Latest Statistics on the Changing Condo Market

By Dian Hymer

Not too many years ago, buying a condo was considered a compromise move. Condos are more affordable, particularly for first-time buyers who have a tough time breaking into the housing market. Until recently the cheap entry fee entitled you to apartment-style living, no yard to call your own and lackluster appreciation-not an attractive package to most home buyers.

This may be changing. According to the National Association of Realtors (NAR), condo appreciation outpaced single-family home price appreciation in the first half of 2002. During the second quarter, the median price of single-family homes rose 7.4 percent compared to the second quarter, 2001. The median price of condos rose an impressive 14.7 percent. NAR expects condos to set a sales volume record in 2002.

Statistically, condos are looking like a better investment in some areas and for some home buyers. But, not all condos appreciate at the same rate. To ensure that you make a good investment, consider the following before you buy.

Condo Hunting Tip: Look for a condo that's in a development that has a high ratio of owner-occupants to renters. Some lenders won't lend on condos that have a high rate of absentee ownership. Also, owner occupants tend to be more concerned about keeping things going well in the development.

When you purchase a condo or townhouse, you obtain exclusive ownership rights to the interior space of your particular unit. But, you also own common areas-grounds, fences, shared walls and facilities-with the other homeowners.

You automatically become a part of a homeowner's association to which you pay dues. The dues cover the cost of maintaining and insuring the common areas. Precisely what the homeowner's dues cover will vary from one complex to the next, so find out exactly what's covered before you buy.

The homeowner's dues may help fund a reserve account to cover major expenses, like refurbishing common areas or replacing an elevator. Make sure to check a current financial statement for the association. If the reserve account isn't flush enough to cover unanticipated expenses, the individual homeowner's could be accessed an additional amount to cover the expense. This will add to your cost of ownership.

Find out if the dues have increased over time and by how much. Also find out if additional assessments have been levied against the homeowner's in the past. Be aware that with new projects, the dues may be subject to change in the future.

Condos are governed by CC&Rs (Covenants, Conditions and Restrictions), which restrict your ownership rights. For instance, the CC&Rs might include remodeling restrictions. If you only want to buy the condo if you can modify it in a way that's not permitted, you should consider buying elsewhere. Some condos prohibit pets. And some have parking, storage and renting restrictions.

Read and understand the CC&Rs and any other pertinent governing documents before you complete a purchase. Some CC&Rs are hard to read. If you feel overwhelmed by them, hire an attorney with condo expertise to review and interpret the regulations for you.

It's usually best to avoid buying into a condo complex where the homeowner's association is involved in litigation. To find out if there are any other association issues that you might want to avoid, read copies of the minutes from recent homeowner's association meetings.

The Closing: One of the best ways to get the straight scoop on a condo project is to talk with some of the current residents. Find out what they like and what they don't like about living there before you decide to buy.

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