HOA fees. There are also rules and regulations in place that all condo owners in a particular complex are expected to follow.
A condo is often commonly described as an apartment that you actually own. While this is somewhat accurate, condos have their own unique features and characteristics that set them apart from apartments as well as traditional houses.
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What you need to know about Condo
1. Structure and design
Condos can take a variety of forms in terms of structure and design. They may be similar to conventional apartments, or they may take the form of townhouses. As a matter of fact, a good number of them are converted apartment units or townhouse complexes. Condos are common in newer buildings, hence they mostly have the layout and style of new construction such as open plan layouts and modern finishes. When compared with prewar structures, condo buildings generally tend to take a more boxy shape. In some condominium communities, you may find individual standalone houses, but the same conditions that define condos still apply to them.
2. Sales and ownership
Selling a condo is similar to selling a house- the individual purchasing the property will secure a mortgage, and on the day of the transaction, he/she will sign the deed for the property. Just like when you own a detached home, as a condo owner, you have the freedom to sell and use the living space as you see fit unless there are rules and regulations in place limiting such use. However, despite the similarities, the deed for a condo does not give you the same level of ownership that a deed to a house grants. All that you own in a condo is the interior walls to your unit or just the air space within the condo. Since the common spaces in a condo complex are under the joint ownership of all the owners, you don’t individually own the exterior walls of your unit, and you are probably restricted from doing any exterior painting or making any modifications. On the other hand, if you want to make improvements indoors, you have the right to install new fixtures, change the flooring, get rid of non-supporting walls, or even install a completely new bathroom or kitchen. As a result, it is always important to keenly go through your condominium to determine exactly what you own.
The cost of a condo is determined by a variety of factors.
- The location – One of the biggest determining factors of the cost of a condo is the location. For example, the average price of a condo in downtown Los Angeles is $620,000, while in Cleveland, a condo goes for an average price of $168,544. In order to have an idea of how much a condo in your area costs, make sure that you carefully browse the relevant listings. This way, you will be able to gauge how large the mortgage payment will need to be so as to buy the condo.
- The down payment – The down payment is by far the largest upfront payment that you will encounter when buying a condo. The amount to be paid as down payment depends on a number of factors, such as the cost of the condo, the loan program you intend to use, the guarantor of your loan, and your credit history as well.
For example, if Fannie Mae is your loan guarantor, you will have to put down a minimum of 25% on the condo in order to avoid additional fees. On the other hand, if the condo you intend to purchase is in a complex that qualifies for funding from the Federal Housing Administration (FHA), you may be able to purchase it by making a down payment of 3.5%. However, if your credit score that is below 580, you will be required to make a down payment of 10%. The larger the down payment you make upfront, the lower the consequent monthly payments will be on your mortgage. Furthermore, you will also increase equity on your property faster.
- Closing costs – Unfortunately, mortgages are not handed out for free. In addition to paying for a number of mortgage processing services, you are also required to compensate the lender. These fees are referred to as closing costs. Some of the expenses factored into the closing costs include charges for pulling your credit reports, carrying out a title search, and writing a loan for you.
- Other costs – The condo complex that you intend to move into may require that you pay a move-in deposit. You will also need to pay movers, and you may feel the need to make some renovations to suit your preferences before you move in. You will also need to take into consideration HOA fees that you will inevitably be required to pay.
All these costs should be factored into your budget before you make a purchase on the condo that you want.
Many condos typically feature a variety of amenities that may include an on-site laundry facility, free parking, pool, a playground, gym, a park, a community room, and other conveniences that are meant to make the property more appealing. The higher the quality of the apartment, the wider the variety of amenities provided. Features that you may find within a condo unit include hardwood floors, granite countertops, and vaulted ceilings among others
5. Homeowners Association (HOA)
The HOA is a governing body in a condo community that is run by an elected board. It is in charge of the maintenance and management of the amenities as well as the general standards in the complex. Here is a general idea of what you can expect from an HOA in a condo community.
- Covenants, Conditions, and Restrictions (CC&Rs) – The CC&Rs are rules and regulations that condo owners in a complex are expected to follow. They generally provide the requirements and restrictions about how you can use your property. In most cases, these stipulations are sensible and beneficial to the neighborhood. For example, you probably won’t have a hard time accepting a rule that requires you to keep the noise levels down.
However, there might be some stipulations that are come across as unreasonable or simply interfere with your future plans. For example, if you want to install solar panels to harness as much renewable energy as you can, you will have to check with the CC&Rs first in case it is restricted. Or, if an HOA community you want to join doesn’t allow the breed or size of dog you have as a pet, you may be forced to find a home elsewhere.
- Common elements – Any area that is not within your condo unit is categorized as a common element (sometimes known as a common area) of the complex. There are different types of common elements that you need to be aware of as a condo owner living in a complex:
- General common elements – These are elements that all residents in the condo building can use. They include lobbies, stairways, amenities, and hallways, as well as the land on which the property sits on.
- Limited common elements – These are areas that are only used by a limited number of residents in the condo building. A common patio, for example, may only be used by condo owners on a given floor.
- Exclusive common elements – These are areas of the condo building that only residents of one unit can use. A balcony that is accessed only by one condo owner or exclusive parking space may fall under this category.
- Maintenance responsibilities – The HOA is usually in charge of managing the repair and maintenance of common spaces. This may include garbage collection, snow removal, roofing repairs, and painting the exterior of the unit. However, you will still have to take care of leaks and other issues you may experience in your condo on your own since it is not a common element.
- HOA fees – On a monthly, quarterly, or yearly basis, you will be expected to pay fees to the HOA. These fees are directed towards maintaining the common elements as well as providing services such as snow removal and landscaping.
HOA fees can rise depending on whether there is a need to keep up with repair, maintenance, and replacement costs constantly. You may also need to pay for a special assessment, which is an additional cost that may come up if there is unforeseen damage or if the HOA has not collected sufficient funds to keep up with the maintenance tasks.
Just like any other living space, there are upsides and downsides that come with living in condos.
Pros of condo
- Fewer maintenance responsibilities – One of the main upsides of condo living is the reduced maintenance responsibilities. Many condos usually contract a maintenance company that shovels snow, cut overgrown grass, fix roof leaks, and generally maintain the grounds. This is especially convenient if you don’t have time for these tasks for one reason or another.
- Convenient location – You will find a majority of condos built in urban areas. They are a great option if you want to live in the city center, or within walking distance to your workplace or to essential amenities.
- Security – Many condos usually offer security features such as locked or gated entries, or even guard service. Furthermore, being surrounded by neighbors provides an added sense of security in case of an emergency.
- Amenities – A majority of condo communities offer their residents a variety of amenities that you might not find in other unit types. Using these amenities can also allow you to get to know your neighbors, so if you love to meet new people, this could be a significant perk.
- Affordability – When compared to single-family homes, condos are generally cheaper. If you want to make the transition from apartments to home ownership on a tight budget, purchasing a condo is a great start.
Cons of condo
- HOAs dues – As a resident in a condo community, you are required to pay HOA fees regularly, which is an added expense on top of your mortgage. HOA fees vary widely depending on a variety of factors and could cost you anywhere from $100 to $1000 per month. Keep in mind that HOA fees can also be increased, which makes them even more of a financial burden.
- Limited privacy – As a resident in a condo that is located in a condo complex, you will inevitably have to share walls with neighbors, and maybe below and above you as well. This means learning to deal with noise filtering into your apartment and disturbing your peace and quiet.
- Rules and regulations – Some condo communities have unreasonably strict rules and regulations that all condo owners are expected to abide by. Some residents might be fine with following rules, while others may consider it to be stifling.
A condo is a great unit option which, like any other unit, comes with its upsides and downsides. You may also want to consult an expert who will help to guide you on what you can expect, or at least do some in-depth research on your own regarding condo ownership. Being aware of your preferences as well as your needs is also useful in helping you determine if going for a condo is best for you.