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Seven Major Mistakes Buyers Make When Purchasing a Condo

condo-buying-mistakesPurchasing a condominium is a great way for individuals to become homeowners at a cost reduction not possible when buying a house. Viewed by some as a stepping stone towards house ownership, condos are a cheaper, more viable option than single-family properties for a variety of reasons. Benefits such as lower down payments, and shared utility and maintenance fees add up, representing significant savings. Additionally, condos can be a safer option than houses; property sales value are easier to drive up as a result of improvements and condos located in smaller buildings are usually somewhat less vulnerable to changing market conditions.

A certain lifestyle driven by amenities offered by numerous condominiums furthers their appeal. For example, in-unit pools, gyms and recreational offerings are covered by HOA fees, whereas these communal perks rarely come with the purchase of a house.

In recent years, urban-dwelling has seen resurgent popularity, migration to cities is up, and, as a result, condos have taken on a new importance. Offering inhabitants many perks not found in suburban environments, such as accessibility to restaurants, public transportation, nightlife, high population density and job volume, residents are drawn to city-life; condos provide these individuals with a convenient, low maintenance lifestyle, while simultaneously allowing for a quality of life and long term financial stability that is elusive to renters.

As is the case with a house purchase, buyers are encouraged to do their due diligence prior to putting money down on a condominium. Below is a list of seven major mistakes that buyers make when purchasing a condo. It is easy to get caught up in the superficial frills of a building, avoid these blunders and forgo financial catastrophe.


Below are the Seven Major Mistakes:

  1. Mistake One: Not Checking the Financials of the HOA:
  2. Mistake Two: Not Making Sure That the Building is not in Litigation
  3. Mistake Three: Not Checking the Conditions, Covenants, and Restrictions (CCRs)
  4. Mistake Four: Not Making Sure That HOA Dues Adequately Fund The Reserve Study
  5. Mistake Five: Not inspecting the Grounds
  6. Mistake Six: Not Verifying the Number of Parking Spaces
  7. Mistake Seven: Not Having a Grasp of the Community Prior to Purchase:


Mistake One: Not Checking the Financials of the HOA:

Home Owners Associations are an integral part of community properties; they function to ensure that the property is maintained. HOA’s have the authority to collect dues as well as make assessments. The money spent by the HOA originates with the unit owners, how these finances are directed should be of significance to the buyer. Checking the financials of the HOA can help you avoid a money pit. If the HOA is unable to maintain expenses, and the reserve fund is depleted several things could happen but the most common are listed below:

  1. You may be subject to an increase of HOA dues (assessments) and as a result, pay more money than you bargained for with added expenses including unsold unit dues, utilities, faulty construction repair, ; or
  2. You may experience a reduction in services and amenities such as gym and pool maintenance or janitorial services.
  3. You may lose property value as neighbors go into foreclosure as a result of not being able to afford the increased HOA fees.

Buyers want to enter a community with a stable financial situation. HOA finances are open to prospective buyers via the seller or HOA. Information accessible includes dues, yearly balance, annual revenue, reserve funds, and pending lawsuits. Variance is a bad thing, communities with annual dips and spikes are a red flag, unless the money was spent on project improvements and maintenance. Protect yourself by thoroughly reviewing the documents.


Mistake Two: Not Making Sure That the Building is not in Litigation

Condominiums with widespread drama are a nightmare. Owners’ suing other owners and management is a gigantic warning sign. In addition to this, litigation for builder defects are very common. Litigation in the community can equate to poor management and or volatile neighbors. While lawsuits do not automatically mean the death of a purchase, they are something to take very seriously. Discuss the situation with an attorney, and remember a condo in litigation may scare away lenders, limiting financing or refinancing options.


Mistake Three: Not Checking the Conditions, Covenants, and Restrictions (CCRs)

The CCR is the rules and regulations created by the HOA that govern residential life in the community. These rules outline the acceptable norms and standards for occupants in common areas, hallways, and exterior facilities. Read and understand the CCRs before making a purchase. It is important to know whether or not you can abide by the established community guidelines; if you cannot, do yourself a favor and purchase elsewhere.


Mistake Four: Not Making Sure That HOA Dues Adequately Fund The Reserve Study

A reserve study is a statistical analysis that predicts and prepares for the costs associated with building expenses and common area replacement and repair, over a specific amount of time. This type of study looks at the physical state of the property and then conducts a financial analysis. To ensure that they are properly funded in the event that major repairs are needed, HOA’s hire companies to perform a reserve study. Residents benefit from a reserve study because they can plan for and anticipate their level of long term financial commitment. Make sure that your HOA dues are funding the study of at least 50% of the projected need. The absence of a reserve study may main big payment increases in the future and where the reserves are not adequately funded, you may be in for a huge increase of HOA dues in the future.


Mistake Five: Not inspecting the Grounds

Inspect the community, walk the property, just because the common areas look nice does not mean everything else does. When examining the property, ask, “are these merely superficial looks functioning as window dressing to sucker buyers in?” Many buyers only examine a properties surface. This often results in a rude awakening of leakage, staining, clogs, pests and a seemingly endless list of other issues. The best way to navigate this trap is to have a home inspection conducted prior to putting any money down.


Mistake Six: Not Verifying the Number of Parking Spaces

Make sure that you know the specifics of things like parking. If you have two cars and only one spot provided for what are you going to do? A seemingly innocuous issue, these impediments add up and cause much stress and headache. Go over these details prior to putting money down.


Mistake Seven: Not Having a Grasp of the Community Prior to Purchase:

Before moving into a new condo complex, make sure you firmly understand who lives there, what the atmosphere is like and whether or not you are compatible with it. Are the neighbors young and loud, or is the community more family oriented? What about the thickness of the walls, is noise going to seep in or out of your unit? Not knowing who lives in the community could spell trouble down the road. Mistakes interweave the human experience; learn from those made by others. If presented with the opportunity, speak with residents about the pros and cons of the community and weigh what they say against your expectations.


Living in the right community is going to have a major impact on your home owning experience! To apply for a VA condo loan, complete the form below.

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