Buying a condo or town home is a lot like buying a share in a closely held, publicly-traded, non-profit real estate holding corporation -- run by volunteers.

You don't just buy a home, you also enter a partnership and, in any business, surprises can cost you.

That's why you need the Community Association Institute's (CAI) "Community Matters -- What You Should Know Before You Buy," a brochure that provides some insight on the lifestyle.

"Most people are very satisfied living in community associations, but issues can and do arise. The more you know, the more likely you'll enjoy your new home and community" says Tom Skiba, CAI's chief executive officer.

Condos and town homes, often a given market's more affordable owner-occupied housing choice, are home to more than 54 million Americans and an estimated 274,000 homeowner and condominium associations, cooperatives and other planned communities.

Condominiums, town homes and even some newer higher-density, single-family home communities are developed along the lines of a common interest -- you own everything in your unit, at least everything on your side of the walls. You are a shareholder in the remainder of the buildings, grounds and other facilities. As a shareholder, you are a mandatory, dues-paying member of the community or homeowner association (HOA), the organization responsible for the upkeep and care of buildings and grounds.

Under the guidance of a board of directors (comprised of volunteers from among the development's owners), one of the association's primary responsibilities is managing the dues and other money collected to fund the operating budget of hundreds of thousands of dollars. Budget monies are dispersed for repairs and the upkeep of common area components -- the condo buildings, other structures, landscaping, walkways, paving, swimming pools, decks, etc., as well as for other operating expenses.

Community associations deliver or finance services that were once the exclusive province of the local government, including trash pickup, street lighting, snow removal and street cleaning, to name but a few. The privatization of services has become more and more common as the demand for housing has out paced the ability of some local governments to provide services. The higher-density model also allows builders to pass on costs saved to buyers.

But there are rules.

Lots of them.

If you want a pink house, need to air dry your clothes, plan to add on a room or would like to park a small yacht in your drive way, you may want to reconsider buying a condo or townhome.

Here are some additional tips from "Community Matters."

• Condos have become a hit with speculators and investors, who want to realize a return on their investment now and vacation and or retire there later. However, all HOA-governed developments don't allow short-term rentals. Examine the governing documents (Covenents, Conditions & Restrictions) for rental rules. Even if the development allows short term rentals, your tenants must also abide by the rules and regulations, which you must make sure they know.

• Another market trend, condo conversions, comes with a red flag too. Appearances can be misleading. Old buildings are old buildings. A restored lobby does not necessarily mean that the heating system, elevators and roof have been replaced, upgraded or otherwise made new.

• Know how your property will sell -- before you buy. The community association manager or officers can tell you if there are any unresolved issues pertaining to a property that might affect its resale -- delinquent assessments, unapproved architectural changes, etc.

• When it comes to remodeling, your home is almost always not your castle to improve. Learn about the HOA's architectural guidelines in terms of what you can and can't do even to the interior of your home to make it more suitable for your needs and tastes. Often you are limited to only cosmetic changes, upgrades and floor and window coverings. Changing the floor plan could be difficult if not impossible.

• In addition to your monthly mortgage, insurance, property taxes and HOA dues you could be assessed for unexpected costs incurred by the community and you need to know how much you can be assessed compared to how much your household budget can bear. Learn the circumstances under which assessments occur, determine how often they can appear, what assessments can cover, and what will happen if you are delinquent.

"There are many benefits, and various attractions and amenities depending on the community, but there are also obligations and rules. It's important that home buyers understand the nature of community association living," said Skiba.

For more HOA information, click here.

Published: June 21, 2005

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.