Contemplating a condo?
In effort to meet the ever-changing real estate needs of today’s society, new forms of home ownership have emerged. Diverse lifestyles, changing family structures and a growing population have in many ways redefined what it means to own a home. In response, condominium developments have become an ever-increasing popular way of owning residential property.
A condominium, or “condo” as it is often referred, is a form of real estate ownership wherein a single property is divided into multiple, independently owned units. Condos are typically seen as buildings possessing owned apartment style homes. However, condominium developments are no longer limited to high or low rise buildings, as the concept has evolved to encompass detached dwellings possessing the appearance of single-family homes.
Once a property has been established as a condominium, each unit within the development becomes a separate parcel of real estate. Unlike apartments which are leased by their tenants, condominium units are owned outright. Like a freestanding home, condominium units may be mortgaged, affording prospective buyers a means to finance their purchase.
Each owner holds an ownership interest in their respective unit while also holding an undivided interest in the ownership of the condo’s common facilities and areas, which are shared jointly with other owners. These common elements, as they are often called, include, courtyards, walkways, land, lobbies, the exterior structure, elevators, hallways, stairways, laundry facilities and the roof. Common elements may also include recreational facilities such as tennis courts, swimming pools, gymnasiums, golf courses and club houses.
Administration of a condominium is accomplished through a home owner’s association (HOA). The HOA consists of an elected board of directors, who also own units within the condominium. The association typically oversees the day-to-day operations and maintenance of the condominium complex and is also charged with managing the property or hiring the services of a property management company.
Like traditional homeowners, condominium unit owners hold an unlimited tenure in their respective ownership and are free to sell or transfer their property as they choose, unless the condominium’s HOA has enacted the right of first refusal. In these circumstances, the owner is required to offer the property at the same price to other residents within the condominium before accepting purchase offers from the outside.
Living in a condominium can have political and financial implications. Unit owners are encouraged to actively participate in meetings and contribute to the decision-making process. But, prospective buyers should be aware that actions undertaken by the association can translate into financial obligations for ownership. Regardless, owners must pay fees to the HOA to cover the cost of insurance, shared utilities, property maintenance, amenities and financial reserves. Fees collected may also be used to pay charges incurred in operating the development. Association fees can increase over time, and should any part of the condominium require extensive maintenance, those costs not covered by the reserve, may be assessed to unit owners.
When a unit is sold, the new owner receives a copy of the association’s declaration of covenants, conditions and restrictions (CC&R’s). CC&R’s are legally binding documents providing regulations pertaining to the condominium. Each declaration definitively outlines an owner’s regulatory use of their respective unit while describing the broader use of common areas. To ensure perpetuity of the condominium’s CC&R’s, the declaration details the selection process of the association’s board of directors.
Parking in a condominium can present a concern for some prospective buyers. Developers oftentimes have differing approaches to addressing parking needs when constructing the property. Some developments reserve parking in common areas, while others include parking in unit sales allowing owners to hold an ownership interest. A prospective buyer should confirm parking arrangements will meet their needs.
It is important to note, although town houses share many of the same ownership criteria afforded in a condominium, there are distinct differences. Town houses differ from condominiums in that owners possess ownership rights to their dwelling and the lot on which the town house has been built. But condominium unit owners only possess an ownership interest in their respective units.
Owning a condo can be financially more expedient than paying rent on an apartment; however, it may not be the best option for all prospective buyers. Those who have concerns about privacy and prefer not to share their property’s amenities, may wish to consider a more traditional route in purchasing a home. Buyers should also understand it can prove more difficult to sell a unit in a condominium, as owners only own their respective units and not the ground beneath them.
Those who benefit most from living in a condominium are people who have experience living in an apartment setting and don’t mind having neighbors. Also, buyers who prefer not to be encumbered with responsibilities for external maintenance may find living in a condominium advantageous.
Prospective buyers should be diligent in their examination of condominium living. It is important they examine the fees and rules associated with ownership before committing to a purchase. Still, there are benefits afforded to the right person when considering a condominium. If a prospective buyer is contemplating the purchase of a condo, they should seek the guidance and insight of a trained real estate professional.
Sean and Aimee McDonald, realtors with RE/MAX North Lake Tahoe, can be reached at 775-250-8335 or firstname.lastname@example.org.