Buying a condo is not the same as buying a single family residence.
There are many considerations that should be taken into account prior to making the decision to buy a Philly condo. We’ll assume that you have already decided that condo living is the right fit for you.
Just like purchasing a single family home it’s critical to get pre-approved prior to starting your search. Obtaining a mortgage can be tricky as many lenders do not offer financing for condos. If you were planning to use an FHA loan in Philly you’re mostly out of luck, as there is a very small list of FHA qualified condominiums. The good news is a number of small local banks do offer financing with as little as 5% down.
Homeowners Association (HOA) Fees and What They Include:
HOA fees are an expense in addition to the mortgage expenses and are usually paid monthly directly to the association. You should know exactly what the fees include and if any exclusions apply. The basic inclusions usually are common area insurance, common area maintenance, snow removal, trash removal, water, and sewer. A very important term to understand is common area and what is included. Will you pay for repair and maintenance or is it the condo associations responsibility?
Rules of the HOA:
It is important to understand that unlike a single family home, you cannot make your own rules and do whatever you want. The rules are for the good of the community and cover such items as pets, renting your unit out, maintenance, improvements and the like. Some condo buildings have only basic rules while others have extensive restrictions. Obviously good to know before you buy.
Sometimes major repairs to the building are needed that surpass the amount of money in the reserve fund. A special assessment is a one time fee that covers this cost. This fee is divided among the owners, usually paid monthly for a specific period of time and is a short term expenditure. Special assessments are usually planned out and known ahead of time. So good to ask if any planned special assessments are in the works.
The Reserve Fund:
How much money is in the reserve fund? This is important as it establishes the financial health of the association. The healthier the reserve fund the less likely you’ll get stuck with a special assessment. A general rule is the reserve fund should contain 10% of the annual revenue budget if the complex is under ten years old. If the condo is older than ten years, the budget should be closer to 25%.
Management Company or Self-Managed Condo:
Some condos are run by professional management companies and others are run by the homeowner’s association itself. You should find out which is the case before your purchase, knowing who maintains the property and collects the dues is very important. If you have questions regarding the community rules, regulations, or fees ask the management company or the head of the homeowners association. There are pros and cons to both, the greater the number of units the more likely that it’s professionally managed.
Lawsuits Against the Condo Complex:
Yet another important questions to ask before buying that condo. You should make sure there are no pending lawsuits which could impact you financially down the road. There can be lawsuits from owners against the association or home owners can have a lawsuit going against the developer. Sometimes they are frivolous but it is always good to know about them before making any purchase decision.