What You Need to Know Before Buying a Condo (That Nobody Ever Told You)

As a realtor in Florida, a large portion of the transactions I’m a part of are those involving condos. It just comes with the territory (we are, after all, right on the beach). I’ve been doing it long enough to know exactly what most buyers have in mind – and what they don’t know – when they approach their first condo purchase.

Most of us know the basics of condos, but there are two distinguishing characteristics about transactions involving them that are regularly left out of the conversation.

So this week, I wanted to touch on a few crucial aspects of condo purchases that you absolutely need to know if you’re considering buying one as the season heats up.

You NEED an agent who has experience selling condos, because these are uncharted waters for you. In a word: contingencies.

Selling or buying a condo is an entirely different animal than selling or buying a single-family home. This is mostly due to the fact that a condo’s purchase contract carries a whole new set of contingencies that most single-family homeowners are going to be unfamiliar with. There are different contingencies than the common contingencies that are in a residential purchase and sale contract.

For example, as a buyer, there should be a separate addendum used in conjunction to the sales contract prior to closing. This addendum generally states that you understand and agree to the association rules and regulations and should give you an opportunity to review the bylaws, FAQ’s, and the budget just to name a few.

However, as a buyer, you may want to attach your offer to a set of your own contingencies, and again, these are unique to condo communities. You can, as a buyer, make your offer conditional on a review of those same community regulations and bylaws, and whether or not they’re A.) reasonable, and B.) satisfactory to you.

You can also make your offer contingent on a review of the minutes of the association’s meetings, a submission of their budget (because you’ll be paying fees and you have a right to how they’ll be managed), repair and renovation receipts, permits, assessments and the list goes on. This actually helps protect you as a buyer in case new information comes to light after you’ve put forth an offer.

Because of this, it’s important you work with a real estate agent who has experience selling condos! They’re going to know exactly how these things are done and will have the experience of past transactions – including buyer, seller, and association demands – to handle the unique complexity of the sale. They’ll also know how to guide you through the process and ensure important documents aren’t overlooked.

Financing is going to be a lot different than what you may be used to. It may not even be available at all from some lenders!

Financing of a condo isn’t the same as what you might typically encounter for an average single-family home. Some things still apply, obviously: it’s still important to get pre-approved prior to looking at properties. Obtaining financing can be tricky when it comes to purchasing a condo because some lenders and loan products don’t allow condo purchases.

Of course, you can still obtain a private mortgage for a condo purchase but that’s going to come at a higher cost to you one way or another, either in the form of higher interest rates, PMI (private mortgage insurance), or a larger down payment. The last is the most common scenario, and many private lenders will require a minimum of 20% down on a condo purchase. So if you don’t have a substantial amount of money saved for a down payment, buying a condo may not be the best fit for you.

Condos are often purchased with cash or higher down payments due to the regulations of lenders and programs. Down payment amounts are a big factor in the approval process of condo financing. Believe it or not, the amount you put down on a condo purchase determines whether the lender does a limited or a full review of that condo. This is done with what is called a condo questionnaire, which must be filled out by the association manger and asks for information like occupancy ratios, full-time vs. part-time owners, and budget questions. These things can make a big difference when purchasing a condo. So please stay in the know and call, text, or email me if I can help you navigate this complex buying process.

Condos can be a great investment for the right buyer, but they’re not for everyone. If you want to know more, leave a question in in the comments or email me using the sidebar to the right!

– Matt