Condos can be huge money savers; just be sure you know what you're buying.
Time was, condos were only for city dwellers and everyone else lived in a neighborhood or rural environment. But condo life is a lot more common than it used to be, and for good reason. It's often more affordable than a house, and it takes some of the responsibility off the home owner's shoulders. It's not for everyone, but it's exactly what some people need.
Although you gain ownership of a house or condo once the paperwork is settled, ownership means something a little different depending on what you buy. Here are some of the similarities and differences, as well as issues that you'll want to watch out for if a condo is in your future.
What You Really Own
Probably the most basic question about condo ownership is what do you really own. Unlike a house that you own inside and out, in a condo you own the interior only. That means your space is from the drywall on into the center of the unit. You can paint the interior walls any color that you like, and you can have the funkiest green shag carpet if that's your heart's desire.
You can also renovate the condo interior, but you'll probably have restrictions. For example, although you own the unit, your neighbors have the right not to be disturbed by anything that you amend. So a new wood floor on a second-story unit where you can practice tap dancing is probably out of the question, and likely so is a new fireplace.
Modifying the physical structure of the unit is another area that might meet resistance. You can renovate a house any way you see fit as long as it meets local code and any community association restrictions. Expect major condo renovation plans to require committee approval, for both the nuisance to neighbors and for the way those modifications might affect the safety and stability of rest of the building.
Compare several condo communities before settling on one, as the differences might be surprising.
What's Owned by the Community
In a house, nobody else owns anything on your property. The city often has a utility easement, which means there's a portion of your property near the street where you can't build, but it's still your property. You might also have shared ownership of a fence if it's erected on the property line.
In a condo, the community owns what's outside the unit walls. Common areas usually include stairways, halls, gardens and landscaping, foyers, elevators and any other part of the building that all residents use. That also means when the roof needs replacement, you won't have to hire a roofer on your own.
Although you'll have partial ownership of what's outside your unit, that doesn't mean you can claim a portion of it to do with as you like. For example, if you hate that tree at the end of the parking lot, you probably can't cut it down because it belongs equally to everyone. You can, however, expect to pay fees toward the maintenance, repair and general care of all community areas. Also, maintenance and repair inside the unit might be your responsibility, or that might be paid for in condo fees.
Differences in Financing and Lifestyle
The purchase of a home is largely the same whether it's a house or a condo, but there are some important differences. Any lender has a right to deny financing for a number of reasons, and most of those deal with risk. In a house, a lender might deny financing if the property isn't worth the asking price. In a condo, the lender might back out if the building has more renter occupants than owner occupants. Owner occupants tend to take better care of units than renters, which affects the overall value of the building.
When buying a house, you'll want to check out the neighborhood. In a condo, the neighborhood is a lot closer to your front door. Issues that affect a neighborhood of houses might be easier to avoid than those in a condo building. If the condo association has any lawsuits or if there are a lot of disputes within the association, that might be a sign that you'll want to look elsewhere. Legal Match says it's smart to work with both an attorney and a real estate agent who are well-versed not just in real estate but in condo ownership specifically.
Restrictions may come with any home ownership situation, whether it's a house or a condo. Be sure to check association bylaws and find out whether any are up for review. Today, you might have the right to build a fence around your house or you might have two assigned parking spaces outside your condo unit. Tomorrow, all of that might change.
Another major difference between condos and houses have nothing to do with the purchase and everything to do with the sale. Unless you live in an extraordinary building such as the Dakota in NYC, chances are the property will appreciate very slowly. Condos, says Money Crashers, are can be notoriously hard to sell. That can be a plus if you're buying with no intention of ever selling. Condo sellers are usually motivated like no one else.
Condos are exactly right for a lot of people. Many of them are spacious and have all of the interior amenities of any other home. They also free you from yard work and cleaning gutters. But they can come with more restrictions than exist if you were buying a house. Just do your homework on the building, investigate the condo association bylaws and move ahead after you're satisfied with all of the elements of the sale.
Still in the dreaming stage? We've got a lot of information that can help. Check out our mortgage articles on topics from financing to the best time of year to go home shopping.