Discovering Hidden Fee's In Your New Condo Purchase

 The condominium market was one of the real estate groups hit hardest by the recession.  While single family home prices fell around 22% throughout 2007 to 2010, condo's saw their value dropped 24%, but the good news is that the condo market is on the rebound.  Still, you should take the time to do your research before you consider purchasing any properties.  

So how exactly do condo's and single family homes differ?

Riskier Federal Housing Administration Loans

In 2009, the Federal Housing Administration (or FHA) announced some changes to their loan policy when it comes to condos.  

They will now only insure loans in existing condo developments where at least 50% of the units are owner occupied.  

In a new development that number drops to 30% of the units needing to be sold (not neccesariy occupied)

This type of issue doesn't affect single family homes and should be an important factor in your preliminary research.  HUD.gov provides information on which condo developments are approved.

While these occupation percentages are important - consider looking to buy a condo in a development that is at least 90% occupied - this can mean big savings for you and more stability for your purchase in the future.

Maintinence Fees & The Condo Association

Once major difference in condo's vs. homes is the monthly maintience fee due to the condo association.  

Many new condo buyers don't often realize this fee exists can it can be a nasty surprise for condo owners on a fixed budget.  

Another factor is the annual increase in maintinence fees - these should (at the max) follow the general rate of inflation which is around 3% growth per year.  

If you notice your fees growing larger than inflation rates it may be a red flag for your purchase.

Another issue is to look at exactly how many residents are current with their fees - in a condo association its the rest of the residents who must make up this shortfall and you don't want to get sucked into paying the way for your neighbors no matter how great the condo looks.

Also speak to the condo association to see what % of their fees they might put into a reserve fund.  

You should want to see them put at least 10% of their annual fee's into a reserve fund.

Major Building Maintenance

Ask about major mechnical and structural systems present in the current condo development.  You'll want these two closer to five years since their last replacement/upgrade vs. 15 years.  

If you do notice that these systems need repair you could be in for a costly "special assement" charge that you won't see until after you move in.

Ryan Nish is a real estate agent and runs Condo Buyer Cloud which is a collection of Hoboken Condo Listings