What You Should Know About Buying a Condo

As you explore your homebuying options, you may find that a condo is the perfect fit for your lifestyle, budget and homeownership goals. But what exactly is a condo, and how does it differ from other property types? Here is everything you need to know before buying a condo.

A condo is an individual unit within a larger residential development in which residents own their units rather than rent them. A condo can be any architectural style: garden-style, a townhouse, a high-rise, or a detached home.

For some buyers, condos combine the benefits of apartment living, such as convenient amenities and fewer maintenance responsibilities, with wealth-building opportunities and the stability of homeownership.

Things to Consider Before Buying a Condo

There are a few important things to keep in mind when exploring the idea of a condo purchase.

• Condo boards and associations: Most condos are managed by a board or association, which is similar to a homeowners association (HOA). The condo board or association oversees the financial management and the upkeep and maintenance of shared areas.
• Monthly condo dues: Your dues will vary depending on the property and what services and amenities are included. Make sure you factor this cost into your homebuying budget.
• Rules and regulations: In addition to maintenance, the condo board or association is also responsible for enforcing any rules and regulations that property owners must follow.
• Long-term plans: Even if you plan to live in the condo for a long period of time, it’s a good idea to think ahead about your options when you are ready to move out. Will you keep it as a rental property? Will you sell it? What improvements can you make to increase the property value?

Research Before You Buy

Before finalizing a condo purchase, take time to review the condo board or association documents so you understand the community’s financial health, rules and potential risks. Start with the budget to see how funds are being used. You can also review the most recent reserve study to determine whether there are adequate reserves for future maintenance, repairs or unplanned expenses.

You may also want to review recent meeting minutes, which can provide insight into ongoing issues within the project, such as pending litigation, amenity concerns, maintenance needs, delinquent dues or other matters that could affect owners.

Ask whether there are any pending or recent special assessments, which are additional charges owners may be required to pay for major repairs, improvements, insurance costs or other expenses not fully covered by the regular budget or reserves.

It is also helpful to understand how the board or association operates. Boards are typically made up of unit owners who help make decisions about the community’s budget, rules, maintenance and long-term planning. Learning how to attend meetings, vote or participate can help you stay informed and have a voice in your community.

Because laws can vary by state and locality, consider researching the laws that apply to condo board and associations where you are buying so you understand your rights and responsibilities as a unit owner.

The Buying Process

• Mortgage pre-approval: Before you buy, you’ll want to compare several mortgage lenders and choose one you’d like to work with. Your lender will help you complete a loan application, determine if you qualify for a loan, and issue a pre-approval letter detailing the amount of money they are willing to lend you. This is an important step as it will help you determine the price range for your search.
• Finding the right condo: Once you know what you can afford, work with your real estate agent to discover available properties that match your housing needs. Do your research on the property to make sure you have a full picture of what you’re buying.
• Making an offer: When you’ve found the right place, your real estate agent will help you determine an offer amount, submit and negotiate your offer, and finalize the contract.
• Review the resale package: Once you make an offer, check to see if a Resale Disclosure Package is available. The information contained in the package will help you to determine if the condo is financially sound.
• Inspection and due diligence: An inspection and appraisal will help ensure the amount you pay is aligned with the home’s value.
• Closing the sale: The final step in securing your new condo is closing. On closing day, you’ll pay closing costs and sign documents to make the sale official and get the keys to your new home.

Understanding Condo Insurance

Like any home purchase, it is critical to make sure you are protecting your investment with adequate home insurance coverage. Homeowners who live in shared buildings like condos are protected by two types of insurance policies:

• The master policy covers damage to shared areas — things like the roof, the outside of the building, hallways, or community amenities.
• The HO‑6 policy covers damage inside your own unit, your personal belongings, and sometimes extra costs you might owe if the master policy isn’t enough to cover a loss.

Master policies may vary in coverage, so it is a good idea to reach out to the condo board or association, or the management company, to fully understand what is covered. Depending on your community’s bylaws, you may need to add loss assessment coverage to your HO-6 policy — this can assist you with any costs assessed by your condo board or association after an insured loss on their master policy.

Depending on your situation, purchasing a condo could be the right choice as you explore your next homebuying opportunity. If you are in the market for a condo, building a trusted homebuying team and exploring available resources can help you navigate the process with confidence.