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Whether you are just starting out, looking to own with all the extras or transitioning to simpler living conditions, How to Buy a Condominium or Townhouse explains how to find the best condo, townhouse or co-op for you.
- Find the biggest space with the most amenities
- Finance your purchase-even with less than perfect credit
- Find a real estate agent who will work just for you
- Negotiate your sales contract to get the lowest price
- Participate in your homeowners association
Plus, gain that extra edge with bonus material that can save you big money. Mythbuster boxes expose common myths about community developments. Insider's Tip boxes reveal crucial negotiating techniques. The Top 20 Frequently Asked Questions answers your most pressing questions. Convenient charts and sample forms make it easy to compare properties, calculate financing and much more.
How to Buy a Condominium or Townhouse is your essential guide to finding and buying a new home in the community that fits your lifestyle.
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About the Author
For over twenty years, Ms. Evans and her husband have bought, sold, and developed a wide variety of real estate investments, some on a shoestring and some with more generous financial resources, but always using the same principles, and always at a handsome profit. She resides with her husband in Tuscaloosa, Alabama.
Read an Excerpt
Should You Buy a Condo? Decide if condominium-living is right for you before you sign the papers.
Excerpted from How to Buy a Condominium or Townhouse by Denise Evans ©2006
Almost this entire chapter applies equally to condo, townhome, or cooperative apartment living. To make things easier on you, all of these things are referred to by their generic name common interest developments (CIDs). If something in this chapter differs for each type of CID, it will be mentioned specifically.
Living in a CID offers virtually all the benefits of traditional home ownership. Mortgage interest is deductible, including the interest on a loan used to purchase stock in a cooperative apartment. Property taxes are deductible, including your pro rata share of the property taxes paid by a co-op building. Unit value usually appreciates over time. However, life in a CID also contains some of the same drawbacks as detached housing, such as large closing costs and market risks, and often regular maintenance expenses.
Common interest developments offer two extremely important advantages over typical stand-alone homes. First, they give you the ability to live in areas of extremely high real estate prices, where the price of the land alone would make residency impossible for most people. Second, they provide you with the privilege of enjoying amenities formerly reserved only for the very wealthy-full-time security, Olympicsize swimming pools, property management, perhaps even stables and riding rings, boat slips, private airfields, on-site day care, and many other benefits that would otherwise not be available to you.
Before going further, you should evaluate how much individuality you are willing to give up to gain the benefits you want. As a general rule, co-ops are the most restrictive, then condos, and townhomes last. There are variations of restrictiveness within each group, however. Decide early on the importance of the following issues to you, and then shop for something that fits your personality, not just your financial or other types of needs.
Are You Willing To Share?
Sharing expenses in order to get more expensive things also means you have to share the things. Problems come with all the little things you never thought you would have to share. For example, you might not have a particular parking place that is specifically designated for you. Someone might become irate if you hog your share of the dumpster by tossing in some old mattresses. Finally, think about possibly sharing bandwidth for your computer, hot water for your shower, or loading dock time for your movers. Are you okay with sharing these things?
Some things cannot be shared in a CID. There might be rules against burning incense because the other owners do not want to share your fragrances. Likewise, they might be opposed to the lovely melodies coming from your wind chime collection. You could be stunned to discover that the lighted Santa Claus who always sits in your living room window during the holidays is not welcome. Not only must you share many things, but you also must refrain from sharing many other things.
Can You Give Up a Little Control?
When living in a CID, owners have less control over their environment than with stand-alone dwellings. Your ability to modify your unit will usually be limited. Rules designed to prevent abuses by other people-self-centered maniacs bent on mayhem and destruction-might actually keep you from having a perfectly civilized, late-night party at the pool with fifty of your closest friends.
However, it is hard work making all the decisions that come with home ownership, and sometimes it is nice to have major decisions made for you by these rules. Isn't it okay if someone else picks out the carpet pattern in the hallways-even if it is a color you detest-as long as someone else also vacuums it every day? How terrible would it be to buy a condominium or townhouse it be if you could not paint your front door a beautiful shade of red, but your next door neighbor also could not paint his or her door some ghastly color like mauve?
By and large, members of a condominium association have the same interests as you. They want to share amenities on a reasonable basis, preserve property values, decrease the amount of time wasted on maintenance issues, and balance privacy concerns with the very human desire to build vibrant and interactive communities. Because people have widely different views about what is necessary to accomplish those goals, there have to be multiple rules rather than one golden rule. That is the heart of CID living.
Are you Willing to Participate?
In order to receive the full benefits of community ownership, you must be willing to take part in CID government. Folks who do not attend meetings or read the monthly newsletter will probably have unpleasant surprises ahead for them, because people who are vocal and who regularly review issues and vote on them will have the most influence on rules, regulations, and enforcement policies. Your ability to live happily and productively, with a minimum of objectionable restrictions, will depend on your input into the process.
Test: Is a Condo Right for Me?
To determine if condo living is right for you, try this quick test.
1. My privacy is:
___ Not important to me.
___ Somewhat important to me.
___ So important I used to be a hermit.
2. My need to be in control of my living environment can best be described as:
___ NOT a control freak.
___ Need to be in control, at least to some degree.
___ As a matter of fact, someone DID die and make me king.
3. Amenities such as swimming pools and tennis courts are:
___ Very important to me.
___ Not that important to me.
___ I'm not the athletic type.
4. I would respond to the following statement, "I like mowing the lawn, landscaping, and gardening," with:
___ Are you kidding?
___ I don't mind it.
___ I love working outdoors.
5. The following describes my position on doing my annual maintenance chores exactly on time:
___ I thought gutters flushed themselves out.
___ I am on top of it, give or take six months.
___ I have a laminated schedule taped on the refrigerator.
6. Home resale value is important to me:
___ Because I may be moving within the next three years.
___ But I expect to be here for a while.
___ Even though I plan to live here forever.
7. Living in an urban environment is:
___ Vibrant, exciting, and convenient.
___ Something I can either take or leave.
___ Not for me-give me the country life.
8. Meeting and interacting with many different types of people is:
___ Very important to me.
___ Relatively important.
___ I hate people.
Total all your points, giving yourself 1 point for each first answer, 2 points for each second answer, and 3 points for each third answer.
Evaluate your scores as follows:
8 to 10 points: Future president of condominium association
11 to 20 points: A good candidate for CID life
21 to 24 points: Thanks for buying the book anyway
Do not get discouraged if you scored in the 21 to 24 range but truly want to enjoy beachfront property part of the year, a retirement community that can adapt to your changing needs over time, or any of the other specialized CID opportunities.
Real estate developers understand market forces. They know that not everyone is a perfect CID candidate, but they still like to attract as many buyers as possible. If you shop carefully and do your research, you can find a community that is right for you.
Table of ContentsIntroduction -
Top 20 Questions of First-Time Condo or Townhouse Buyers -
Chapter 1: The Difference Between Condos and Houses -
- Major Differences Between Condos and Townhomes
-Major Differences Between Co-ops and Condos
-Financial Comparison of Condo, Co-op, Townhome, and Apartment
-Planned Unit Developments
-Common Interest Developments
Chapter 2: Different Types of Condo Developments -
- Vacation Condos
- Kiddie Condos
- Game Day Condos
- Kosher Condos
- Leasehold Condos, Co-ops, and Townhomes
- Limited Equity Condominiums and Co-ops
- A Style for Everyone
Chapter 3: The Condo Lifestyle -
- Are You Willing to Share?
- Can You Give Up a Little Control?
- Are You Willing to Participate?
- Test: Is a Condo Right for Me?
Chapter 4: Legal Overview -
- Specialized Law
- Who Owns What?
- Who Owns What in a Condo, Townhome, or Co-op Development?
- Who is Responsible for What?
- How Much Independence Do You Have?
- Owners' Constitutional Rights
- Typical Condominium Rules
- Typical Townhome and Co-op Rules
-What if the Condo Developer has Financial Problems?
-What if a Co-op Board has Financial Trouble?
Chapter 5: Social and Political Considerations -
- The Homeowners Association
- The Cooperative Board
- Developments with Residents of Similar Interests
Chapter 6: Deciding What You Can Afford -
- Working Up a Housing Budget
- Calculating the Monthly Housing Expense You Can Afford
- Preapproved Loan Amounts
- Dues and Assessments in Condos and Townhomes
-Co-op Rent and Maintenance
-Converting Housing Budget to Purchase Price
- Purchase Price Worksheet (with Examples)
- Monthly Loan Constants for a Thirty-Year Mortgage Loan
-Mortgage Interest Tax Deduction
- Calculate Home Mortgage Tax Deduction Savings
- Special Considerations for Co-ops
- Vacation Rental Income
-Overall Financial Analysis
Chapter 7: Financing Options -
- Overview of Mortgage Lending
-Shop for Financing Early
-Know Your Credit Score
- Improving Your Credit Score
-Less than Perfect Credit
- Comparison of Loan Interest Rates and Terms
- Common Lender Traps
- Prepayment Penalties
-Fully Amortizing Loans
- Balloon Loans
- Adjustable-Rate Mortgages (ARMs)
- Interest-Only Loans
- Growing Equity Mortgages
- No-Document Loans
-The Right Loan Arrangement for You
Chapter 8: Different Types of Lenders -
- Traditional Sources of Residential Mortgages
-Specialized Co-op Lenders
- VA Guaranteed Loans
- FHA Insured Loans
- USDA Loans
- HUD Loan Guarantees for Native Americans
- Fannie Mae, Ginnie Mae, and Freddie Mac
- Mortgages from Stock Brokerage Houses
- Assumable Loans
- Using Retirement Money
- Creative Financing Sources
- A Dangerous Lending Alternative
- Loan Comparison
- Loan Comparison Worksheet
Chapter 9: Deciding on Home Features You Want -
- Length of Ownership
- Use of the Home
- Your Particular Unit Features
- The Development
- Area Amenities
- Utilities and Technology
- Develop a Checklist
- Home Features Checklist
- Comparing Properties
Chapter 10: Real Estate Brokers and Agents -
- Real Estate Professionals
-How Agents Are Paid
- Buyers' Agents
- Transaction Brokers
- Limited Consensual Dual Agency
- Who Does the Agent Work For?
- Determining the Type of Broker that is Right for You
- Finding a Broker with Condo and Townhome Experience
-Special Considerations for Co-ops
Chapter 11: Finding Properties on Your Own -
- Properties You Won't Hear About From an Agent
- Working without an Agent
- How to Find Properties
- Special Considerations for Co-ops
- Real Estate Agent Etiquette
- Sources of Information about Recent Sales
Chapter 12: Asking the Right Questions as You Shop -
- Getting Information from the Listing Agent
- Talking Directly to Sellers
- Ten Questions to Ask Sellers about the Unit
- Special Questions for Mature Projects
- Special Questions for New Projects
- Co-op and Condo Conversions
- Nine Questions about Finances
- Meeting the Neighbors
- Health and Safety Issues
- Curb Appeal
Chapter 13: How to Negotiate Successfully -
- Basic Negotiation Tactics
- Price vs. Terms
- Concentrating on Deal Points
- Understanding Offers and Counteroffers
- Negotiating Directly with a Seller
- Negotiating through an Agent
- Negotiating with the Developer of a New Project
-Documenting Verbal Negotiations
Chapter 14: Writing a Contract -
- How to Personalize Real Estate Forms
- Important Clauses You Want in Your Contract
- Miscellaneous Other Matters
Chapter 15: Important Contingency Clauses -
-Contingencies that Favor Buyers
- Common All-Purpose Back Doors
- Contingencies the Developer Wants
- Clauses the Seller Wants
Chapter 16: Preparing for Closing -
- Assistance from the Real Estate Agent
-Choose a Closing Agent
- Select a Title Insurance Company
- Deliver Information to the Closing Agent
- Finalize Loan Details
- Read the Closing Checklist
- Order Inspections
- Obtain Important Letters
- Review Documents
- Secure Proof of Association or Co-op Building Insurance
- Order Homeowners Insurance
- Assist the Appraisal Process
- Check with Local Governments
- Contact Utilities
Chapter 17: The Closing -
- Closing Procedures
-The Settlement Statement
- Other Closing Documents and Procedures
- Deductible Closing Expenses
- Tax Deductions for Home Purchase Expenses
Chapter 18: Ownership Responsibilities -
- Participate in Governance
- Manage the Management Company
- Understand Your Community Personality
-Vote Intelligently on Dues and Assessments
- Avoiding Problems
- Proper Management of Rental Units
Chapter 19: Thinking Ahead to a Sale of Your Condo -
- Buy What You Can Afford
- Buy Smart to Sell Smart
- Know the Neighbors
- Stay Informed about Your Market
- Deciding Whether to Remodel
-Recouping Your Investment and Closing Costs
- Calculating Profit on the Sale of a Condo, Townhome, or Co-op
- How Long Must You Own Your Condo Before You Can Make a Profit on Sale?
- Investing in Rental Properties
-Estate Planning Issues
- Overcoming Analysis Paralysis
Appendix: Websites -