There are certain parts of the country where condos are an incredibly popular housing option. Some areas are tourist-centric. For example, if you want to buy a house in Daytona Beach, many of the available options are condos.
There are also condos in a lot of bigger cities and urban areas.
There are unique features of a lot of condos that you should know about before you decide to buy one, which we detail more about below.
1. What’s Considered a Condo?
A condominium also referred to as a condo, is a residential housing complex. There are separate units, and every unit is owned by an individual person. If someone rents a condo in one of these buildings, they’re renting from the owner of the condo.
A condo owner is responsible for what happens in their unit, including the repairs and maintenance. Condo owners are also usually required to pay fees to an association. The fees they pay are meant to be their contribution to the upkeep and maintenance required for the shared common areas and the complex exterior and to maintain any amenities.
2. Condo vs. An Apartment
The terms condo and apartment are sometimes used interchangeably, but there are pretty significant differences.
First, apartment buildings are usually owned by a property management company. A condo, as mentioned, is an individually owned unit. When someone lives in a condo, they aren’t answering to a property manager. Instead, there’s a condo association responsible for the collection of dues to cover the maintenance costs for common areas.
For apartments, any rules are set by the property manager, and every tenant has to follow the same ones for the most part. With a condo, the governing board of the condo association makes up the rules. The condo board consists of people who own units in the building or complex.
When you own a condo, you have to pay your mortgage and any condo or HOA fees, as well as property taxes. If you’re renting a condo from the owner, you may not feel like there’s a big price difference between it and an apartment, but if you’re renting a condo, what makes up your payments may be different. For example, your landlord might have included in your lease that you’re responsible for the association fees.
Community amenities in a condo can be similar to apartment complexes, such as pools or gyms.
3. Condos vs. Houses
A single-family home is a free-standing structure with no shared walls. Homeowners own the home itself and also the land it’s on.
Homeowners have more autonomy when they buy a house, but if they’re in a community with a homeowners’ association, there may be major limits on changes they can make.
Generally, a single-family home is more expensive than a condo, and they have more square footage.
4. Condo vs. a Townhouse
A townhouse is like a hybrid between a condo and a single-family home. Townhomes are houses with multiple stories, and they usually share walls but not below or above the actual unit.
Townhomes can have two types of owners in most circumstances. One is condo ownership, and the other is fee-simple ownership.
With condo ownership of a townhome, the responsibilities for the unit are similar to condos. You own the inside of your unit, and then your HOA covers the exterior and common areas. By contrast, if you have a fee-simple townhome that you own, you’re responsible for the land the property is on and the property itself.
A condo association will usually have stricter rules than one governing townhomes because townhomes don’t require as much maintenance.
Townhome communities don’t usually have amenities, although some may have pools or a playground area.
5. Types of Condos
There are two main types of condo categories. One is a freehold, and the other is a leasehold.
A freehold unit is one that the tenant outright owns. With a leasehold condo, the tenants have a contract with a landlord who owns it rather than owning the unit themselves.
A standard condo home is one where the owner owns the part of the building that makes up their home’s interior. A condo share is often vacation or second home. The tenants have the opportunity to use the condo for a certain number of days and at certain times every year.
A detached condo doesn’t have shared walls, and a private condo is owned by the landlord of the unit.
In a freehold condo development, there’s a developer who owns the land that the units sit on. Then, when a tenant buys the condo, ownership is transferred to them. In this situation, an owner is responsible for the upkeep of their unit, which includes the exterior walls, but the management will maintain the shared common areas.
6. Buying a Condo
When you’re buying a condo, if that’s what you ultimately decide on, you want to make sure you’re considering your lifestyle. There are downsides to condos, including the shared walls and living in such close proximity to neighbors.
You’ll want to work with a real estate agent who understands condos, so they’ll be able to guide you through important steps. For example, your agent should be able to go over and assess the condo association documents.
There are certain things that can negatively affect you if you own a condo that your agent needs to learn about, such as financial issues in the community or infrastructure problems.
You also need to know as much as you can about potential resale values.
If you’re buying a condo, getting a mortgage can be more complex than it is for other types of homes because the community itself will be scrutinized by lenders in addition to your finances.
Finally, working with a mortgage professional with experience in condo lending can help. The FHA has a list of approved condos on its site, and a conventional lender may require similar things to the FHA. If a condo isn’t FHA-approved, you might not be eligible for a conventional loan.