Before you buy a condo, consider
the financial costs added to the sales price through maintenance and other
issues. While condos often appear to be cheaper than townhouses or
single-family properties, the hidden costs can actually make the price of
owning a condo higher than the price of owning comparable single-family
properties.
In my opinion, condo timeshares like the one above are next
to extortion. You own the condo for one or two weeks out of the year. You pay a
condo fee and in some cases, they just go up every year to the point where you
are paying $1,000 or more a year just to stay for 1 or 2 weeks. If you want to
sell, good luck. No one will want to buy them because of the fees.
Condo in Heron Harbor, Havre De Grace, Maryland
Homeownership for living all year
around is a different situation. But you better know the cost of what you are
getting into before you get into it. The Condos in the picture above cost $589,900 to $799,900 to buy. The condos in Heron Harbor cost $256 per
month in maintenance fees. Total taxes per year $9,925. Plus you have your utilities and insurances.
Below is information that I got from
the Independence Financial Portal.
#1 Condo Association Fees
The first consideration is the
association fee required by a condo or homeowner's association. In many areas
of the country, these fees can be moderate, such as a few hundred dollars each
month. If you are purchasing a condo in a highly desirable area, though, the
condo association fees can be prohibitive. It is not uncommon to find fees that
represent 50 percent of your total mortgage cost along coastal areas or in the
hearts of cities. Since you do not own any space other than what is inside your
condo, these fees can often be wasted on improvements that do not raise the
value of your property.
#2 Private Mortgage Insurance
If you buy a condo with less than a 20
percent down payment, you will be required to pay private mortgage insurance
(PMI). Some mortgage companies will make this requirement on even higher down
payments. Surprisingly, it can be hard to secure private mortgage insurance for
some condominium purchases. This occurs because the value of a condo is highly
variable based on the value of the building and comparable sales within the
building at the time of sale. Since these factors can be unpredictable, many
insurance companies refuse to insure condo mortgages. Having a mortgage without
PMI may not be an option; where it is possible, it is expensive.
#3 Homeowner's Insurance
A condo is defined as a property with
more than two shared walls. In a condo, you may have residents above or below
you. You do not own public spaces around your condo, and this leaves them open
to other residents of your building or even those passing through. As a result,
condos are viewed as less secure than comparable townhouses or houses. Your homeowner's
insurance will increase based on the safety rating of your condo. Further, if
there is a claim anywhere in your building, you may see your personal
homeowner's insurance rates go up as a result. This does not occur as directly
in a neighborhood as it does in a multi-family complex.
#4 Resale Value
At the time you sell your condo, the
sales price will be heavily dependent on the desirability of the building as a
whole. Even a very desirable building will suffer if too many units are for
sale at the same time. In this case, supply will be greater than demand, and
the sales price of your unit will decrease. This is particularly true if the
various units in your building are extremely similar. In this case, it is very
difficult to differentiate your listing in a competitive market. Further, even
if you make improvements to your property, you must always be vigilant about
out-pricing the building. There is a price ceiling on most condo sales.
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