When people talk about the housing market, they often discuss single-family homes and traditional properties. However, much of the current housing market’s success is being driven by condominiums that offer flexible living, greater affordability, less upkeep, and top-notch amenities.
As a condo buyer in this market, there are a few things you need to know in order to find and purchase the property of your dreams.
The Booming Condo Market
The condo market is surging as of late. This increase in demand is being driven by a couple of factors.
First off, the exponential rise in the value of single-family homes means some buyers are getting priced out of the market and are turning to more affordable options like condos. While the median existing condo price is currently right around $322k (11.9 percent annual increase), this still pales in comparison to the median existing single-family home price of $382k (15.2 percent annual increase).
Secondly, much of the demand for condos is being driven by younger buyer demographics who are less interested in owning big homes on large properties. They would rather own newer properties with less upkeep and good walkability in the surrounding neighborhood. Condos often fit this bill better than single-family homes do.
4 Tips for Buying a Condo
If you’re in the market for a condo, there are several helpful tips you can use to ensure you find the right property and navigate the offer and due diligence periods well so that you ultimately have a smooth closing.
- Choose the Right Agent
If you already have a really good real estate agent that you know, like, and trust, you can certainly use that individual. At the end of the day, buying a condo is a real estate transaction – just like buying a single-family home.
However, there are some nuances. That’s why it’s generally recommended that you work with someone who has experience with condo transactions.
For best results, work with someone who has experience selling condos. This guarantees that they understand all of the nuances involved. From association rules and regulations to different contingencies, you’ll want an agent who has a lot of knowledge in this area.
- Get Your Financing in Order
Financing a condo comes with some of its own nuances that make it slightly different from obtaining traditional financing on a single-family property.
Because condo owners usually only own the “walls-in” and the HOA owns the rest of the grounds, lenders take special care to evaluate things like the building’s occupancy rate and financial health.
As Rocket Mortgage explains, “These factors can include, but are not limited to, the property’s age, structural integrity, amenities, grounds and even the current finances of the building, as homeowners associations are tasked with maintaining annual budgets and reserves.”
As you go through the qualification process, make sure you ask lots of questions and give yourself plenty of time. As long as you check all of the boxes (good credit, reasonable debt-to-income ratio, etc.) and the condominium property is in good shape, you should be fine.
- Make a Clean Offer
When putting in an offer on a condo in this market, you want to make the offer as clean as possible. In real estate terms, this means limiting the number of contingencies you put on the offer (and being mindful of any clauses that a seller places in the contract).
You’ll have to determine how much risk you’re willing to take on. And, if you’re using financing, you’ll have to see what your lender will allow you to do. In some markets, buyers are waiving appraisals and even inspections.
Be mindful of clauses that sellers may try to use. For example, some condo sellers will try to slip in something known as a “kick-out” clause. This is a provision in the contract that allows them to accept your contingent-based offer and still show the home to others in the hopes that they receive a non-contingent offer. In other words, if a cash buyer approaches them later with no contingencies, they can back out of your contract and proceed with the other one.
Again, this speaks to the importance of having a good team of professionals around you. An experienced real estate agent can ensure you’re making a good offer and will keep you informed on everything that’s in the contract.
- Study the HOA
With condos, the HOA must be carefully studied. These complexes often have strict rules and regulations on what you can do, what you can’t do, who is responsible for what, etc. For example, a certain percentage of units are usually required to be owner-occupied. And then there are rules on how big maintenance projects (like replacing the roof) are handled. If the HOA doesn’t have enough reserves, each owner could be hit with expensive assessments. Just make sure you’re in the know!
Adding it All Up
While the demand for condominiums is booming (like the rest of the real estate industry), there’s a little more room for buyers to breathe in this corner of the market. However, don’t be complacent in your search. Sellers still have most of the leverage and you’ll need to act quickly when you find a property that you like. Use these tips to get started!
