How to turn that owning-a-pad dream into a owning-a-pad reality
By Audrey Fine
Buying a home is, of course, one of the most significant decisions you'll ever make — there aren't take-backs once the contracts are signed. So like it or not, you have to do a ton of research and preparation to figure out what you truly want.
And if you think you're done with renting but have no interest in mowing the lawn or fixing the roof, a condo may be the way to go. Ideally, a condo that also has a pool, a gym, and a favorable male-to-female ratio. Here's an idea of what you'd need to do to make it happen.
Step One: Find a real-estate agent
You want an estate agent who knows the market and has experience representing condo owners. Just because a guy's face is on a bus stop does not mean he's the best choice. Depending on your state's laws and/or your level of comfort analyzing contracts and financial statements, you may also need (or want) an attorney to counsel you along the way.
Don't choose a real estate agent because she's hot or he's on your softball team. You'll get caught up in trying to impress her/him, be self-conscious about your budget, and wind up wasting time looking at units you can't afford or aren't interested in.
Step Two: Find a lender
Because of the housing market collapse and the subprime mortgage crisis, buying a condominium in today's world is kind of like going to South Beach with your mom: There are lots of very attractive, very accessible options out there, but your game is going to be compromised.
Before hitting the streets with your agent, you need to know exactly what you can afford. There's no point wasting your time viewing luxury units (and picturing yourself living in them) only to find out later that your budget is less-than-"Cribs." You want to love your new place, not complain about how much better it could be.
Talking to one or more lenders will provide you with the opportunity to:
1) Ballpark the maximum mortgage you will qualify for; note that the prequalifying for a mortgage does not guarantee that a lender will ultimately grant you the loan
2) Discuss different mortgage options and their potential impact on your condo search. For example, Fannie Mae and Freddie Mac have adopted more stringent requirements for condominium mortgages and mortgage rates, which might impact your ability to buy in certain developments.
Step Three: Assess the field
Even if you think you know where you want to buy, check out units in a few different developments. Walk around each property. Does the place look like it's maintained well? Does it have all the amenities you want? How's the soundproofing in the unit? (Pro tip: to minimize condo-to-condo sound issues, try the bottom or top floors of a development.) Water pressure? Storage?
Ask your agent for a market analysis (sometimes called comps) of the places you've visited. How do the prices match up? Compare the different home-owners' association (HOA) dues. Are the elements that are being ascribed value things that you actually care about? Remember, your HOA dues will be in addition to your monthly mortgage payment.
Step Four: Learn the rules
You've chosen a development and a unit. Now what?
Request and review the HOA bylaws (and all amendments) and the minutes of the last few meetings of the HOA. This due diligence is crucial. The bylaws will govern what you can and can't do with your condo — from whether you can have a pet, to whether you can wash your car in your driveway, to whether you can rent out your condo to someone else.
Read the minutes to get a feel for whether there are any recent issues or debates. Check to see if there's any pending litigation to which the HOA is a party. (Meaning, is your condo association getting sued?)
Talk to people who live in the development and ask about management: Are they responsive? How quickly/well-done are repairs? Take note of how willing people are to discuss management. If they avoid your questions that could be a sign that there is dirt they aren't sharing.
Step Five: Run the financials
Losses incurred by a development's HOA are ultimately borne by the homeowners as increased costs or assessments, possibly triggering a domino effect of foreclosures, losses, and even higher costs. You (and your lender) want to see evidence that you are buying into a stable, well-run property.
You definitely want a lawyer to review financial documents relating to the HOA. Again, you're trying to get a fix on the financial health of the development as a way of minimizing your exposure to risk. Some things to look for:
Are all homeowners current with their dues payments? Have dues significantly increased in recent years?
How many assessments (lump sum fees paid by homeowners in addition to dues) have there been in the last 10 years?
What percentage of the units are occupied by renters? (High renter occupancy is not attractive to lenders.)
Do expenses exceed revenues? If they do, the HOA has had (or will have) to make up the difference through assessments, tapping the reserve fund, limiting accessibility to amenities, and/or cutting back on maintenance.
What does the HOA's master insurance policy cover? Does the budget reflect adequate reserves for the insurance deductible? NOTE: If the master policy does not cover the interior of your unit you would be wise (and your lender may require you) to get homeowner's insurance.
By Audrey Fine
Buying a home is, of course, one of the most significant decisions you'll ever make — there aren't take-backs once the contracts are signed. So like it or not, you have to do a ton of research and preparation to figure out what you truly want.
And if you think you're done with renting but have no interest in mowing the lawn or fixing the roof, a condo may be the way to go. Ideally, a condo that also has a pool, a gym, and a favorable male-to-female ratio. Here's an idea of what you'd need to do to make it happen.
Step One: Find a real-estate agent
You want an estate agent who knows the market and has experience representing condo owners. Just because a guy's face is on a bus stop does not mean he's the best choice. Depending on your state's laws and/or your level of comfort analyzing contracts and financial statements, you may also need (or want) an attorney to counsel you along the way.
Don't choose a real estate agent because she's hot or he's on your softball team. You'll get caught up in trying to impress her/him, be self-conscious about your budget, and wind up wasting time looking at units you can't afford or aren't interested in.
Step Two: Find a lender
Because of the housing market collapse and the subprime mortgage crisis, buying a condominium in today's world is kind of like going to South Beach with your mom: There are lots of very attractive, very accessible options out there, but your game is going to be compromised.
Before hitting the streets with your agent, you need to know exactly what you can afford. There's no point wasting your time viewing luxury units (and picturing yourself living in them) only to find out later that your budget is less-than-"Cribs." You want to love your new place, not complain about how much better it could be.
Talking to one or more lenders will provide you with the opportunity to:
1) Ballpark the maximum mortgage you will qualify for; note that the prequalifying for a mortgage does not guarantee that a lender will ultimately grant you the loan
2) Discuss different mortgage options and their potential impact on your condo search. For example, Fannie Mae and Freddie Mac have adopted more stringent requirements for condominium mortgages and mortgage rates, which might impact your ability to buy in certain developments.
Step Three: Assess the field
Even if you think you know where you want to buy, check out units in a few different developments. Walk around each property. Does the place look like it's maintained well? Does it have all the amenities you want? How's the soundproofing in the unit? (Pro tip: to minimize condo-to-condo sound issues, try the bottom or top floors of a development.) Water pressure? Storage?
Ask your agent for a market analysis (sometimes called comps) of the places you've visited. How do the prices match up? Compare the different home-owners' association (HOA) dues. Are the elements that are being ascribed value things that you actually care about? Remember, your HOA dues will be in addition to your monthly mortgage payment.
Step Four: Learn the rules
You've chosen a development and a unit. Now what?
Request and review the HOA bylaws (and all amendments) and the minutes of the last few meetings of the HOA. This due diligence is crucial. The bylaws will govern what you can and can't do with your condo — from whether you can have a pet, to whether you can wash your car in your driveway, to whether you can rent out your condo to someone else.
Read the minutes to get a feel for whether there are any recent issues or debates. Check to see if there's any pending litigation to which the HOA is a party. (Meaning, is your condo association getting sued?)
Talk to people who live in the development and ask about management: Are they responsive? How quickly/well-done are repairs? Take note of how willing people are to discuss management. If they avoid your questions that could be a sign that there is dirt they aren't sharing.
Step Five: Run the financials
Losses incurred by a development's HOA are ultimately borne by the homeowners as increased costs or assessments, possibly triggering a domino effect of foreclosures, losses, and even higher costs. You (and your lender) want to see evidence that you are buying into a stable, well-run property.
You definitely want a lawyer to review financial documents relating to the HOA. Again, you're trying to get a fix on the financial health of the development as a way of minimizing your exposure to risk. Some things to look for:
Are all homeowners current with their dues payments? Have dues significantly increased in recent years?
How many assessments (lump sum fees paid by homeowners in addition to dues) have there been in the last 10 years?
What percentage of the units are occupied by renters? (High renter occupancy is not attractive to lenders.)
Do expenses exceed revenues? If they do, the HOA has had (or will have) to make up the difference through assessments, tapping the reserve fund, limiting accessibility to amenities, and/or cutting back on maintenance.
What does the HOA's master insurance policy cover? Does the budget reflect adequate reserves for the insurance deductible? NOTE: If the master policy does not cover the interior of your unit you would be wise (and your lender may require you) to get homeowner's insurance.
