The do’s and don’ts of buying a condo

Article Courtesy of  The Palm Beach Post

By Ellen James Martin

Published February 9, 2017


Many homebuyers are drawn to condo ownership by the simplicity and convenience of living in a building where most upkeep is handled by a maintenance staff. But real estate experts urge condo buyers to exercise caution to select a unit with strong resale value, especially if they don’t plan to hold the condo for long, or their living situation necessitates a need for more space or a major relocation in the near future.

“The condo market has historically been more volatile than the market for detached single-family homes. That’s why it’s important to think about your time horizon when buying a condo,” says Aaron Terrazas, a senior economist for Zillow, which tracks real estate markets throughout the country.

Here are a few pointers for those intending to buy a condo:

1) Seek an area with a strong employment base.

Fred Meyer, a veteran broker and appraiser, says the vitality of a local real estate market is usually closely linked to the employment strength of the area. But as he notes, the buyers of condos shouldn’t count on a single employer to keep the local economy afloat.

“You don’t want to buy in a ‘one big company’ town that would be badly hurt if that single employer closes,” he says.

How can you investigate the strength of the local economy?

“If you want to get sophisticated in your research, go to the offices of the Chamber of Commerce and ask them what’s happening to jobs in the area,” Meyer says.

By avoiding an economically depressed area, you not only enhance your chances of owning a salable condo — you also increase the likelihood of living in a vibrant area where you’ll be happy.

2) Use both objective and subjective measures to judge any condo complex.

As Meyer says, your emotional reaction to a condo building can be helpful in the selection process. But you, along with your real estate agent, will also want to search out data that helps you analyze the pros and cons of buying in a particular building.

“Look at the resale history for the building going back for as long as four years. Notice especially the median number of days that it takes to sell units in the building. The more days it typically takes to go from list to sell, the less liquid the building,” Meyer says.

Also, he says you should be sure to check the “reserves” of the building, which translates to the amount of money owners there have set aside for key repairs and renovations.

“If the building needs a new roof and there’s no money available for this, all the owners could be hit with a big special assessment. A poorly financed building can become run-down, making it less desirable for future owners,” Meyer says.

3) Avoid buying in a building with rock-bottom condo fees.

Nearly all condo buildings impose fees on residents. Among other expenses, these monthly charges cover the cost of routine upkeep on a building and its grounds, along with support services, like a concierge at the front entrance.

Early says condo buyers sometimes shop for a building with the lowest possible monthly fees to help curtail their expenditures. But seeking out a building with rock-bottom fees could be a mistake.

“Nearly always, you get only what you pay for in condo fees. A building with surprisingly low fees might actually decline in value, due to poor maintenance. That could make your unit hard to sell in the future,” he says.

4) Steer clear of a building with a high proportion of renters.

Homebuyer advocates are wary of buildings in which a large percentage of the units have been rented out by their owners.

“Owner-occupants feel a natural pressure to ensure that a building is adequately maintained and has plenty of money set aside in reserves for future repairs and improvements. Renters feel no such natural pressure,” Meyer says.

What percentage of owner-occupants is sufficient? That depends on the location of the building. In most cases, Meyer says you’ll want to see more than half the units occupied by owners. However, this rule may not hold in a resort community where seasonal rentals are the norm.

Even though it’s not wise to choose a building with a large number of renters, Meyer says it’s also important to avoid a building that prohibits owners from renting out their units should they wish to do so.