by Tom Knight
So many clients have recently called me regarding the possible purchase of a condo that I thought it might be helpful to share my thoughts on the subject, particularly since I live in one. Most condos are significantly less expensive to purchase than houses in the same area, so it’s easy to understand their appeal. However, the old adage “caveat emptor” (buyer beware) applies even more to condos than to single family homes. That is because a condo is like an iceberg: there’s a lot more beneath the surface that you can’t see. Proceeding slowly is the best course of action, lest one encounter a collision of titanic proportions with possibly damaging condo realities. Just what are some of those hidden hazards?
When you purchase a condo you are actually buying the air space between the walls, floor and ceiling, and a fractional proportion of the entire “common area.” There are many rules about what you can and cannot do to alter your home, and indeed, rules about how you can even LIVE within it. The first rule of thumb is to become familiar with Homeowners Association (HOA), the quality of management, the financials of the association, and any history of litigation or special assessments. Then there is the question of monthly dues. How much are they, what do you get for your money, how often are the dues increased and by what percentage. Check out the rule book while you’re at it. If you are rock drummer, a condo is probably not your best bet.
Here are some general observations: very small condos, such as those found in large homes which have been divided into just a few living units, carry the greatest risk for special assessments and higher maintenance costs, while providing the fewest, if any, amenities. Old estate homes made into condos may seem incredibly charming and located in upscale neighborhoods, but keep in mind: that old plumbing, wiring, roof and foundation may need major renovations soon which could cost a bundle.
Condos quite recently built can be highly attractive. They seduce the young buyer with sparkling stainless steel kitchens, gleaming granite baths, and dramatic two-story vaulted living spaces. The architecturally designed abundant glass and steel features reflect the best of HGTV. They’re hip and cool and all that jazz. But beware, beneath the flash is often found a troubled HOA groaning under the weight of delinquencies and foreclosures. That’s because new complexes just sold a few years ago at the peak of the market are now worth only half as much, so expected contributions to the Reserve Fund do not meet projections. Down the road the money may not be there to do needed maintenance, and essential repairs might then be funded by special assessments. Not every new condo is in this financial bind, but many are. Detailed study of the HOA financials is required before purchase. One other thing about the newer condos: they are almost always multi-level homes, certainly not the best for young toddlers or seniors tilting towards the geriatrics ward.
Really large condos come in two flavors: high rise and sprawling. High rises can have spectacular views, but quite often the windows won’t open. That’s a no-no for my wife. And do you really want to haul your groceries up an elevator every time you go shopping? The sprawling complexes are often older, built when land was still cheap. Such places may seem more like apartments, and in fact, many were first constructed as such and subsequently converted to condos. If you remember your college apartment, didn’t you have to take your dirty clothes down the hall to the laundry room? Older condos may not have washer/dryer hookups in the units, truly a pain in the booty for many. Sound proofing in older buildings can be far below current standards, meaning you may be hearing more of the neighbors’ activities than you would care to (TMI). Older condos can be noisy. One advantage larger complexes have over smaller: the amenities are usually far superior. I live in a larger condo with 1246 homes. It has four swimming pools, multiple tennis courts with lighting at night, a gym, racquetball courts, a sauna, a steam room, pool tables and a very comfy clubhouse with a commercial kitchen you can use for those huge family reunions. I don’t think you’ll find those benefits in your 20 unit condo. You’ll be paying a club membership off campus for many such perks.
When it comes to financial risk, there is one really good thing about the big places: the financial burden is shared by many, so there is less risk of a catastrophic assessment. Another important consideration in this day and age: Our condo is large enough to provide full time security service, 24/7/365. I appreciate that when my wife is coming home from an evening meeting. Actually, there are quite a few reasons why I enjoy living in our condo. Convenience is a big one. We can walk to many shops, including Trader Joe’s (good turkey meatballs) and Trader Vic’s (home of the original Mai Tai). Starbucks and Chevy’s are next door too, providing appropriate beverages depending on where you are in your day.
We are located on the shores of the Bay. The Boardwalk affords a lovely area to stroll and bird watch simultaneously. I never have to mow the grass or do any yard work, but the 26 acre campus looks like a park. I can come and go as I please and don’t worry about a thing. Included in our dues is water, garbage, cable TV, insurance on the building, even free current movies at the Clubhouse, as well as the many other amenities I have already mentioned. We are at the foot of the Bay Bridge and can see the Toll Plaza from our balcony. If the traffic’s not bad we can be in downtown San Francisco in 15 minutes. It’s true that we hate to do laundry in the downstairs laundry room and our downstairs neighbor is a little strange, but overall we love our condo home and continue to enjoy living there each and every day.
If you are thinking about buying a condo, check out these websites:
-Yahoo Finance: Home Buying Tips, “7 Questions You Must Ask Before Buying a Condo.”
-eHow: “How to Buy a Condominium.”
Tom Knight, Broker Associate
BERKELEY HILLS REALTY