Purchasing a condo or Townhome can be a great decision in home ownership but you need to do your homework first. Be aware of these three pitfalls in order to you make a sound investment while enjoying the benefits and rewards of living the simple life.
There are lots of reasons people buy condos and townhomes, but there can be pitfalls you need to avoid if you’re going to be successful. In this article, I will discuss some of the most common issues that pop up in condo transactions and how you can avoid them to get the deal closed.
This is a big one, especially since the market crashed. Distressed sales — foreclosures and short sales — continue to surface in many condo buildings. And if someone isn’t paying the mortgage, the condo dues are probably being neglected as well.
Herein lies the problem: The buildings run on the assumption that they will get a fixed amount from each unit owner on a monthly basis to keep the building running. When the building’s association doesn’t have enough money to pay its bills, they need to raise additional funds by either increasing monthly assessments or leveling special assessments. The problem with this, however, is that it may push other unit owners who were on the verge of default into default because they can’t meet the additional financial obligations. It’s a vicious cycle.
Rental and Lending Issues
Another major problem buyers face purchasing a condo is that things can affect the property value over which you have no control. An example is the percentage of rentals in a building and its relation to, financial issues.
If too many people in the building are upside-down on their mortgage and cannot sell, then they may consider renting their units as an alternative. But if too many people in the building are allowed to rent — usually 50 percent of the total units — the vast majority of lending programs will not approve the allowing the current owners to rent out the unit. It’s a double-edged sword.
The last pitfall you’ll want to avoid is building issues. Unfortunately, as with all professions, there are good and bad builders. A major problem we’re seeing in the marketplace is that some buildings were built poorly, and thus have problems that are either ongoing or just surfacing.
There were a lot of sub-par condos put up during the boom time, and even if the unit looks wonderful from the inside, there can be danger lurking just outside — or even in between the walls. Mold, substandard construction practices, and massive city code violations are just some of the problems that I’ve heard about in the news lately, and I’m talking about some of the premier buildings in my market of uptown and downtown Dallas. Certainly not what you’d expect!
How We Help Our Clients
Condos and Townhomes are wonderful dwellings for many reasons and can provide a lifestyle that is free and enjoyable. We take the time to identify the pitfalls, make a plan, and stay organized to ensure that your best interests are protected and that you feel confident that you are associated with a firm having the expertise within our community. Of course, there’s no way to guarantee anything, but we as experts owe it to you to create the best scenario to mitigate risk and ensure you have made as sound an investment as possible.