*** Condo News - You Can Use ***
HUD has finally issued a long-awaited update to its condominium rules, announcing that it will now allow individual unit approval and is taking other steps to loosen requirements that make these properties eligible for FHA financing. Under the revised guidelines that took effect October 15, 2019 – an individual condo unit in a building of 10 units or more may be eligible for spot approval if no more than 10% of the units are FHA-insured. For units in buildings with fewer than 10 units, no more than two units can have FHA insurance.
The FHA is also extending the recertification deadline for approved condo projects from two to three years, and it will insure more mixed-use projects, or those with more commercial space, to be eligible, stating that approved projects can now have up to 35% of their square footage dedicated to non-residential use. The agency also loosened restrictions on owner-occupancy rules, stating that eligible condo projects can now be just 50% owner-occupied. It also said it will insure up to 50% of units in any given project.
The FHA said it expects the updated guidelines to qualify an estimated 20,000 to 60,000 more condo units per year for financing. Currently, of the more than 150,000 condo projects across the country, only 6.5% are approved for FHA financing.
For buyers this means lower down-payment FHA financing will now be available on hundreds of additional condos locally. Sellers, this attractive financing option can increase demand for your property, likely resulting in a higher sale price.
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Selling Your Condominium
No matter how much you enjoy your home and love your condo lifestyle, there might come a day when moving on to another community or stage of life change means a move and sale. So, you may need to know the ins and outs of how to sell a condo. AND... No, it's not exactly the same selling a single family house!
Condos have their own unique selling points and challenges that are good to know before you put yours on the market, so here's some advice on how to pinpoint the right time, price, marketing tactics, and more so you can make out like a bandit once someone bites.
When to sell a condo
Often condos are smaller and valued lower than the area's resale single family homes. Even so, they can take longer to sell depending on local market conditions. But even though marketing time could be longer I'd recommend you be able to move quickly. If you're priced right multiple offers are always a possibility.
Most people think spring is the best time of year to sell a house, and the winter holidays are the worst. But with condos, conventional wisdom might not apply. Families with school aged children may prefer a spring sale and summer move but Condos in many areas, cater to empty nesters. With them seasonal factors may not be so important. Anyway, a look at market conditions and inventory of similar properties can affect your timing. If there's no urgency, you may want to consider waiting for better conditions that could net more money.
How much is My condo worth?
This is probably the trickiest part of selling any property. Price it too high, and a lot of potential buyers won’t even take a look. Price it too low, and you’ll lose out on a good chunk of change. But the great thing with condos is that you may be surrounded by similar (or heck, even identical) units. This makes it much easier to get sales information on similar properties in your area. For example if a three-bedroom condo just like yours a few doors down recently sold for $175,000, you can expect to get around the same price for yours.
Just keep in mind that some differences in otherwise indentical properties could mean thousands of dollars higher/lower. For instance, condo end units are considered quieter than those in the middle and, as such, can command a higher price... and what about that one with the view at the end of a cul-de-sac with the extra parking spaces? As your real estate agent I'll pull comparable sales info and recommend not only an asking price but the right strategy to go with it. Want an idea of your condo's current value? Click Here and fill out the short request for an emailed report with recent sales, current listings and an estimated value range.
Is staging important?
Since condos can be a bit more cookie cutter than freestanding homes, you might have to work a bit harder to make it stand out (particularly if other units in your complex are for sale at the same time). To show your condo at its best, you'll want to clean it, make repairs, and de-clutter your possessions. It's also easier for furniture and other items to make spaces feel cramped. To give the illusion of more space, throw away or box up and store everything that is not absolutely essential.
Once the de-cluttering is done, you can note small cosmetic touch-ups that need to be made—from cleaning grout to painting walls and beyond. Fix the stuff that's in obvious need of repair. Many buyers see small signs of neglect as harbingers of larger problems, so focus on the little things you may have grown accustomed to that you barely notice, like the fact that your front door sticks. Annoying right? Buyers will think so, too.
I do offer professional staging services at no additional cost as a perk for my clients.
How to market a condo
Once your condo is glowing and spotless, it’s time to start the marketing process. With condos, this largely means emphasizing your complex's unique selling points. We'll accentuate the maintance free lifestyle that comes with condominium ownership. Many buyers are looking for the hassle-free living experience that they can’t find with a single-family detached house. Being free to lock the door and go on a trip without worrying about their property is a major advantage.
Other important selling points unique to condos are the amenities of the complex. Does yours have a pool? Fitness center? A parking garage? A meeting room or lounge? Concierge services? We'll make sure they're played up in the listing copy and shown in the professional photos and marketing materials.
Then there are the assets of your own individual condo that you’ll want to expand on: If your condo has a great view, convenient location, or recently remodeled bathroom, be sure to include that in your marketing materials. I'll review the important features we'll want to play up. My goal is to provide the market perspective to highlight the unique selling points of your place so we generate the maximum interest and appealing, quality offers.
Don't forget to put important information together
Before buyers start coming through take some time to get paperwork together. A condo isn't like a single family home purchasein that a knowledgable buyer is going to want a lot of additional information that typically isn't publicly available. Things like what the assn dues cover, rules and regulations, association meeting minutes, association insurance, budgets, repair reserves, and information on any pending litigation. Ask me for a copy of my checklist to help in pulling all this information together. By having this information available up front you'll avoid contingencies that can delay the sale process after you accept an offer.
Buying A Condominium
If you’re thinking about buying a condo it could look pretty appealing. Especially looking at brand new ones where the builder/developer offers all kinds of incentives and discounted association dues. After all, you don’t have to worry about exterior maintenance. Plus, you get ammenities like a pool, fitness center and clubhouse that you don’t have to pay for or keep clean. Cool, right? So you can cancel the gym membership and save a few more bucks.
Like everything else in life, there are pros and cons to buying a condo. Before you sign on the dotted line, it’s important to look at what are important factors to you. Below I've also added some key questions you may want to ask when buying a condo.
Pros of Buying a Condominium
Personal Security - Some condos have restricted access with gated or locked entries. Higher end condos may have on site security professionals for residents. If you live alone, or security is a concern for you, this can be a major perk. In addition, since you’re living in close proximity of others, in an emergency, close by neighbors can likely be of help.
Community Amenities - Want a pool? A fitness center? Wednesday game nights at the community clubhouse? Many condo communities offer residents amenities that would likely be out of reach for the average homeowner.
Exterior Maintenance - One of the biggest benefits to living in a condo is that other people do the maintenance for you. They cut the grass and maintain the grounds and they fix the roof. If you’re a first time homeowner, in poor health, busy with work, like to travel, or you just don’t want to deal with all that work, this is a major benefit to living in a condo.
Easier to Afford - Condominiums are often priced lower than single-family homes. If you want to dive into home ownership, a condo can be a great first step. Keep in mind that today it is pretty much a seller's market so even though condos are priced lower than single family homes you may be competing with other buyers for the same property. I recommend getting preapproved for financing to put yourself in the position of being a strong approved buyer. I usually recommend Derek Good with Equity Resources for mortgage financing. For infomation on Derek just Click Here .
Cons of Condo Living
Homeowners Association Fees - As you might imagine, that pool, fitness center, security system, and maintenance crew all cost money. And, that money is paid by you. When you buy a condo, you essentially become a business partner in that community. You pay a monthly fee each month (on top of your mortgage) which goes towards the upkeep of the property, as well as future investments. How much will you have to pay each month? HOA fees vary widely, depending on the location, size, and quality of your community, but plan on spending at least $125 a month in association fees.
Lack of Privacy - A condo is essentially like an apartment that you own. Well, you get all the “perks” of apartment living too; and this includes neighbors on the other side of the wall, and neighbors going up and down the hall or grounds at all hours of the day and night. If you’re looking for some peace and quiet around you, a condo may not be the right choice.
Delinquency - In a slower economy some residents could end up with financial problems with owners failing to pay their association dues. What happens in this case? Dues can go up for everyone else to cover a delinquency. This means you can get stuck paying extra until the association can recover funds through what can be costly legal actions.
Can be a Challenge to Sell - Condos can be difficult to sell. Why? Well, they pretty much all look the same. Market conditions will dictate if this is even a concern. But, if there are empty units in your building/community, those are likely going to sell first. And if there are a lot of empty units… good luck.
Living by the Rules - Living in a condo means you have to live by the association's rules. For instance, say you want to install green energy technology like a solar panel on the roof to save energy at home. Instead of just getting started, you have to ask the condo association if it’s ok. If they say no, you’re out of luck. There are many rules for living in a condo and for some people, this can be stifling.
Slower Appreciation - Condominiums can appreciate in value slower than single-family homes. This is because you don’t own any land, which is the biggest driver for appreciation. Instead, you only own the living space and that's a big difference.
Questions to Ask Before Buying a Condo
So, you've decided a condo makes sense for you. What are the main things you should inquire about before making a decision on a specific property? Here’s an initial list that you can use as a guide to get started.
What are the biggest complaints - What gripes are people airing at the condo board meetings? Get your hands on the minutes from the last few meetings, or talk to current owners. If the association isn’t quick about fixes, you want to know about it before committing to live there.
What’s the management team like - You may want to interview the condo manager (i.e. the one who’s there full-time) personally. Also, talk to your neighbors about management. A lousy manager can make condo living a grueling experience. Some condos are self/resident managed. That is, there are no property managers, and the residents meet to make decisions together. The good side to this is that it often means monthly fees are much lower than professionally managed communities. Although self-management works in some cases, think carefully before moving into a community like this. You have to live next door to all of these people…do you really want to manage a community with them too?
Additional storage space - Some condos offer residents personal storage space. Your condo may not have an attic or garage, so ask if you’ll be provided any extra space to store bikes, winter skis, and luggage.
Whos insurance covers what - Make sure you get a copy of the condo association’s insurance policy. Find out exactly what is covered, including the cost to bring the building up to code. Also make sure the estimates to rebuild are reasonable, and not minimized or outdated. It’s also important to check if their policy will cover your personal belongings if the roof leaks or the building catches fire. If it doesn’t, you’ll want to consider adding that coverage to the contents policy you take out on your own.
How soon will you be moving - Condos often appreciate a slower than single-family homes. And, even though prices are now increasing, a slowdown is possible that could change selling conditions. So, it could take awhile for you to make a profit if you decide to sell. While it’s impossible to predict the future, make sure that you really want to live in this community before you decide to buy.
Do you fully understand the monthly association fees - Condo association fees are calculated based on how many units there are, what it costs to maintain the property (both short and long-term), whether or not the community is professionally or self-managed, and funds set aside for litigation and major repairs. Get your hands on a breakdown of the monthly dues you’ll be responsible for. Make sure you can truly afford this extra payment, and that you understand what you’re getting for this payment. And remember, condo association fees are not tax-deductible like your mortgage is.
You also want to look at the Repair Fund. Every condo association must put a certain portion of dues aside for major repairs. If the complex is less than 10 years old, the repair fund should have 10% of the cost to repair major items (i.e. roofs, tennis courts, etc.). If your community is 10-20 years old, the Fund should have 25%-30% or more on hand for major repairs. And if the community is more than 20 years old, 50% needs to be funded.
Many communities promise their residents “ultra low dues.” Be wary. Although this may seem appealing, chances are it means the community isn’t funding their Repair Fund like they should; if the roofs end up needing a replacement, you and all the residents could be hit hard with a major bill. Find out the delinquency rates on monthly dues as well. When other owners fail to pay their monthly dues, this often leaves everyone else holding the bag. Good communities will have a delinquency rate of 15% or less.
What are the rules - Does this community allow pets? Can you rent out your unit if you need to? Will you have a chance to plant a bed of flowers? Go over the community rules/guidelines line by line. Make sure the condo doesn’t have rules that you simply can’t live with.
Is there any litigation - Condo communities can often be rife with drama and, yes, litigation. Owners sue other owners, as well as the management team or developer. Make sure there are no past or pending litigation in your community, since it’s often a sign of a poorly run community, or one filled with litigious neighbors.
Whos porch, deck or patio - Many condos offer residents porches or balconies with their units. Make sure you look at the Unit Deed, and the Master Deed, very closely. The porch may be attached to your unit, but do you truly own it, meaning it’s your responsibility to repair it as it ages or breaks? Or, do you own it in the sense that it’s yours, but the community actually maintains it?
My Final Thoughts - Buying a condo like a single home constitutes one of the largest purchases most people will ever make. With condominium homes there are many important aspects to consider that you don’t have to worry about with single family homes. This is why it’s important to go into the process knowing what to look for, and what to ask. Feel free to call me for additional information - PH: 614-548-0531