House, Townhome or Condo?
First time homebuyers often start out thinking
that they want a condo or maybe a townhome. Why? Usually, they think that a
condo might be cheaper and less of a transition from apartment life. After
all, they are used to shared parking, common amenities and neighbors very
close by. And, some condo developments, particularly new ones often offer
seemingly unbeatable "package deals".
So, what's wrong with that? Maybe nothing;
maybe a lot. Before jumping into a condo or a townhome purchase it is wise to
carefully consider all the facts, both positive and negative relating to
condo, townhome or other "shared ownership" type properties.
Consider some of the positives: Condo's can be
cheaper than single family homes due to construction economies and land
prices. In many high cost locations there isn't even a choice; either buy a
condo or continue to rent. There's also the
maintenance issue or, more specifically, the convenience of not doing it
yourself. With a condo or townhome much or all of the exterior maintenance and
grounds keeping is contracted out. No hot summer afternoons behind the old
lawnmower for you! Often too, there are built in niceties such as Cable TV,
Swimming Pools, Exercise Rooms and more. Such a deal!! And, there are the
cherished tax benefits of home ownership to boot. Sounds great, doesn't it?
Consider some of the negatives: First and
foremost is appreciation and the market cycle. In most areas condo prices
start rising long AFTER single family homes in an up cycle. The reverse is
true in hard times. Condo prices crater FIRST and usually hardest. Financing
can also be a major issue. The builder may have had a "super mortgage
deal" when you bought it new but when you are looking to resell the
picture can be much different. For one thing, lenders require certain levels
of owner occupancy in condo and townhome developments. Why? Many owners use
their units as rental property (either as an easy investment or because they
just can't sell them) and too many renters may have a negative impact on the
overall development. Lenders also count the
"monthly maintenance fee" when they qualify the buyer; the higher
the fee the harder to qualify. And, about those maintenance fees. . . . Right,
they almost never go down, only up. Even so, condo managers sometimes still
don't have sufficient funds to meet the needs of aging properties and are
forced to turn to "special assessments".
The lesson here is to be very very careful if
you are thinking of condo or townhome ownership. The amenities and freedom
from maintenance chores are nice but the freestanding single family home is
still the "gold standard" of residential real estate.
First Published 6/23/00 (1/7)
