This would be my first real estate purchase - what are the possible downsides to buying a condo?I am not sure of all the legal ramifications, but I have a cautionary tale to share. A former coworker bought a condo. She was so excited about it until she actually moved in. The condo connected to hers was owned by a heavy smoker. Apparently the heating systems were somehow connected and the smoke smell filled her condo!!! The condo association didn't care and offered her no remedy. She was finally forced to put her new home on the market for less than what she paid for it!!!
I think each condo should have separate heating/AC and pipes. There should also be a firewall between each unit. If there is a firewall, make sure it extends all the way through the attic. An apartment complex I lived in once said it had firewalls, but they didn't extend through the attic!!! One unit caught on fire (little boy playing with matches) and the fire raced through the attic to the neighboring apartments!!!
Also check what the condo rules are and read them carefully. Look for rules about parking, visitors, noise and pets. :)
Good luck! :)Ask about the housing association fees and rules. Some people are miserable in condo communities based on the types of rules in place. Most people who live in condos do fine.You have to pay fees, just like renting, that are not tax deductable. This is a total waste, you are better off paying that same amount into a mortgage.
You have to deal with neighbors, just like an apartment, but are trapped, there is no moving. Also, you can not do what you will with your property, you have to have approval from the HOA.
They are VERY difficult to sell, because no one else wants to pay those fees, deal with those neighbors, etc.
I personally think condos are a very foolish investment, not as bad as time shares, but pretty darn close.Condos usually don't appreciate as much as a house or townhouse. Your condo will probably depreciate in this market. New Condos are way over built so there is too much inventory.
The homeowner association fees will probably go up and you will probably get a special assessment you HAVE to pay. New condo fees are set by the builder and the builder wants to keep those fees as low as possible regardless of whether they cover the expenses they are supposed to.
After you have signed the contract, the builder will probably try to take back some of the incentives they offered to get you to sign. "We can't give THAT much away" is a favorite approach. Walk away as soon as they do this.
I don't know how you are financing but compare the closing costs. I am assuming a zero down payment based on what your note said but be careful if the builder is providing financing.well a condo is connected to others therefore if a fire were to happen then your condo would burn even if it wwas not your fault..other then that i think a condo is a wonderful idea.Condos do not appreciate the way stick built homes do, but if your area has a good percentage of condominium housing, it should be a fair investment long term.
A condo is basically an apartment you own, so there are similar issues with condos as there are apartments. Neighbors can be a concern. Since the condos are new, you aren't going to know how noise is going to travel or if you are going to be able to tell what the neighbors are having for dinner.
Condos typically have home owner's associations and fees attached. An HOA is the governing body of the condo units, they enforce the rules. You are going to want to take a look at the rules before you sign up. If you need two arms to carry the CC&R's, pass. Since this is a new venture, you aren't going to know how the HOA works, if they are sticklers for every rule and quick to hand out fines or not.
Every condo has monthly or annual fees, these are for use of the common areas and upkeep.
I don't agree that condos are a bad investment, as I said earlier, in areas that have a good amount of condo living, you should be able to resell without a problem. However, if your HOA gets a reputation for being difficult or the owner's dont maintain the property, that will work against selling the place.First off, Landlord claims that they are VERY difficult to sell. This is not true in all areas. Some are difficult to sell, just depends on what the others in the area are selling for. Others are not so hard to sell, especially if the mortgage will end up being less than what one could rent the unit out for.
Wallbaker is plain wrong, in just about all respects. As for the units depreciating because there is just too much inventory - that may be true in his area, but maybe not in yours. Contact a Realtor to find out what the market is where you are.
Next, yes, you will have Homeowner's Association fees. These may go up, they may not. Again, a Realtor can help you navigate the balance sheets and P & L of the HOA where you're considering buying.
Next, "you will probably get a special assessment you HAVE to pay." Wow, is this guy off base. A special assessment is when something unforeseen comes up - maybe the sewer line fails or the parking lots need repaved and this was not factored into the HOA monthly fees. You said that this is a new condo association - if there is a special assessment in the future, you're probably looking at 20 years down the road, unless something major happens that no one can predict. Oh yeah, this can happen in a neighborhood of single family homes, also.
Next, "After you have signed the contract, the builder will probably try to take back some of the incentives they offered to get you to sign. "We can't give THAT much away" is a favorite approach." If a builder tries to take away any incentives, you have a contract that's enforceable in a court of law. If you're worried about the builder trying this, you have another reason to have a Realtor representing you and protecting your interests.
Now, with all of that being said, there are many people living in condominium properties who absolutely love it, for many reasons, including that they have no maintenance issues to cater to, they have assigned parking, and they have close neighbors to socialize with.
If so many people don't like condos, then builders wouldn't build them anymore.
Lastly, here's a main reason to buy a property - your mortgage interest is tax deductible! This can reduce your taxes owed to our wonderful government by as much as $10,000 or more, based on your mortgage and tax rate!! You don't get this perk when you're renting.
Best of luck to you!you have to share things with other people ....
you are only owner of the space in where you live.
that is bs
try buying a single family residence, it is 10 times betterDon't forget the basic rule of location, location, location! Choose a unit that has a good position within the development. Generally, upper units, and end units are the most desireable because they share fewer walls with neighbors, have more light, and more privacy. I have seen one exception and that was in a Flordia senior community where the aging population that bought in its 60's wanted to swap down to lower units as people reached their 80's. Take a skeptical view of the estimated monthly HOA fees. Check and compare them with similar developments that are now a few years old. Fees are higher when there are more amenities to maintain. Pools are especially expensive. You will be paying for it whether you use it or not. One thing you won't be able to know is the ratio of renters to owners. As an owner occupant you will want to live in a building where there is a high number of other owner occupants. Rental properties tend to deteriorate more as absentee landlords try to keep maintenance at a minimum. Ask if the developer is going to make an initial contribution to the HOA reserves so that your community starts out with something in the piggy bank for any unforseen issues not covered by the warranty. Google the developer and see if there have been any construction defects lawsuits for shoddy construction. Just because it's new does not mean that it's of good quality in either materials or workmanship. Don't buy until you have done some comparison shopping. What else is available? Could you take an older property for the same price, or lower, and get a superior location, a larger unit, a view, or some other advantage? Good luck and I hope you have a happy new year in your new home.Take a closer look at the deal they are offering you....and I hope you have a Realtor representing you, because they aren't giving you a discount for not using one, are they? Nope, they are pocketing what they don't spend on one.
If the mortgage is less than your rent, then they have probably quoted you a 1-year ARM'd rate which are very bad deals right now.
The biggest downslide is the HOA dues...you need to see a COPY (not what the sales person tells you) of the by-laws to see how they are calculated, how often they can be raised, and by how much.
You also need to ask about construction...are there fire walls in between the units? Are there sprinkler systems installed? How is the building secure?
If you didn't think to ask any of these questions...that is another reason why you need a Realtor. You also need to know if they are priced correctly.
Remember that the on-site sales agent is NOT your friend and represents the builder.