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How to Buy a Condo with Confidence

Today approximately 75 million Americans live in condominiums, which is a community that’s overseen by a homeowner’s association (HOA). In fact, that number is expected to grow as the Foundation for Community Association Research predicts more than 3,000 new HOAs will form by year’s end.

Since condominium purchases don’t typically include land, they tend to cost less than single family homes. The National Association of REALTORS® (NAR) reports the median condo price in January 2022 was $297,800 and the median price for a single-family home at the time was $357,100.

“Condos are an attractive option for many homebuyers,” says Sarah Cole, board chair for the Greater Milwaukee Association of REALTORS® (GMAR). “They offer unique advantages over a single-family home, but also come with special considerations. To make a smart choice, buyers should know what to look for and what to avoid.”

Condo Advantages

Like any home purchase, buying a condo makes great financial sense, especially for first-time buyers who are making the transition from renting.

“Rent increases put tenants at the mercy of the landlord,” says Dana Karow, a REALTOR® with the Stefaniak Group who specializes in the condo market. “Unlike rent which goes to a landlord’s mortgage, a condo payment goes to the buyer’s mortgage and can build equity over time.”

Karow also notes that, unlike an apartment which belongs to someone else, condo ownership gives the buyer freedom to paint, change cabinetry or flooring and decorate inside and out according to personal tastes and preferences

“Condos with balconies allow owners to create unique outdoor spaces for relaxing, dining, entertaining or flowerpot gardening without ever having to leave the unit,” notes Karow.

Condominium living also provides a close sense of community with many options for socializing. On-site amenities like meeting rooms, social spaces, pools, fitness centers, grilling stations and pet runs enhance the condo lifestyle since costs are shared with other residents vs. all on the owner’s dime.

Added Benefits

Often condos are located in highly walkable areas with easy access to events, shopping, restaurants and parks, which adds to their attractiveness. Karow says that some condos even provide concierge services to assist with a range of services.

According to Chris Corley, president and owner of Corley Real Estate, living in a condo brings increased security. “Condos add a layer of security not found in apartments or even a single-family home. This can be especially beneficial to people who work long hours or nights and are regularly on the go,” he says.

Other highly desirable advantages of buying a condo include:

  • No yard work
  • Minimal maintenance responsibilities
  • Easy “lock-and-go” for those who travel

Condo Drawbacks

Corley points out that living in a condo is like 1-200 people living together on a single acre of land. So, while condos offer social benefits of a tight-knit community, more neighbors mean less privacy. Enjoyable amenities go hand-in-hand with others using them. Residents also share common spaces like the lobby, hallways, elevators and parking garage.

Every condo association makes its own rules and outlines restrictions, which must be adhered to. They cover a gamut of topics from pets, noise, policies about renting the unit out and maintenance requests to fines associated with offenses.

“The condominium documents, including rules and regulations, can be hundreds of pages long,” says Karow. “An experienced REALTOR® knows what to look for and can break it down for a buyer.”

Cost Considerations

Besides the mortgage and insurance, condos come with additional expenses. Parking may be extra. For those who want a two-car garage with lots of storage space, a condo owner may need to go off-site. Sometimes pets are extra and restrictions may apply on the number allowed.

Condo association dues, which on average range from $100 – $700 per month, represent the largest additional cost. Factors impacting the amount of the dues can include the building’s amenities and location and whether or not water or trash service are paid by the HOA or the owner. The HOA’s financial reserves comprise another key portion of the dues.

Reserves and Special Assessments

The HOA’s financial reserves cover major building projects, repairs and maintenance items. For example, if a significant repair is on the horizon for the pool, increases in dues and conveying special assessments – or additional fees – fall to the owner. As maintenance costs and inflation continue to increase, HOA’s look to increase dues and assessments to bolster their reserves.

Financing Requirements

Since a condo is part of a HOA that includes others’ finances, lenders view a condo mortgage as a riskier investment than a single-family home.

“The lender considers not just the buyer’s finances but the entire condo community,” says Corley. “Making sure the HOA’s finances are secure, and increasing the down payment to 25%, helps eliminate the high risk associated with a condo loan.”

Lenders require information on the property’s occupancy – how many units are rented vs. owned – as well as information on condo fees and the financial stability of the HOA. An experienced REALTOR® knows which lenders work best for condo purchases. They can help a buyer select the right property and provide the necessary documentation for a condo purchase.

Review and Research

To make the most informed purchasing decision, the buyer should ask the right questions during a tour, conduct a review of the HOA’s documents and research the property.

Ask:

  • What is included in the HOA fees?
  • What maintenance items are covered by the HOA and what are the owner’s responsibility?
  • Who oversees maintenance requests?
  • How are the rules enforced and complaints managed?
  • Is a property manager located on-site?
  • What are recent maintenance items and building projects?
  • Are any special assessments planned?

Review:

  • Minutes from the HOA Board meetings
  • Budgets, financial records and history of increases in dues
  • Rules and regulations

Research:

  • The developer and property manager’s reputation
  • When the reserve account was last evaluated
  • Any legal actions or outstanding debts against the HOA

REALTORS® who specialize in condo sales know the market, including the history of condominium buildings and reputation of property managers. They’re especially equipped to give valuable insights and guide buyers through the technicalities of the buying process.

The REALTOR® Advantage

A REALTOR® is a member of the National Association of REALTORS®, is committed to a Code of Ethics and has the expertise to find the right home for everyone. Look for the “R” to determine if your agent is a REALTOR®.

Locally, the Greater Milwaukee Association of REALTORS® is a 5,500-member strong professional organization dedicated to providing information, services and products to help REALTOR® help their clients buy and sell real estate. Visit gmar.com for more information.