A condominium may appear to be an excellent investment at first glance. Most come with numerous amenities, maintenance-free living, and a great location. However, there are hidden costs that are often talked about. Nobody likes financial surprises as they can cause excessive stress levels.
Let’s take a look at a few of the hidden condominium buying costs that must be accounted for before purchasing.
Homeowner’s Association Charges
Condo owners can avoid landscaping, roof repair, deck repair, and sometimes even window repair charges. However, their investment isn’t entirely maintenance-free. Condos have annual, monthly, or quarterly charges in the form of homeowner association fees that cover typical building maintenance.
These fees tend to increase at per with the property value and as the property ages and requires more maintenance.
Understanding property association fee amounts, frequency of payment, and rules governing increases are critical in ensuring they don’t overeat into your pocketbook or wallet.
When buying a condo, carefully look over the financial statement. Ensure there is economic stability and plenty of money in the reserve fund.
Special Assessments Are Unplanned Expenses
Property association charges generally cover typical costs. However, unplanned expenses are inevitable and must be passed over to condominium owners when they occur. These are known as special assessments and are typically significant expenses.
They can be a tough pill to swallow, especially for new owners who have just purchased and weren’t aware of them.
A typical example would be expenses to rebuild a balcony that has been deemed unsafe. If all balconies must be redone, the cost is generally shared among all condo owners. Another example is the roof on the clubhouse needing replacement. These costs can add up quickly.
Most unplanned expenses aren’t optional and need to be met by every property owner. The importance of knowing a condominium’s prior unexpected expenses history can’t, therefore, be overlooked.
It also helps to know the protocol for unplanned expenses. There are many questions to be asked when buying a condo and anything related to fees is crucial.
While the property must have insurance, condominiums have unique insurance needs. Even if you take a mortgage to finance your purchase which typically comes with insurance, you should consider severe but commonly overlooked risks.
For instance, condominiums spread across the beach to offer expansive ocean views come with additional risks. Proximity to the beach is a great marketing tool. However, standard homeowner insurance policies don’t cover damage linked to hurricanes, flooding, and wind.
The location of many oceanfront condos makes them susceptible to flooding. Most are located in or near flood zones demanding additional insurance protection. It’s therefore up to a condominium owner to take additional coverage for their unit.
To avoid hidden insurance costs, it’s advisable to see what the current insurance protects before buying the condo. The exclusions at this stage can be used to negotiate for a better buying price.
Alternatively, you’ll be able to see if the additional insurance cost makes sense. Insurance agents can assess current coverage to identify further needs.
Consulting an insurance agent ensures you uncover hidden insurance costs that help you make a more informed condo purchasing decision.
Owning a condo is a great way to have a vacation property or downsize after retiring without compromising on most things. However, the above information highlights the hidden costs of owning a condo that is commonly overlooked. Acknowledging these costs of buying a condo is critical to ensure your condominium investment makes sense in the long term.
Before making that final purchase decision, talk to the Realtor, insurance agent, loan provider, and property association manager. These professionals should be part of the final process in determining if purchasing a condo is right for you.
Bill Gassett is a nationally recognized real estate leader who has been helping people buy and sell MetroWest Massachusetts real estate for the past 33 years. He has been one of the top RE/MAX REALTORS® in New England for the past decade. In 2018, he was the No. 1 RE/MAX real estate agent in Massachusetts.