ResalesCondos Offer Affordability, Demand Buyer Scrutiny
Often half the price of a single-family home, or less, condos offer an
affordable alternative to the American Dream for some 42 million
Americans who live in them, according to the Alexander, VA-based Community Associations
Institute.
Buying one, however, can be a lot like buying a share in a closely
held, publicly-traded real estate holding company governed by an
ever-changing regulatory system.
In some areas construction-defect litigation is rampant, sale
disclosure issues troublesome, reams of new and confusing laws are often
enacted and, face it, you"ve got to have a certain mental toughness to
live in such close proximity with your neighbors.
One aspect of condos" notoriety, rule enforcement, was lampooned
earlier this year in an episode of the X-Files
television series featuring a Tibetan monster conjured up to punish
condo residents who didn"t follow the rules.
While you probably don"t need a Pokemon to fight off rule-enforcing
monsters when you buy a condo, you do need special help -- a combination
real estate attorney-broker-emotional support group.
The Sacramento, CA-based Common Interest Consumer Project comes close.
This non-profit education and research group aims to boost consumers"
savvy about condominiums -- a type of housing that shelters up to 7.5
million Californians, or nearly one in four. More than 60 percent of
those who buy condos are first-time home buyers.
One of the Project"s efforts is a newly revised booklet called ""Caveat Emptor: Before You Buy that California Condo.""
It"s a primer on the condo history, the rules and laws that govern it
and the scores of problems that plague it. While specific to California,
it does have implications for condo buyers everywhere.
"Each state has different regulations but it does have information for
people outside California," says Frederick L. Pilot, the Project"s
president, who owns a condo in Novato, CA.
Often criticized as a loose cannon, Pilot insists he"s trying to chip
away at ignorance -- not the condo industry.
"I"m just trying to give them the full picture of the risk as well as
the reward. The book doesn’t say "Don"t buy condos." It"s a wonderful
affordable alternative, but they come with some inherent risks and
concerns," Pilot says.
As such, a condo home is not always your castle.
Condominiums typically are high-density housing constructed as what"s
known as common interest developments (CIDs) -- you own everything in
your unit, at least everything on your side of the walls. You are a
shareholder in the remainder of the buildings, grounds and other
facilities. As a shareholder you are a mandatory member of the CID"s
homeowners association, the organization responsible for the upkeep and
care of buildings and grounds.
Condo homeowners collectively make decisions single-family home owners
normally make themselves. Those decisions involve homeowner association
budgets with hundreds of thousands of dollars to manage and the
decisions are based on reams of rules, regulations and other operating
guidelines not unlike those that regulate a business.
The task of actually keeping the association running often falls to a
group of inexperienced volunteer home owners who comprise the
association"s board of directors.
"It"s like being a stockholder in a closely held, publicly traded
non-profit real estate holding corporation run by volunteers," Pilot
said.
If you are considering a condo purchase, consider these tips:
Hire a real estate agent or attorney with a proven track record in
condo transactions and who is familiar with condos and the laws that
govern them.
Obtain condo documents early in escrow. In some states, the seller
must disclose the condo"s corporate and governing documents,
newsletters, association meeting minutes and more, but associations can
be slow to deliver.
Review the by-laws, rules and other documents that dictate your
conduct. If you can"t adhere to them, find a community more to your
liking or reconsider buying a single-family home.
Pay close attention to the community"s age, reserves study,
outstanding litigation, home owner dues and assessments. Your
professional can explain what they mean to your bottom line.
Get to know your neighbors before they become neighbors. You"ve got
to live with them for the duration of your ownership.
Get to know the association, especially the board of directors, to
determine how they manage the community. If they use a management
company, do a background check on it with other association clients.
Broderick Perkins owns a one-bedroom condo in San Jose California and
is a member of the board of directors of his homeowners association.
Also See:
Is a Condo the Right Home for You?
The "Condo-ing" of America
The Rules of Renting a Condo