The Hidden Costs of Buying a Condo
What You Need to Know Before Buying a Condo
Among retirees and investors, condos have gained popularity. And it’s not hard to see why! Many condos boast maintenance free living, numerous amenities, and typically a great location. Even many families have purchased condos as second homes for their annual vacations. And while condos do have several perks, before you put ink to paper on a condo, it’s important you know the hidden costs of buying a condo.
As a condo owner, you may avoid the stress of putting on a new roof, replacing broken windows, or maintaining the landscaping, but the maintenance free life that is promoted comes with a price tag. Sometimes called HOA (Home Owner’s Association) or POA (Property Owner’s Association), each condo owner is charged a monthly, quarterly, or annual charge to cover the maintenance fees of the building, landscaping, pools, tennis courts, etc.
And while older condo units can sometimes be snatched up for an unbelievable purchase price, it’s not uncommon for those units to have higher HOA/POA dues since the amenities are aging. Maintaining the property is the responsibility of the association; however, it’s the responsibility of the property owners to pay for those repairs and upgrades.
Prior to purchasing a condo, it’s crucial that you or your Realtor inquire into the amount and frequency of the dues. It’s also important to note that these dues are not optional. In fact, failure to pay the required dues can result in a lien on your condo!
In addition to your monthly mortgage payment, HOA dues, property taxes & insurance, owners of condos can be subject to special assessments. Special assessments are additional dues the HOA would need to cover typically unplanned expenses. Special assessments don’t cover routine maintenance. Instead, they cover out-of-the-norm, unexpected expenses. For example, we had a client that had a special assessment to cover rebuilding the balconies that were deemed unsafe. The total bid amount to rebuild all of the balconies was then divided between each condo owner. Depending on the magnitude of the unexpected project, the special assessment can run from several hundred dollars all the way up to thousands of dollars.
It’s important to know the history of special assessments for the condo. Prior to purchasing, inquire about the timeline for the last assessment, as well as the amount. It’s also important to ask the protocol for implementing special assessments. As with the HOA dues, special assessments aren’t optional, and they’re required to be paid by each property owner.
If you’ve ever visited a beach town, you’ve probably noticed many high-rise condos dotted along the beachfront. Again, part of the appeal of many condos is the location. In a beach town, it’s common for many of the condos to be directly on the beach. And while the expansive ocean views may be priceless, there’s an additional price for such proximity!
A standard homeowner’s insurance policy may not cover any damage to your condo caused by flooding, wind damage, and hurricanes. Due to the proximity of many oceanfront condos, it’s highly possible that they’re located in flood zones—requiring additional insurance. While the HOA will carry insurance to cover the exterior, it’s the property owner’s responsibility to cover the interior of their own unit.
Prior to purchasing a condo, it’s important to inquire with multiple insurance companies to see what coverage is provided, and, more importantly, what’s not covered under the plan. An insurance agent will be able to assist in identifying adequate coverage, including additional flood insurance.
Condos can be an affordable way to own a vacation property or downsize during retirement; however, condo ownership doesn’t come without additional costs. Doing your homework prior to purchasing a condo is important so the hidden costs don’t lead to an unfortunate situation! Consult your Realtor, insurance company, loan officer, and the HOA association before purchasing!
If you still are deciding if buying a condo is right for you, don’t worry, we’ve got you covered.