Condos are a great choice for buyers who want a low-maintenance home. Many newer complexes offer popular amenities such as on-site gyms, concierge services, picnic and pool areas and covered parking. Condo living remains a very popular option for buyers at a variety of price points. Read more about the pros and cons of condo living.
Some condo owners have concerns when it comes to resale. As a real estate agent, I’m often asked if selling a condo is harder than selling a single-family home. So, what’s the deal? As with a lot of things, the truth is it depends.
First, your condo is only as good as your Homeowners’ Association or HOA. HOAs typically charge each unit a monthly fee for being part of that association, which usually covers maintenance for the exterior and common areas, a master insurance policy for the building, landscaping, trash removal and any other building amenities. The fee may cover monthly utilities such as water and electric, as well.
Buyers factor in that monthly fee when deciding what property to buy. It may be harder to sell a condo in a building with a much higher HOA fee than similar buildings in the area. But while a low fee may seem like the best deal for buyers, it’s important that the HOA has enough funds to keep up with the property.
In addition to maintaining the community, each HOA is responsible for maintaining a savings account, called reserves for the building or complex. These reserves are used to cover operating expenses as well as fund special projects, such as repainting, replacing the roof or updating the building’s HVAC system.
Why is this important? If your association doesn’t have enough in reserves and a major expense arises, the association has the right to vote on and authorize a special assessment. During a special assessment, each condo owner is required to pay a specific amount in order to raise the needed money for that repair. If your HOA does not have sufficient reserves and the complex needs an unexpected, expensive repair, the owners are left holding the bag. If there is a special assessment due when you are selling your condo, the buyer may expect you to pay for it. Or they may decide to move on to another property altogether.
When it’s time to sell, the person who is going to purchase your condo will most likely need to get a loan. The buyer’s lender will review the HOA documents and the buyer and lender will look over the association’s financial records, any pending lawsuits and the percentage of owner occupants versus renters. All of these numbers are extremely important.
If the lender finds the HOA reserves are insufficient or if there is potential or pending litigation against the HOA, the lender may decline the loan. Some mortgages have rental cap requirements, and will not lend in buildings with a large ratio of renters versus owner-occupants.
In essence, if your HOA is not in good shape, lenders may choose not to lend on your building. If that is the case, only cash buyers will be able to purchase your property, severely limiting your pool of buyers.
In general, the pool of buyers for a condo is different that the pool of buyers looking for a single family home. Depending on where you live, the pool of interested buyers may be large or it may be quite limited. Having an understanding of the type of housing that is most popular in your neighborhood is a good start. Even in places where there are fewer buyers interested in condos, don’t fret. Condos continue to be an attractive option for many busy professionals, first-time buyers, investors, empty nesters and downsizers.
If you’re a condo owner, the best way to make sure your property is marketable is to stay up to speed on your association. Don’t be afraid to join the board, voice your opinion and get involved! After all, a strong HOA can not only make your condo living experience better, but also make things easier for you when it comes time to sell.
