A condo seems like the perfect deal. In fact in most parts of the country, owning a condo can be cheaper than renting, but before you throw your lawn mower out for “worry free living,” here are some reasons Why Not to Buy a Condo:
HoA Fees Increase
Every month you will be charged HomeOwner Association fees, that you have virtually no control over. Depending on your HoA agreement, these fees cover things like water, electric, trash, landscaping, foundation, roofing, management, tennis courts, pools, gates and entry ways, and much more. The scary part however, is who controls these fees is usually a small group of people who engage in a HoA board. This board can decide how to spend your existing HoA Fees and how much to increase or decrease future fees. Your HoA agreement can have a maximum amount the board can increase per year, but over time it adds up.
Imagine you buy a $160k condo and are paying $150 a month for HoA fees. The fees covers water, landscaping, and a pool. This might seem reasonable now, but don’t be surprised if the following year the fees look at like more $160 or $165 a month. Go down 10 years down the line, your fees might be somewhere in the neighborhood of $244 a month (5% increase per year). Now imagine going to sell that condo, the HoA fees are higher and therefore the monthly payment to the buyer of your now older condo would be higher. The higher prices can of course be counteracted by a lower selling price.
That’s right, your monthly fees go up while your condo’s value falls. Talk about double whammy. Want proof of this? Take a look at older condos (10-15 years) where the HoA fees are almost equal to the price of the actual mortgage portion of the payment.
Special Assessments
Did you know that many condo’s HoA boards can assess “special assessments” for needed repairs? Perhaps your building needs a new roof, the money has to come from somewhere. It is possible that the HoA fee has this built-in, but this is not always the case.
Lack of Freedom
Want to paint your front door? You might not be allowed to. You want to stain your deck? Well your HoA board might have some issues with that as well. HoAs have the ability to limit what you can and cannot do with your property.
Lack of Mobility
Condo’s can be incredibly hard to get your money back out of when it does come time to move. Used condo’s tend to be a hard sell. In fact, I have at times thought about the condo life, but I know that would lowball if I was going to buy a condo. “You don’t like my offer? Well there are 88 more identical units with 8 more for sale.”
The question also needs to be asked “How much is it worth for me to be mobile for job opportunities.”
Foreclosure Hits Condos Hardest
Besides values dropping, condo owners have to worry about HoA fees not being paid, and maintenance being neglected. Think about it this way, you are kind of counting on your neighbors to pay.
Selling Restrictions
Watch out if you do find a buyer for your condo, because there are restrictions on what type of financing they can receive if the condos are delinquent of HoA fees or if a certain percentage of condos are not “owner occupied.” It may leave the opportunity open to a limited audience of buyers, who most likely will want a better price.
Final thoughts:
Owning a condo can be a a good fit for many, but just be aware of what you are getting yourself into.