The condominium has been growing in popularity over the years, both locally and nationally. And buying a condominium as your next home may be a great opportunity for you. But it truly is “different” from owning a traditional single family home, and you need to know ahead of time what you are getting into.
Here are some of the questions I am most often asked. I hope they will help you to decipher condos, and understand the good, the bad and the ugly.
Q: Exactly what is a condominium?
A: A condominium is a form of ownership, not a style of construction. In a condominium you purchase individual ownership of your unit, from the carpet up, from the ceiling down and from the walls in. FHA refers to condominiums as “air space estates.”
In addition you purchase an undivided interest in common areas, which typically includes the structure of the buildings, all the grounds, the pool, the streets and the clubhouse, if there is one. Undivided means you share these areas with the other owners.
Q: Are we talking about a multi-family community of a bunch of homes?
A: In the south, we typically think of attached townhomes. In places like New York City, we think of old apartment buildings, like we saw in the Seinfeld show. They call theirs “co-ops,” but those are very similar to our “condos” in Georgia
Q: What’s the good news about condominiums?
A: In a nutshell, condos have several major advantages:
Economies of scale: It’s a lot cheaper for 100 unit owners to hire one company to keep the lawn mowed and the flowers planted than it is for 100 different people to try to do it on their own. It’s a lot cheaper for 100 homeowners to pay to have a pool open all summer than it is for each to have his own pool. There are lots of areas where joint ownership results in reduced costs.
Enforced exterior maintenance: In a condo environment, the association of owners is almost always responsible for all exterior maintenance. That includes streets, grounds, grass and shrubbery, and all exterior building maintenance.
Amenities and location: Because of condominium unit density, you may be able to afford a great location with amenities you might not otherwise get, at a price you can live with.
Q: Is there any bad news with condominiums?
A: Well, when you buy an ownership interest in a condominium, you need to understand that you are giving up a significant number of rights you would otherwise have if you bought a traditional house.
Q: What are we talking about?
A: For starters, you don’t get to decide what the outside of your unit looks like. You can’t paint your unit a different color, you usually can’t put a grill or even a large potted plant on your balcony, and in most cases, you can’t even decide what color window curtains you can have. These decisions are almost always made for you by the Home Owners Association, which is a club made up of all the owners.
And if the association decides to save some money by delaying maintenance or flower planting or exterior painting, the whole community can suffer, which includes your unit, and there is little you can do about it.
Q: OK, so, whats the bottom line?
A: My advice is this: if you’re thinking of buying into a condominium community, know that you are giving up some of your individual rights. And please understand, in advance, what rights you are giving up to the home owners association.
Talk to other owners before you buy, talk to the association officers about important issues of the condo, and talk with your real estate professional about your alternatives before you make a final decision.
The rules and regulations of the condominium are detailed in a documents called a) the declaration, b) the by-laws, and often c) the house rules. Make sure you understand these documents before you make an offer to purchase.
Q: Anything else we need to know?
A: Historically, the condominium market in metro Atlanta has been the first part of the market to go soft, and the last part of the market to firm up after an economic downturn.
That may not be true going forward, but it is a factor to keep in mind when considering your alternatives.
Atlanta native John Adams is a veteran real estate broker, investor, and author. He welcomes your comments and questions at Money99.com, where you will find an expanded video version of this column.