The Ten Commandments of Condo Buying: The Most Important Things You Should Know Before Buying. Dan S. Barnabic
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The Ten Commandments of
Condo Buying
Dan S. Barnabic
Neon-Publishing Corp.
Copyright © 2013 by Dan S. Barnabic
All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage and retrieval system, without permission in writing from the publisher.
This e-book published in 2013 by
NEON-PUBLISHING CORP.
7 Hayden Street
Unit 207N
Toronto, ON M4Y 2P2
Tel.: 647-347-1773
Fax: 416-921-9617
www.condobible.com [email protected]
ISBN 978-0-9868651-2-1
Cover: Christian Otegui/Gnibel
Text design: Daniel Crack, Kinetics Design, kdbooks.ca
CONTENTS
2 BEWARE OF BARGAIN PRICES WITH HIGH MAINTENANCE FEES
5 BUY WITH A SOLID DOWN PAYMENT
6 BE CAUTIOUS WHEN BUYING DURING PRE-CONSTRUCTION
7 MAKE SURE YOU CAN AFFORD THE CARRYING COSTS
8 BEWARE OF COMPLEXES WITH MANY UNITS RENTED OUT
10 CONSIDER DEMOGRAPHICS AND FUTURE RESALE VALUE
1 DO NOT RUSH
It’s human nature to buy on impulse. The young or inexperienced may fall in love with a good-looking used car and buy it without giving it a thorough mechanical inspection. Later, when they discover defects that the dealer wasn’t aware of or failed to disclose, they learn what it means to have bought a “lemon.”
Similarly, an over-eager condo buyer may run into difficulties by signing on the dotted line without thoroughly examining the condominium unit and its complex for potential problems.
Many condo buyers succumb to:
• The allure of becoming their own landlord and the promise of carefree living
• The pressure of sales pitches and promises, many of which are unfounded
Being in a rush to buy can obscure important aspects of condo buying. Besides its obvious benefits, condo ownership is also fraught with many perils.
The rest of the commandments provide you with invaluable tips and information while you search the market for a condo unit, but this first commandment, “Do not rush,” applies to all of them. You must take time for careful consideration before committing to what is likely to be the biggest investment you’ll ever make. Slow down! Otherwise, you may succumb to developers’ and/or real estate brokers’ commission-driven sales pitches and make an unwise decision.
Don’t trust others to make decisions for you. Take your blindfold off and read the commandments with care. By adhering to them, you can develop your own real estate buying skills and take control of your own destiny.
• DO NOT RUSH INTO BUYING A CONDO
• RUSHING MAY LEAD TO OWNING A “LEMON”
2 BEWARE OF BARGAIN PRICES WITH HIGH MAINTENANCE FEES
If you come across a condo unit that’s selling at a rock-bottom bargain price, think twice before signing a contract. Condominium complexes may have no choice but to sell their units for a song – sometimes as low as $25,000 per unit. Because of mismanagement or poor construction, sometimes coupled with a drop in the real estate market, these complexes may have depleted their reserve funds to cover maintenance and repairs. They compensate for low selling prices by charging higher than normal monthly maintenance fees.
In other words, what you save on the price of the unit, you’ll end up paying back in higher maintenance costs. Over time, you may find yourself imprisoned in a financially troubled complex with a unit that’s nearly impossible to resell.
Many buyers of these “bargains” are driven by the notion that writing a monthly check for higher carrying costs will pay off in the long run once the market turns around. They think that, when they eventually sell their unit, its value will have increased to the point that it will recoup the costs they’ve racked up in paying those higher maintenance costs.
Unfortunately, it may take months – or, more likely, years – for the market to improve. These unfortunate owners may end up losing money. Worse yet, they may be bombarded by a myriad of ongoing demands from their condo board through special assessments to replenish the reserve fund, service the common loan, and pay for legal fees, etc. Should unit owners be unwilling or unable to meet these demands, the board will place a lien on the units and eventually take them over and sell them – at a bargain price – to the next crop of unsuspecting buyers.
Historically, financially weak condo complexes are prone to being wound down, through voluntary or involuntary bankruptcies.
Bottom line: Beware the marketing schemes of desperate condominium complexes promising better days in the future.
• STEER CLEAR OF CONDO COMPLEXES THAT OFFER UNITS AT BARGAIN PRICES BUT WITH EXCESSIVELY HIGH MONTHLY MAINTENANCE FEES
3 BUY AT THE RIGHT TIME
To understand how important it is to buy at the right time, just think of condo units that, only a few years ago, sold at very high prices but lost their value – many of them as much as 50 percent or more – as a result of the American real estate collapse of 2006/07.
For example, brand new units on Brickell Ave. in Miami, which were selling for up to $600,000 before the crash, took a dive in value almost overnight. Some ended up