Is It Finally Time To Buy A Condo?

Written by Jaymi Naciri Posted On Wednesday, 03 August 2016 13:17

The popularity of condos has swelled and waned over the years, gaining popularity especially in areas where buyers may be priced out of the single-family home market and where high-density is the only way to go if you want to buy something new.

Despite their greater affordability, condos have been harder for buyers to get approved to purchase unless they had a large down payment. That's because the Federal Housing Administration (FHA), a popular source of loans for first-time buyers because they're (a) government-backed; (b) require as little as 3.5 percent down; and (c) are often a solution for buyers who have less than perfect credit, has historically only approved a small number of condos for their financing, leading the L.A. Times to previously call condos an "FHA no-lending zone."

But that may be changing with new legislation that just was just signed by the president.

"President Obama has signed H.R. 3700 - the "Housing Opportunity Through Modernization Act" into law. The National Association of REALTORS® (NAR) hailed the development as a ‘significant step' in eliminating barriers to safe, affordable mortgage credit for condos," said the NAR.

NAR has long been an advocate of the bill, testifying before Congress and lobbying for its passage. Additionally, nearly 140,000 REALTORS®across the country voiced their support for the legislation during the NAR call for action."

McCrimmon Home Team

Passed unanimously by Congress, the bill lowers "the owner occupancy requirement for condo complexes from 50 to 35 percent," said 10 News. "That means more condos could be purchased with a 3.5 percent down payment, well below the usual 10 or 20 percent requirement."

That's huge news for condo buyers who have experienced the frustration of searching for an affordable property only to be shut down by a lack of available inventory.

The FHA does have 90 days to devise their new rules on owner occupancy, "or the 35 percent owner occupancy rate goes into effect," said 10 News. In the meantime, let's take a look at some of the pros and cons of condo ownership.



No exterior maintenance. If you're looking for a lock-and-leave lifestyle, or if you just don't have a green thumb (guilty!), this is a huge bonus.


Somebody's gotta do that maintenance, which probably means you'll be paying a homeowners' association (HOA) fee.


If you have an HOA, you probably also have some amenities in the community, like a pool or gym, that you may not have in a single-family home.


You still have to pay for the amenities even if you don't use them. And HOA fees are not tax deductible.

Emerald Coast Realty


But if you do use them, you might meet some neighbors, which could make living in your condo even more enjoyable. Sometimes, close quarters create great bonds.


And sometimes close quarters just translates to lots of noise. In a condo, you'll typically be sharing at least one wall, and probably at least one floor as well. For some, privacy may be one of the downsides of condo ownership. Those who are buying for the first time, moving down, or simply looking to own something of their own at the lowest possible price might not mind so much. Still, the idea of going from an apartment to something that still feels like one can be disconcerting.


Even with the drawbacks, a condo you buy is still something you own, and the benefits of owning real estate are many - like pride of ownership, to start, not to mention the tax benefits. If you've never owned property before, you'll love being able to write off your mortgage interest, which, on average, is about $1,900 a year in savings, said MarketWatch, plus any points on your mortgage, property taxes, and private mortgage insurance, which you'll need if you're putting less than 20 percent down.


Even if the new law results in greater availability of condos, making them more attractive and more viable to buyers, condos are still traditionally more difficult to sell than single-family homes. "Condos can be difficult to sell. Why? Well, they pretty much all look the same," said Money Crashers. "If there are empty units in your building, those are likely going to sell first. And if there are a lot of empty units…good luck. Also, Condominiums often appreciate in value much slower than single-family homes. This is because you don't own any land, which is the biggest driver for appreciation. Instead, you only own the living space. There's a big difference."



If you're in an area where single-family homes are out of reach for many or most buyers and condos are your one shot at homeownership, you might not care that it could be harder to sell some day. And, it might not even be an issue in your area. Your Realtor should be able to advise you on neighborhoods that are best buys.

Also, newer condo units that vary the exteriors to look more like a village may avoid the "everything's the same" problem.


You could have to pay an assessment. "Assessment is the bad word of any planned community" because it means money out of your pocket.

"Every month, a portion of your condo fees goes into the development's reserves," said US News. "That's where the condo association gets the money to fund occasional projects, such as repainting the building's exterior. If an expense can't be delayed - let's say a pipe burst and there isn't enough in the reserve to cover repairs - condo owners could be asked to pay an assessment, which can range from a minor pittance to thousands of dollars."

You can help avoid any potential issues by doing your due diligence upfront.

"Before buying your condo, you should request and read the documents that apply to the management of the complex," said Investopedia. "What are the hot issues for this complex? How big is the condominium's reserve fund? You need to get a sense of whether the condominium you are considering is well run, whether the rules and restrictions would allow you live the lifestyle you're seeking and whether the building/complex is experiencing any problems that could hurt the value of your share of ownership in the future."

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