Tips & Tools : condo

What to Ask When Buying a Condo Pre-Construction

RE.com Tips & Tools — Thu, 26 Jul 2007 17:27:00 GMT

Buying a condo that hasn't been built yet poses its own set of risks. Learn what details you should find out about before you sign that contract.

While most people would never sign away tens of thousands of dollars on a car sight-unseen, they do exactly that with real estate all the time. Many homes and condominiums are purchased before the builders ever sink a shovel into the ground. Visiting a model home may give you an idea of what the finished product will be like but it’s not the same as touring the real thing.

Buying a pre-construction condo is also different from buying a pre-construction home. In most cases, a homebuyer will have some degree of say in the design and layout of their planned home. A condo buyer rarely has this luxury. Beyond flooring and surfaces, the design of the unit is generally left to the discretion of the developer. Concerns that seem intangible at the time of purchase -- proximity to neighbors and waste disposal, for example -- can become unavoidably real after you move in. But it’s hard to think about all the potential problems when you’re basically purchasing a spot of empty space.

Purchasing real estate of any kind is a big decision. Here are some questions to ask when buying a condo that hasn’t been built yet.

What’s being done to enhance the soundproofing?
While you’ve no way of finding out how noisy your neighbors are going to be until after you’ve actually moved in, you can ask what steps the developer has taken to improve the building’s soundproofing. Depending on where your unit is located, you may have people living above, below and on either side of you. Sound transmission -- be it airborne sounds coming through the walls, or impact noise from high-heeled shoes coming the ceiling -- is a common complaint about condo life.

Most modern condos are well soundproofed, but there are still certain things that are well worth asking about. You can request to see a floor plan of your neighbors’ units to determine which common walls you share and which of their walls connect with which rooms in your unit. Also, if possible, try to find out if your upstairs neighbors have opted for wall-to-wall carpeting -- an option that’s less conducive to sound transmission than bare hardwood flooring.

How close will my unit be to common areas?
Many areas of a condo are shared by all of the tenants. Find out ahead of time if your unit will be situated on, or near, the front vestibule, meeting/party room, gym, elevator or stairwell. People tend to be less careful of noise in shared areas than they are inside of their own unit, and a raucous celebration in an adjoining party room or people tromping up and down nearby stairs could keep you up at night. If your unit will be situated near a noisy part of the complex, ask if it may be possible to get a price discount.

Where will my unit be in relation to sanitation and laundry facilities?
Being near the laundry, sanitation room or pool can pose noise- and smell-related hazards. You could end up living in a condo that constantly smells of bleach, chlorine or cleaning supplies. If your unit backs onto the parking lot or alleyway behind your complex, make sure you ask where the dumpsters will be placed. A balcony becomes significantly less charming if it offers a scenic -- not to mention fragrant -- view of a building’s trash, especially in mid-summer.

What is the building’s expected occupancy?
Be sure to ask how many people you’ll be sharing the services and amenities of your condo with. Do some math: Will a laundry room built for five washers and dryers be big enough if a quarter of the tenants opt to do their laundry on a Sunday afternoon? If the gym has only three treadmills, how long might you have to wait after work to get onto one?

Also, ask about what the expected ratio will be of owners to renters. Owners are more likely to take better care of their units than renters. As a result, it can sometimes be more difficult to secure financing for a unit in a condo with more renters than owners, or you may be charged a higher interest rate on a mortgage. A good owner-to-buyer ratio is 3:2 or better.

What are the rules and regulations?
Unlike private home ownership, condo ownership is subject to certain rules and regulations pertaining to the use of both common areas and individual units. Condos can place restrictions on just about everything from the number and type of pets you can have (if any) to what kind of renovations you’re allowed to undertake on your unit. Some even place restrictions on how many guests you can have at one time. Get a list of all of these rules and see if any of them are unreasonable or potential deal-breakers.

By asking the right questions, you can get a better understanding of what a condo is going to be like after it’s built. And, hopefully, knowing what to expect will help you avoid having any unpleasant surprises.

Pre-Construction Condos: How the Process Works

RE.com Tips & Tools — Tue, 17 Jul 2007 17:24:00 GMT

When you buy a home that's not built yet, there can be setbacks before you move in. Here are steps to buying a pre-construction condo

Pre-construction condos are units that have been proposed by a developer, but have not yet been built. When you purchase a pre-construction unit, you are putting money down before construction begins.

Buying a pre-construction condominium can be a great opportunity, but you should proceed with caution. Because you are buying into something that does not yet exist, there is greater potential for unforeseen problems and setbacks before you move into your home. By understanding the risks and planning carefully, you can avoid complications and come out a winner.

Advantages

The main advantage to buying into a condominium development before construction starts is that you often get a lower price than if you buy when construction is complete. The reason for this is that developers typically need pre-construction sales of 50 percent to 90 percent of the units in a development before they can borrow funds to begin construction.

Pre-construction condos can also get you in on the ground floor of an investment that will appreciate. The market value of pre-construction units generally increases during the one to three years it takes to build a development, so your unit may be worth more than you’ve paid for it before you set foot in the place. In addition, you can often choose from a variety of finishes and flooring options, allowing you to customize your home.

How the process works

There are several steps to buying a pre-construction condo. They can vary from developer to developer, but the basic components are:

1. Reservation agreement
You give a deposit (usually between $5,000 and $10,000) to reserve the unit and set the price (although the builder can reserve the right to change the price in the contract). The deposit is held in escrow and you can cancel the agreement at any time with a full refund.

2. Condominium documents
When a development is approved for construction, the developer submits condominium documents (including budgets, association rules, unit descriptions, materials and other important information) for approval by the state. Once the documents are approved, they are sent to you for review. Read them carefully to make sure that you will be comfortable living by the association rules.

3. Right of rescission
Once you receive the condominium documents, you have a 15-day period to decide whether you would like to proceed into a binding contract. If you don’t, you can exercise your right of rescission and withdraw with a full refund.

4. Hard contract
If you don’t withdraw, you’ll provide the balance of the required down payment, usually 15 to 20 percent of the purchase price, and sign a binding contract agreeing to purchase the condominium. You generally have seven days after that to cancel. This is your last chance to walk away with no penalty.

5. Closing
When construction is nearly finished, the developer will issue you a Certificate of Occupancy. A closing date is set when you will hand over the balance of the purchase price and sign the final documents. If all goes according to plan, your closing will coincide with your move-in date, and you will be ready to enjoy your new home.

New trend in vacation homes: Condo hotels

RE.com Tips & Tools — Tue, 16 Jan 2007 21:15:00 GMT

Looking for a vacation home with all the comfort and convenience of a first-class holiday resort? Consider a condominium hotel.

According to the National Association of REALTORS®, vacation home sales in 2005 were a whopping 16.9 percent higher than they were in 2004 -- an all-time high of 1.02 million units. And some of that increase was due to sales of a hot new type of property -- units in condominium hotels.

These condo units provide a seemingly unbeatable combination -- a hassle-free, first-class vacation spot, and a long-term appreciating asset. Plus, they can be rented out to help cover their costs when you’re not in residence.

How they work

The purchase of a condominium hotel unit is just like any other real estate investment: you make an offer that includes a deposit or down payment, and pay the balance of the agreed-upon price when you close the deal. Once you take possession, you actually own your unit, and can enjoy the comfort of staying in a resort hotel during the weeks or months you vacation there each year.

Many major hotels and resorts have developed condo units, and they typically come tastefully furnished complete with up-to-date kitchens. Plus, they offer the additional amenities of fine restaurants, fitness facilities, swimming pools and concierge service.

You can also use the services of the condo management company to rent out your unit (in exchange for a portion of the revenue) when you’re not in residence. And, like all real estate, condo units can appreciate in value -- an amount you can potentially pocket should you decide to sell.

Do your research

Because condo hotels are a relatively new type of real estate investment, it’s important to do some research before you buy. Be sure to check out:

The management. You are buying into the hotel business. So look for a unit in a building owned by a top-flight, internationally known hospitality company, and run by a management company experienced in worldwide marketing. These factors help ensure that the condo is located on prime real estate, meets the high standards associated with the franchise or brand name, and can attract guests to rent your unit when you’re not there.
The location. A unit in a prime tourist or business location will likely rent out easily. Keep in mind, though, that resort properties often have a limited season. For example, you may have a hard time renting out a ski condo during the summer months.
Your vacation needs. Some developments allow you to live in them full time and take care of your own maintenance. Others may limit your occupancy to no more than 90 days a year and require you to rent out your unit the rest of the time so they can share in the revenue it generates. Be sure to check these things out in the owner’s agreement, which will also list the frequency, notice requirements and other considerations you’ll have to respect when you want to use your condo hotel unit.
The costs. Read the fine print of the agreement. It will state what you have to pay for in addition to the usual monthly condominium maintenance fees, property taxes and mortgage payments. Other costs you may have to cover include operating expenses (daily housekeeping, redecorating, front office and capital improvement fees) as well as liability, claims and damage or loss insurance. It will also specify what your share of the revenue will be. Typically, you’ll split rental income 50-50 with the management company. Keep in mind that you can’t count on rental income to cover all your expenses because the unit may not be rented all the time.
Your financing. As with any vacation home, prices can vary widely based on location, size and amenities. Because it’s a second home, you may be required to make a larger down payment (up to 30 percent) and pay one or two percentage points more for a mortgage than you do for your primary residence. So it’s well worth shopping around. You may also be able to obtain a better rate by taking out a home equity loan against your primary residence to fund all or part of your purchase costs.

Condominium buying basics

RE.com Tips & Tools — Tue, 16 Jan 2007 21:08:00 GMT

Understanding the differences of buying a condominium versus a single family home can help you through the process.

Buying a condominium is very much like buying a house. There are a few minor differences that you should keep in mind, though.

When buying a condominium, it is important to understand how a condo differs from other types of homes. If you choose to live in a condominium, you can have neighbors above, below, and beside you. It is similar to living in an apartment, except that instead you own your home. Also, you will have no yard to maintain. Condos can be more affordable, which makes buying a condominium a great way to become a first-time homeowner.

Because a condo is different than a single-family house, there are certain things that you should be aware of when buying a condominium. For example, because you share walls with your neighbors, you need to check on soundproofing. Make sure the condo you decide to buy is quiet and that you cannot hear your neighbors walking above you, vacuuming below you, or watching television next door. Also, when buying a condominium, look to see how well the building is maintained. You also need to consider the parking availability. Is there covered parking or parking close to your unit?

Something else to keep in mind when buying a condominium is the homeowner’s association. You can ask to see the minutes of the last meeting to see what issues were important to others in the building. Find out how much homeowner’s dues are and what you get for paying that fee.

Condominiums also can come with amenities. Be sure that the condo that you are considering has the amenities that you want. Realize that you pay for the amenities through the homeowners’ dues. If the condos have a pool and you do not want a pool, perhaps you should look at buying another condominium since you may have higher dues with a pool. Through a little searching, you can find the condo with amenities that most appeal to you.

Being prepared helps in any home search. By understanding exactly what you are getting, you can have a great experience buying a condominium.

Condominium or house: Which is right for you?

RE.com Tips & Tools — Fri, 12 Jan 2007 16:46:00 GMT

Condos and houses have their advantages and disadvantages. Use our chart to help compare your options.

Be it in New York, Atlanta or Miami, the condominium market is thriving, with modern towers and low mortgage rates luring would-be home buyers with the possibility of building equity at rent-like prices.

Should you join the condo club or go for a more traditional home? Consider your lifestyle and weigh the pros and cons of each before deciding which to buy.

Condominiums
Pros	Cons
Easy upkeep: Do you lead a busy life? A condo can offer you a comfortable home free of yard-work and home-maintenance responsibilities. If you’re not a hands-on, do-it-yourselfer, having a maintenance crew take care of the upkeep is a definite plus.	Condo fees: Most condominiums have monthly maintenance fees. The money goes toward the collective upkeep and development of the property. Combine these fees with monthly mortgage payments and you can sometimes end up paying more per month for a condo than a house of equal value.
Location: A condo provides the option of living right in the heart of the city. Many urban condos are also within easy walking distance of amenities such as grocery stores, dry cleaners, restaurants, cafes, shops and theaters. A home in the suburbs can mean jumping in the car to complete even the smallest of errands.	Shared decision-making: How your condo fees are spent is the purview of the condominium board. You could find yourself subsidizing the salary of a concierge or the maintenance of a parking garage you don’t use. And what if you want to do some renovations? Yes, the condo board decides that, too.

Houses
Pros	Cons
Family friendly: With their own yards and generally more square-footage, houses tend to be more family friendly. A fenced-in backyard for children to play in can be a big benefit. Plus, a house allows the option of having pets that may not be permitted in a condo.	Upkeep: When you own your own house, you’re responsible for all the maintenance. The bigger your property, the more time and money you can end up sinking into it. The upside is that money you put into home improvements will likely pay off in terms of a higher resale value.
Extra living space: Not only do kids need space, so do most grown-ups. If you’re a couple, you have to determine how much time you will be spending together at home and whether or not you need quiet, private rooms. The same is true if you work from home or have a hobby that requires dedicated space.	Additional items: All the extra space a house provides can have a downside. You need to fill that space with additional furniture. You also need to buy extra items to maintain the garden. And you can expect to have higher heating and/or cooling costs with a bigger home.

Of course, regardless of whether you buy a house or a condo, it’s important to do your homework and consider the future of the neighborhood you’re buying into. The old axiom of “location, location, location” remains true for both. Each is a significant investment, and you need to find a safe and vibrant neighborhood capable of nurturing your investment into the future.

Considering a Condo? What You Need to Know Before You Buy

RE.com Tips & Tools — Thu, 11 Jan 2007 18:39:00 GMT

A condominium is the ideal home for many people, but shared ownership means there are special points to consider

People who want to make the switch from renting to owning often choose a condominium as their first “real home.” Other buyers purchase a condo as a part-time holiday retreat or are attracted by a lifestyle that has fewer responsibilities.

What’s a condo?

A condominium is not the same as an apartment, although condo developments may include apartment-style complexes, townhouses or converted multi-family dwellings. It is different from other multi-tenant buildings in that the developer has legally declared it to be a condominium and units in the building or complex are purchased rather than rented. In most states, this means that the development falls under specially designated laws and regulations applied to condominiums.

Shared spaces

A condo owner buys title to his or her individual unit, up to the walls, but not including them. There are also common areas of the development, such as hallways and stairwells, dividing and outer walls, pools, fitness centers, rooftop gardens and barbecue areas. These are under shared ownership and every unit owner holds an interest in these spaces. Every condo development has a unit-owners’ association that manages the maintenance and repair of these shared areas. The association is elected by the condo owners and makes decisions in the interest of the community.

Fees and associations

The condo or homeowners association budgets and determines the fees for all units, usually based on the size of each unit, the number of units occupied and the projected expenses for maintenance and repair.

Condo costs

Down payment, mortgage and property tax.
Maintenance fees. Every condo owner pays fees to help maintain the building, pay the salaries of concierges, handymen or groundskeepers, and provide facilities such as a pool, gym or gardens. The fees are paid monthly and are subject to change.
Special assessments. These fees may be needed when an unexpected repair or planned modification exceeds the cost of the condo fees collected.

Questions to ask

What do unit owners think of their condo association? Ask owners for comments or complaints about the association’s activities and reputation.
Does the condo association maintain a reserve fund to pay for unexpected and possibly expensive repairs? This will help you assess whether you can expect special assessment fees.
Are there any pending legal actions between owners and developers or the association? Legal disputes can be costly.
Are there any plans to add to the facilities, such as a swimming pool or gym? Such projects can mean a rise in fees. The minutes of condo association meetings should reveal any such plans.
Is the development in good repair? Are repairs and maintenance handled in a timely manner? Before buying any condo, have the particular unit and the entire structure inspected to identify potential problems.

The rules

Condominiums are governed by a set of rules called Covenants, Conditions and Restrictions (CC&Rs), which are enforced by the condo association. Anyone who is thinking of purchasing a condo should carefully consider the rules, which vary from one development to another. The CC&Rs may impose restrictions on noise levels, renovation projects, pet ownership and renting.

A condominium can be a great purchase under the right circumstances, but potential buyers should be comfortable living within certain rules and restrictions and in close proximity to others.

Developers

Buyers may want to research other work a developer has done to learn if there have been problems with past projects. Find out if the developer is still in business and whether it is financially stable. Because developers do not generally retain a long-term interest in a building, their work is important. While a home inspection can turn up major structural flaws in the building, if the developer is no longer in business, the condo association may have little or no legal recourse if other major flaws are discovered in the property later on.