I had good laugh recently when I came across an article written by a real estate agent who insisted that condos are a “great buy” and that they hold their value in a down market. Tell that to the thousands of Florida condominium owners who can’t get rid of their properties without taking a major loss!

True, in some markets condominium sales are still strong, particularly in downtown markets that are poised for explosive growth. Our nearby capital city, Raleigh, is one area that comes to mind. In Raleigh, new buildings are going up or being converted and the condos are selling at a brisk pace.

For many other areas of the country, it is truly a buyer’s market. Overbuilding, a tight economy, mortgage problems, and hesitant consumers are some of the reasons why condos aren’t selling. Or, if they are, they’re selling at a deep discount.

If you are in a position to buy a condo right now, you could come across a good find. However, even in similar desirable neighborhoods there are some things you should know before choosing a particular condo:

The HOA — An HOA or Home Owner’s Association consists of a group of people who also live in the same condo development and are responsible for overseeing its care. Each HOA has a rule book which you should be familiar with before buying. For example, you may enjoy growing tomatoes on your balcony, but the HOA could forbid this practice. After paying $320,000 for a two-bedroom, two-bath unit with a great view, is this something that you can accept?

Fees — You’ll be paying a monthly fee to the HOA for keeping common areas in order, removing trash, shoveling snow, etc. This fee can add $80 to more than $500 to your expenses each month. You may get “a deal” when buying your condo, but that excellent buy can evaporate once you figure in association fees.

Property Taxes — Thinking that property taxes can’t possibly be all that high, many condo owners are stunned to learn just how expensive their taxes are and how easily they can move up when the city raises taxes.

Insurance — Your HOA fee will cover some of the insurance costs for the building, but you’ll be responsible for insuring your unit and everything in it. Talk with your insurance agent in advance to learn how much you can expect to pay for homeowner’s insurance.

Once all of the related expenses have been determined, you are in a better position to negotiate price. If the market is slow, then you have additional leverage to ask the seller to lower his price. Compare recent sale prices with the unit you are considering to come up with a fair offer.

Finally, there isn’t anything better than a top location to determine if your condo is worth buying. Check out the neighborhood, walk around the condo building, and hang out in the unit you are interested in buying to get a feeling for noise levels, lighting, the ambiance, and more.

With the market in your favor you can choose to be selective and take your time: unloading an unwanted condo can be difficult to do, especially in a tough market.

Tags: condo, condominium, housing market, real estate

In some areas of the country, the condominium market has crashed as a huge surplus of defaulted or unsold homes has wreaked havoc on the market. One market that comes to mind is Miami.

On the other hand, some cities are experiencing a building boom as empty nesters, retirees, and investors look for good values in real estate. In my area — Raleigh, NC — several all-new construction projects are in progress, providing state-of-the-art housing adjacent to everything: government offices, museums, businesses, shopping, and more.

If you are desiring all-new construction or conversion housing, the time to start, build, and complete the project can span several years. This means that you must do your homework before deciding whether a particular condominium is right for you. Let’s take a look at some things you should consider when buying pre-construction.

Why would someone buy something before it is built. For several reasons:

• Oftentimes, early buyers receive a discount as builders want confidence that their project is in demand. By offering a price slightly lower than the market rate, you could find a nice deal.

• Buying now and paying for it later could mean that your property has appreciated during the time it took to be completed. For example, if that two bedroom garden high-rise was contracted for $440,000, it could have gone up in price since. You’ll pay financing on its original value or if you are looking for a way to make some money, you could sell your unit and pocket the money.

When buying pre-construction keep in mind the following:

• What will your financial situation be when the project is complete and you’re ready to move in? Will you need a mortgage and, if so, will you qualify for one?

• Will interest rates be stable or are they trending higher or lower?

• If you are investing in the property will you live in it or rent it out? What are the rental rates for comparable units?

• When the project is completed, what will the neighborhood be like? Will there be other projects under development and what sort of local amenities will be found nearby?

Of course, when you buy pre-construction, your chances of getting what you want are greater if you act sooner rather than wait. Specifically, you’ll be able to choose the floor, floor plan, and unit location (will it face an office building or will you have an unobstructed view of the river?) if you act quickly.

Consider also your down payment monies, possible taxes (property taxes will come later), fees, and the like when buying pre-construction. Theoretically, your cash outlay should be small at first.

The end result of new or repurposed housing is that your home is brand new. You bought it at yesterday’s prices and, if you did all your research, you now possess a home that has appreciated significantly in value.

Resources

Arrange Home Financing

Home Buying Checklist

Repairing Your Credit

Understanding Escrow

Tags: condo, condominium, housing, mortgage, prec-construction