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What to Know When Buying a Condo

If you’re looking for lower-maintenance living that can be budget friendly, a condominium (or condo) could be the right choice for you. Before you buy, it’s important to know what you can expect and how the buying process for a condo differs from that of a detached home.

So, what is a condo?

A condo is an individual “unit” within a larger building or community of other condo owners.

Each condo unit is typically owned by an individual homeowner, with the shared facilities owned by all the condo owners collectively. Condo communities are governed by condo owners associations that arrange property maintenance and management.

Apartment units are rented, and apartment buildings have single owners, which may be large companies or smaller entities. Apartment maintenance is usually overseen by a property manager.

Condo owners make mortgage payments to a servicer, increasing the equity they have in the home. Renters make monthly payments to their landlord that allow them to live in the property but do not confer any equity or ownership.

Unlike owning a single-family home, you jointly own the exterior property and common areas along with all the other owners in the community or building.

Along with the other owners, you will also pay a monthly “condo fee” or "homeowners association fee" that covers general repairs and maintenance to the building’s exteriors and common areas, usually including water, sewer, and trash services and amenities’ upkeep. This payment also contributes to a cash reserve fund for future needs.

Each condo is different, but a few common examples include:

  • High-rise apartments with common interior hallways
  • Garden-style apartments with outside entrances
  • Multistory townhomes

Standard condo homeownership costs

You may be able to deduct your mortgage interest if you itemize deductions on your tax return. And you may discover that, like detached homes, condos may appreciate in value over time. Please consult your tax advisor about your individual situation.

  • Monthly mortgage payment
  • Local property taxes (in most areas)
  • Utilities
  • Insurance costs, which are typically less expensive than policies for a single-family home
  • Homeowners association (HOA) fees

Key questions to ask your homebuying team

Remember, you’re not just buying a home — you’re buying into a community. Your lender, condo association, and real estate agent can be great resources for questions you may have.

Ask your lender

  • Has your team conducted a review of the condo? Does its safety or governance bring up any concerns?
  • How much can I afford to spend on a condo?
  • Are there any major lawsuits pending against the condo association or developer that could limit my ability to obtain financing to purchase the condo?
  • Are there any additional costs associated with purchasing the condo?
  • Is the condo warrantable, meaning it meets guidelines set by Fannie Mae and Freddie Mac?

Homebuyer tip: As part of a broader review of your property, your lender will try to uncover issues that may impact safety, soundness, structural integrity, or habitability. This is for the security of your home and the lender's investment.

Ask the condo association

  • Are there any special assessments (such as for capital improvements to the condo property) that will affect my cost to own the condo unit or the building’s value in the long term?
  • What are my legal rights and obligations under the condo bylaws?
  • How are officers elected to the condo board or HOA?
  • What kinds of modifications to the unit are allowed?
  • How much is in the cash reserve fund for future repairs?

Homebuyer tip: You will typically have a limited amount of time to review the condo documents once your purchase contract is accepted by the seller. One of the most important steps to buying a condo at this point is to talk to your real estate professional and to know your rights — and, if necessary, consult a real estate attorney.

Ask your real estate agent

  • What is included in the HOA or condominium fee?
  • Is parking deeded and/or assigned?
  • Can I talk to some owners in the community or building?
  • What is the remaining useful life of the community or building’s major components?
  • Does the master property insurance policy cover full replacement costs?
  • Does the master insurance policy cover the interior of the units as well as “common elements” used by all the residents?
  • Is the complex renter friendly?

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