The other costs that come with buying a condo

Like single-family homeowners, condo residents pay for their property by taking out a home loan and making a monthly mortgage payment. But condo ownership can come with other costs:

A condo building's governing board may charge residents a fee to help cover the repair costs when the property needs emergency work, when there are legal expenses, if the association budget is running at a deficit, or if capital improvements — maybe your building needs a new roof — have to be done.

The special assessment is in addition to the monthly condo fee and is often a separate, one-time cost. Payment options include covering the cost in a lump sum, though installments, or with financing.

Tip: Review the condo association's financials before you buy, particularly its history of special assessments, and whether it typically raises enough in fees to cover expenses. Check out the meeting minutes to see whether any large special assessments are forthcoming or major maintenance has been deferred.

All condo owners contribute monthly to an account that the building or community governing board oversees. They use that pot of cash to pay for services such as trash removal, window washing, landscaping, and recycling and to maintain and upgrade common areas and amenities.

Condo board members can raise the monthly payments to keep up with inflation or to plan for future maintenance. Typically, fee increases face a board vote.

Meeting minutes could signal a possible fee increase that would affect how much you would pay to live in the property. If the meeting minutes don't mention upcoming repairs, check the building's reserve audit. Completed by an outside firm, this study is a forward-looking document noting any significant improvements the building should make in the next 30 years.

If condo owners want a spot in a garage or an assigned spot in the lot, they may have to pay a monthly parking fee. Buildings that have a parking structure typically divide their offerings into two categories: common or assigned. A common pass gives residents access to park their vehicle in any open spot within the structure. An assigned spot is typically more expensive.

Condo fees help residents cover the cost of maintaining the building, but owners should anticipate and keep a stash of money for repairs needed inside their own unit. The other condo owners aren't going to cover the cost of your broken fridge or cracked toilet tank. The exact boundaries of what you own versus what the condo association owns are defined in the condominium declaration or master deed.

Real estate agents recommend condo owners set aside 1% of their unit's market value every year to pay for unexpected repairs. For example, if a unit's value is $350,000, the owner should set aside $3,500.

Condo fees will cover the cost of trash collection and maybe water or sewer usage, but in some locations, residents must pay for their cable, electricity, gas, and internet service. The cost of those utilities depends on several factors, such as your usage and competition for services in that particular area.

Condo owners should also research whether heating and cooling costs are covered in condo fees or part of the resident's utility bills.

The condo building's board has an insurance policy that covers damage and liability to the property itself, but individual residents must also carry their version of homeowners insurance. Like single-family homeowners, condo residents can pay their insurance monthly or in one lump sum annually.

Homeowners insurance policies can be paid in two ways. One option is to have the insurer take its payments out of an escrow account that's connected to the condo owner's mortgage payment. The second is to pay insurance out of pocket whenever the bill comes due. The actual cost of insurance will vary depending on the size of the unit and the region.

These vary by location and are often paid monthly through escrow. To know what a property owner owes in taxes, local governments first assess the value of a home and the land on which it sits. This process can happen as often as annually or as infrequently as every eight years, as is the case in some North Carolina counties. Each government sets a tax rate annually and applies it to the home value to determine the tax amount. When tax assessments are rising quickly, local governments sometimes choose to lower the rate to reduce the impact for owners, or they may opt to assess properties more often so that the sting of higher bills is phased in.

The property tax is based on the value of a holding, but not necessarily all of it. Many states assess only a portion of that value, providing what’s often called a “homestead exemption” on the rest. The exemption varies by state; in recent years, many states have increased their size to help owners in the face of rapidly rising property values.