Financial Answer Center

Are you looking for the joys and possible financial benefits of home ownership, but dread the idea of mowing the lawn, keeping up the garden, and shoveling snow? Perhaps your choice is to live in the city. Or your budget limits the amount you can afford to spend on your home. In any of these cases, you may be looking at a condominium or townhouse as a more appropriate choice rather than a detached home.

A "condominium" is legal terminology for a form of ownership and does not specifically refer to any type of building or structure. In a condominium arrangement, you as the purchaser of an individual "condo" unit also own a proportional interest in the land, grounds and common area of the development.

IMPORTANT NOTE: When analyzing your monthly costs, don't forget the homeowner's assessment. A condo association will charge each owner their proportionate share of the development's operating expenses. This charge is in addition to your mortgage, homeowner's insurance, maintenance, repairs and decorating expenses on the interior of your unit.

Checklist: Condo Considerations

A condo purchase may either suit your lifestyle tastes or be financially affordable for you. Either way, the development you choose is crucial to a successful decision. Buying a condo forces you into community living and, for that reason, it is important that the community you select be the right one for you.

• Is the area convenient?
• Are the grounds well kept?
• Are recreational facilities available?
• Is the development located close to shopping and transportation?
• How do resale prices on units compare with their original prices?
• Do the condo association reserves appear sufficient?
• Is there an oversupply of condo units in the immediate area?
• Are the majority of units owner-occupied or are they rented by investors?
• Are there severe restrictions on what you can do (improvements, decorating, etc.) with your unit?
• Are heavy unit sales within the development routine?
• What are your rights and responsibilities under the association agreement?

SUGGESTION: Getting the answers you need can be a matter of looking in the right places. Documents you and your lawyer will want to look over carefully: The master deed (or declaration), the bylaws and house rules, your sales contract, the association operating budget, financial statements and analysis of reserves and assessments.

Buying a condominium or townhouse means you'll buy either new construction, a resale unit in an existing development, or a unit in an older apartment building that is being renovated and converted to condominium ownership. Each type has its own considerations for you as the buyer. Here's your action list:

A New Development: Read the section on new homes. Your considerations on quality and builder reputation are the same for a condo as for a detached home in a new development. Pay particular attention to wall thickness and quality. Your neighbors are a lot closer in a condominium development.

A Resale Unit: Make sure the unit has no outstanding assessments against it. These are bills the homeowner's association passes on to each individual unit owner for major repairs that benefit the entire complex. You will be buying those along with the unit when title passes to you. Inquire as to any documentation the original purchaser got when they bought the unit. Make sure you get it too. Since the development has probably been around for a while, the financial condition of the association and any possible future assessments takes on importance for you. Ask questions.

A Conversion: You are most likely looking at an older building that has undergone a major renovation. Get a copy of the engineering report. Make sure everything has been done according to code and that information is provided regarding remaining useful lives on expensive building components. If it looks as though some expensive upgrading will be needed in the near future, steer clear. The cost of that upgrade will be passed on to you.