There are plenty of bargains on real estate these days even on condos. Buying a condo is a little different from buying other types of real estate. There is a more home work and due diligence involved. After a buyers make an offer on a condo they receive a pile of documents to review including financial records for the association. In Minnesota buyers have a ten day rescission period. What that means is that they have ten days to look the documents over and if they don't like the association rules or anything about the association they can cancel the purchase with no penalty.
Some buyers don't look these papers over very carefully and these days we need to do a little digging that goes beyond these documents.
It is important to know if the association has some reserves. They need to have more money than it takes to pay the monthly bills. When something breaks and the association doesn't have enough money to have it repaired each owner is assessed for the repair to pay for it. Condo buildings need maintenance just like a home does. There is no escaping it.
Some condo associations are broke because of foreclosures in the building. Once a bank owns a unit they have to pay the monthly association dues but owners who can not make their mortgage payments will sometimes go for months without paying their dues and the money has to come from some place. It is important to know how many condos in the building are in foreclosure or are being sold as short sales and how many owners are paying their association dues.
Getting financing for a condo is can be a challenge. Not all condo buildings are approved for FHA financing and now we have some buildings where getting financing of any kind is almost impossible because of the low owner occupancy rate in the building. The units in these buildings are often priced very low and buyers use cash to purchase them.
There are condo buildings that are in excellent financial shape with reserves and few distressed units in the building but there are also some that are broke. Please review the financial documents carefully. The Minnesota condo resale certificate will have the phone number for the association and the person listed should be able to answer any questions and provide more information if needed.
See Lofts, Condos & Townhouses for related articles.
Has there been a difference in sales of single family homes compared to condos in the last 2 years?
The suggestions that you make are so easy to overlook once you bond with the condo of your dreams. Excellent points to remember. Thank you.
Kelly – yes there is an emotional component to buying real estate. Buyers need to remain detached. Your two year question is kind of vague. I can say that condo sales have been slower than home sales in general during the last several years.
Hi Teresa,
One of the biggest problems with condos in our area was that during the boom that was really the only type of property that was overbuilt. Now we’ve got a ton of high-end condos – like the Ritz Carlton of White Plains that have yet to reach 50% residency. Builders won’t lower their prices, but the scary thing is that if the builder ends up in financial trouble and still owns half a building???? Shudder!
So how cheap can cheap get, for something that is in a reasonably safe neighborhood?