What the First-Time Condo Buyer Needs to Know 

Everyone knows that there’s a big difference between renting an apartment and buying a house. But not everyone realizes that buying a condo is significantly different from buying a single-family home. There are many good reasons to want to live in a condominium, but the buying process can be a minefield of potential disasters to the unprepared.

While most buyers are clear about the upside of condo life – a vibrant location, little maintenance, convenience to work, shopping, restaurants, services, transportation and entertainment – it also can have a downside. Condo owners may be asked to sacrifice some privacy and autonomy, tolerate more noise, and pay close attention to their condo board and the community’s management company.

The way to avoid problems is to do some research and avoid making an impulsive buying decision. Start with a visit. Visit during the evening, when neighbors are at home, to get a better feel for the noise levels. If the unit above you will have hardwood floors, have the manager arrange to have someone walk around normally so you can hear what it sounds like. Visiting in the evening also means you may have a chance to speak with current residents.

For those considering condos that are under construction, ask about soundproofing, or any requirement for carpeting or rugs. If a particular condo unit is near an amenity such as a pool or party room, consider the added noise factor.

Aside from noise, which is one of the most frequent irritants for new condo residents, there often are issues concerning assigned and guest parking, storage space, limitations on pets, satellite dishes, and the ability to rent or sell the unit, and the amount of money the condo board should have in reserve for maintenance and replacement.

Make sure you have an attorney review all the condo documents, which will be quite substantial. While most of it is generic, the 10 percent that isn’t is where the problems hide, especially in older buildings. Paying for a few hours of a lawyer’s time is much less expensive than litigation later.

Insurance is one issue the condo purchase documents should address. Most buildings have an umbrella policy, but buyers need to know what is covered and what isn’t, to determine the amount and type of coverage they’ll need.

Buyers in older buildings should hire a home inspector, and insist that the inspector read and review the building’s Engineer’s Report. That describes the life expectancy of the roof and major systems, and gives the buyer a clue as to when condo owners are likely to need costly replacements. By comparing those estimates with estimated condo fee payments, buyers can see if the condo board has planned for sufficient reserves to replace systems without levying large assessments on the owners.

Finally, condo loans are regulated differently from other loans. Some loans, especially on units converted from apartments, may not be eligible to be resold on the secondary market. An agent who specializes in condo sales and has experience with lenders will know what questions to ask.

The policies that cover when and whether owners can rent their condos to others also are in the condo documents. It used to be standard that only 25 percent of a building can be rented at any time. But recently, large banks have allowed as many 75 percent of a building’s units to be investor-owned and rented.

Some lenders won’t allow a buyer to go to closing until a certain percentage of a building’s units are sold. This can cause problems for a buyer who has sold a home to buy a condo and has a move-out deadline, but may not be able to move in on time because sales have been slow.

Buyers who’ve done their homework can avoid such problems. Smart buyers – whether young professionals or empty-nesters – will be able to enjoy all the good things about their new lifestyle from the day they move in.

This article has been provided by the Metropolitan Builders Association, a non-profit and non-partisan association which represents the building industry in the metropolitan Milwaukee area, as part of National Homeownership month in June. Information for this article was provided by Condo Lane, the condominium arm of a nationwide multifamily builder. The MBA develops and offers education for consumers as well as members. By establishing business ethics and industry standards, the MBA has earned a reputation as a trusted resource. Consumers enjoy our promotions for housing and housing products, while members take part in our professional and social activities throughout the year.