Craving a condo? Follow these buying dos and don’ts
If buying a condo is on your 2017 bucket list, be savvy.
“The condo market has historically been more volatile than the market for detached single-family homes. That’s why it’s important to think about your time horizon when buying a condo,” said Aaron Terrazas, a senior economist for Zillow, which tracks real estate markets throughout the country.
Many homebuyers are drawn to condo ownership by the simplicity and convenience of living in a building where most upkeep is handled by a maintenance staff. But real estate experts urge condo buyers to carefully select a unit with strong resale value, especially if they don’t plan to hold the condo for long, or their living situation necessitates a need for more space or a major relocation in the near future.
Before making a purchase, consider these pointers:
Use both objective and subjective measures to judge any condo complex. Your emotional reaction can serve as a key litmus test for condo buildings. But don’t neglect the numbers. Partner with your real estate agent to search out data that helps you analyze the pros and cons of buying in a particular building.
“Look at the resale history for the building going back for as long as four years. Notice especially the median number of days that it takes to sell units in the building. The more days it typically takes to go from list to sell, the less liquid the building,” said Fred Meyer, a longtime real estate broker and appraiser.
He also urged that you check the reserves of the building — the amount of money owners there have set aside for key repairs and renovations.
“If the building needs a new roof and there’s no money available for this, all the owners could be hit with a big special assessment. A poorly financed building can become run-down, making it less desirable for future owners,” Meyer said.
Avoid buying in a building with rock-bottom condo fees. Nearly all condo buildings impose fees on residents. Among other expenses, these monthly charges cover the cost of routine upkeep on a building and its grounds, along with support services, like a concierge at the front entrance.
Tom Early, a real estate broker and past president of the National Association of Exclusive Buyer Agents, said condo buyers sometimes shop for a building with the lowest possible monthly fees to help curtail their expenditures. But seeking out a building with rock-bottom fees could be a mistake.
“Nearly always, you get only what you pay for in condo fees. A building with surprisingly low fees might actually decline in value, due to poor maintenance. That could make your unit hard to sell in the future,” he said.
Seek an area with a strong employment base. Meyer said the vitality of a local real estate market is usually closely linked to the employment strength of the area. But he noted that condo buyers shouldn’t count on a single employer to keep the local economy afloat.
“You don’t want to buy in a ‘one big company’ town that would be badly hurt if that single employer closes,” he said.
How can you investigate the strength of the local economy?
“If you want to get sophisticated in your research, go to the offices of the Chamber of Commerce and ask them what’s happening to jobs in the area,” Meyer said.
By avoiding an economically depressed area, you not only enhance your chances of owning a salable condo, you also increase the likelihood of living in a vibrant, thriving area.
Steer clear of a building with a high proportion of renters. Homebuyer advocates are wary of buildings in which a large percentage of the units have been rented out by their owners.
“Owner-occupants feel a natural pressure to ensure that a building is adequately maintained and has plenty of money set aside in reserves for future repairs and improvements. Renters feel no such natural pressure,” Meyer said.
What percentage of owner-occupants is sufficient? That depends on the location of the building. In most cases, Meyer said you’ll want to see more than half the units occupied by owners. However, this rule may not hold in a resort community where seasonal rentals are the norm.
Even though it’s not wise to choose a building with a large number of renters, Meyer said it’s also important to avoid a building that prohibits owners from renting out their units should they wish to do so.
Shop wisely for the right unit within a condo building. Even in the ideal building, not all apartments are created equal.
It’s usually unwise to buy one of the most expensive condos in a building, according to Meyer.
“Buying one of the least expensive condos in a building with much larger and fancier units will help hold up the value of your property over time. That means in the future you’ll probably be able to sell more quickly and for more money. In real estate, you always want progression in values rather than regression,” he said.
Make sure you love the condo you’re buying. Statistics yield a lot of information about the desirability of a condo building. But pay close attention to your emotional response — for your own sake, and future salability.
“Make sure you really love the condo with both heart and soul,” Meyer said. “If you love it wholeheartedly, chances are good others will love it too.”
Located on Chicago’s north side, this home offers modernity, novelty and proximity to downtown.