What Is A Condo And Should I Buy One?
Holly Shuffett7-Minute Read
November 10, 2020
When most people picture their “dream home” they’ll envision sprawling, manicured lawns or large rooms with high ceilings. What probably won’t come to mind is all the effort that it takes to maintain a home.
Whether you’re a young single, a couple looking for a low-commitment first home, or an empty nester looking to downsize, if shirking landscaping and upkeep duties sounds good to you, then a condominium could be your next dream home.
What Is A Condo?
For many people, identifying what classifies as a condo can seem baffling – what makes them different from an apartment or a townhouse?
To put it simply, a condominium – or a “condo” – is a privately owned residential unit that houses its tenants. Most confusion surrounding condos occurs when people attempt to characterize them based on looks alone.
Although condos are frequently likened to apartments, they differ because their tenants can own and sell the property as they would a house or any other real estate. This is also why rules regarding condo remodels are much more relaxed than an apartment’s – since the tenants own the property, they’re free to repaint or remodel to their heart’s content.
What makes up a condo doesn’t lie in the building itself but in the ownership of the units, so it’s no surprise that people can have difficulty identifying them. In fact, in some large cities like NYC or Chicago, a condominium may look no different from an apartment building. And in suburban areas, condos can be easily mistaken for townhouses.
So, if you ever find yourself stumped about what makes a condo, just remember that in both real estate and law, condos are classified in terms of ownership not appearance.
What Does Condo Ownership Mean?
Alright, condos are based off of home ownership – what exactly does that mean?
As we discussed earlier, tenants can remodel the interior space of their unit since it belongs to them. Tenants own their condo “from the walls in” which means that any interior design choices are free rein.
However, anything “inside of the walls,” such as plumbing or electrical, is owned by the condo association. This is because those features are shared entities, used by both the tenant and their neighbors.
And in condo associations, any shared spaces, including lawns, parking lots and general infrastructure, are the responsibility of the condo association, not the individual tenant.
What Is A Condo Association?
If you’ve made it this far, you’ve heard “condo association” referenced plenty. While you probably have a good idea of what one is, despite its similarity to homeowners associations (HOAs), the two organizations are a bit different.
But before we dive into these differences, let’s look at what HOAs and condo associations have in common:
- Both associations are governing bodies which oversee a residential community
- Both require payment from the homeowner in the form of monthly or annual fees
- Both have an established set of guidelines or rules which outline the covenants, conditions and restrictions (or “CC&Rs”) of the homes in their community
- Finally, both bodies are in place to maintain their community’s living standards and to ensure that they run smoothly
Where HOA and condo associations really differ is in their responsibilities.
While HOAs do tend to have say over things like communal landscaping, snow removal and sidewalks, they aren’t responsible for the maintenance or appearance of residents’ homes. Each single-family home within an HOA must be independently maintained by the homeowner.
Condo associations, however, are responsible for shared features – which includes the exterior of each condo – in addition to maintaining community spaces and shared amenities like a clubhouse or pool.
Condo Pros And Cons
The same way that you would go about any big life decision, you want to do your research. Understanding the pros and cons of condo life is essential to figuring out if a condo makes sense for your lifestyle.
Ease of Maintenance
Perhaps the most enticing aspect of the condo lifestyle is the fact that others will do the work for you. As we’ve mentioned before, since condo associations own the exterior of your home and any shared grounds space, chores such as lawn mowing, roof fixing and siding replacement won’t ever be on your agenda.
So, if you’re physically unable to tend to your home’s needs, too busy for upkeep, or just want to skip out on the chores, then a condo could be your perfect fit.
Amenities And Common Areas
Some people will shell out hundreds of dollars for gym memberships and swimming pool access. But with condos, these amenities are usually included in your association fees. Not to mention, these facilities are sure to be located within walking distance of your home.
Most condo associations also have a community clubhouse which residents can visit for various social events throughout the year – but more on that later.
This advantage is more subjective than the others – while some may find the exterior uniformity of condos creatively stifling, for others, the sameness offers peace of mind when considering resale value stability.
If safety is one of your priorities when house hunting, consider looking into gated condo communities. Some condo associations even include night watch teams or security professionals to keep their community safe.
Although all condos don’t offer these securities, they do all offer the guarantee of nearby neighbors in case of a safety emergency.
Lastly, condos can provide plenty of opportunities to interact with your community. Your local clubhouse could host festive holiday parties throughout the year or weekly game nights.
Whether you simply want to get to know your neighbors or you just love to socialize, these opportunities should more than meet your needs.
Although owning a condo is in many ways similar to owning a house, financing one isn’t quite as cut-and-dried as it is for a freestanding home. For those of us who would need to take out a mortgage, the lending process for condos requires a few extra steps, and consequently, some extra cash.
Initially, the lending process for a condo will closely mirror that of a regular house – a loan officer will assess both your financial health and the financial health of the property you’re buying.
With traditional homes, this step is fairly straightforward. Banks just want to know that if you don’t make your payments they’ll be able to sell the property and recover their money. And with traditional houses all that’s needed is a home appraisal and a clean housing title.
With condos however, there are more factors to consider when assessing the property.
Lenders will have to examine your condo association’s CC&Rs for any red flags which could hurt the property’s value. Additionally, the condo association’s finances and percentage of vacancies must be taken into consideration.
And on top of that, some condo complexes simply aren’t on the government’s list of approvals and therefore won’t qualify for an FHA or other government-backed mortgages.
This isn’t to say, however, that it’s impossible to tackle these challenges. Solutions range from simply applying for a conventional mortgage to exclusively hunting for government-approved condo associations.
Now, I know. This is a lot.
But the more aware you are of what challenges condo financing may bring, the better you can prepare for them.
No condo association is the same, and neither are their fees.
However, you can usually expect monthly or annual fees from your association to cover the costs of common areas and general maintenance of the community. Before you question if these fees have you overpaying, understand that they do cover essential expenses like garbage collection, landscaping and utility maintenance. Additionally, a portion of your fees will go toward a reserve collection of money that the association can dip into should anything happen.
What if the association’s reserve won’t cover the full cost of an accident?
Unexpected accidents or damage to property will always cost homeowners some extra cash to repair, regardless of their type of house. For condos, this extra cash is known as a “special assessment.” A special assessment is an unexpected, usually large, fee that residents must pay when the regular fees won’t cover the costs of repairs.
If this has you second-guessing your interest in condos, just keep in mind that unexpected damage or costs can happen anywhere. And although they’re unwelcome, special assessments are usually better for the condo owner in the long run rather than simply increasing regular fees over time.
So long as you prepare financially, you should be more than ready to tackle any unexpected expenses.
All Those Rules
It’s always unnerving any time our personal freedoms are called into question. This is why those CC&Rs are, for many, the biggest obstacle standing between prospective condo owners and sealing the deal.
Perhaps the most highly contested restriction has to do with pets. Some complexes simply won’t allow them – anything from a hamster to a Great Dane is out of the question. Other associations allow pets, but usually contingent on strict guidelines – fish aquariums must be specific sizes, you can only walk your pet dog in certain areas, and above all else, you must always take responsibility for any damages your animals might make to the property.
Other common restrictions center around noise levels, parking and sidewalk guidelines and garbage disposal. Should you break any of these rules, chances are you’ll incur a penalty fine. These fines could cost you anywhere from $25 – $100.
So be sure to stay in your neighbors’ good graces and know your association’s CC&Rs to avoid these challenges.
Is A Condo Right For me?
With these pros and cons, condos usually attract the same demographics.
Typically, young singles or couples without children are a great fit – the low maintenance and social opportunities tend to draw in those who are starting their lives. Additionally, anyone who can’t tend to their own landscaping or maintenance needs usually benefit greatly from condo communities. Empty nesters looking to downsize are also great candidates – there are even communities specific to people of different age groups.
Just keep in mind that trading in the chores of maintenance will cost you in the form of rules and guidelines, so be sure to understand what sacrifices you may have to make for the complex you’re interested in. But if you don’t mind certain restrictions or are particularly enthused about certain amenities, then maybe it’s time to give condo living a go.
Summary: Condos Are A Great Choice For Some Homeowners
We’ve discussed the things you can and can’t do as a condo homeowner, the pros and cons that condos have to offer and who the condo lifestyle may best suit. If you’ve carefully considered all of these factors, then you should be more than ready to make your decision.
Get the right home loan for you.
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