Buying a condo is a great way to wade into homeownership without diving in head first and buying a single-family home. This is because the condo association you pay will handle all exterior building maintenance and landscaping for you. However, it’s important to know what you’re in for before you buy a condo. You want to make sure the community is stable and ran well but there are some other things to watch for too.
Look at how the Condo Association is Ran
When you buy a condo, you’re buying into a “project” with other people. You’ll sign a business agreement, which is why you must know how things are ran and managed. You also want to make sure things are stable so use great caution, don’t depend on your emotions here.
Review the Condo Association’s Budget
This is something most people don’t think about, but it’s in the seller’s best interest to provide it to you. Once they do, make sure you look at how much outstanding debt there is and what percentage of owners don’t pay their dues.
Know What the Delinquency Rate Is
A high delinquency rate (anything over 15%) is difficult to finance by companies like Fannie Mae, Freddie Mac and the FHA (Federal Housing Administration). This is because when you’re buying a condo with an association that doesn’t have enough cash, it must make cutbacks. Some associations also charge owners special fees to make up for budget shortfalls that are caused by people who don’t pay their dues.
Review the Condo Association’s Cash Reserves
When you buy a condo with an older association has a low cash reserve it’s likely you’ll have to pay a special association fee eventually. This is why Fannie Mae, Freddie Mac and the FHA set aside 10% of their annual revenue for such emergencies.
Know how Many Absentee Owners Exist
Your ability to get a mortgage or sell your condo is affected by how many owners are present. This is because when you have too many investors and not enough homeowners the FHA won’t approve any improvement projects. These units lose value because owners must sell them to anyone who’s interested in buying a condo for cash and usually at a loss.
Make Sure the Building is Insured
When you’re buying a condo it’s easy to overlook the community’s insurance coverage. Some communities will drop or reduce the coverage to save money, but this jeopardizes your investment. This is why it’s important to get a copy of the master insurance policy to review with your own insurance agent before you buy a condo. They can tell you if the association has enough insurance in place. If not, you may have difficulty getting financing because the development is seen as part of the collateral when you buy a condo.
Knowledge is Power
Buying a condo is an exciting time. You want to make sure you make all the right choices and find the best home possible for you and your family. For help in finding the “perfect” home in Clearwater, Florida, contact Clearwater Beach Real Estate today.
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