When I was looking to get out of the renting scene, I honestly felt a little overwhelmed by all the options. Should I buy a house? A townhouse? A condo? What are the pros and cons of each? How do I give my family the best I can without overshooting my budget? Which will provide the most long-term value and make it easier to retire?
Maybe you’re going through something similar. In this article, I’m going to explain some reasons why buying a condo might not be for you.
Keep in mind, though, that for some people a condo could be the perfect solution! Since everyone’s circumstances and tastes are different, read through this list and decide for yourself how much you’d care about these disadvantages.
Let’s get started.
HOA Fees
Homeowners Association (HOA) fees, sometimes referred to simply as “condo fees” can be a real pain. They also have a massive range. Some people pay only $100, some people are obligated to pay $1000! To be fair, they serve a good purpose. These fees go towards the maintenance of the building. Here are some examples of what they pay for:
- Roof repair
- Renovations of common areas
- Sidewalk/parking lot repair and maintenance
- Snow removal
- Grounds maintenance
- Security
- Gyms / Pools
- Etc
How does this compare to owning a house?
Really, this is all stuff that you’ll be doing anyway with a house. Some people actually consider this to be a major perk, though. If you’re not very handy, or don’t have the time, everything is taken care of for you. Provided the HOA stays on top of things, that is.
For others, though, this is a major negative. If you’re capable of doing your own maintenance and repairs, you could possibly be saving some serious money. You just don’t have this option with a condo.
Here’s something that can be a bit scary, though: If you’re facing financial problems and can’t make your condo fee payments, there’s a possibility (depending on the agreement) that your condo could be foreclosed! Compare that to a house, where you’d just be falling behind on repairs until you get back on your feet.
At the end of the day, you need to evaluate whether the condo fees are reasonable and whether they’re worth it for you.
Condo Special Assessments
These can come up out of the blue, and be a major expense!
A special assessment is when there’s an unexpected expense that comes up. For example, the underground parking lot might develop a mold problem. Maybe the HOA dropped the ball and didn’t set aside money for the roof repair. Or they need to paint. Or there’s a nasty bed bug problem.
If this happens, the HOA could demand payment in addition to the regular fees. Sometimes this is a few hundred bucks. Sometimes it’s $10k.
Again, this is something that could still happen with a regular house. Maybe something happens that isn’t covered by insurance, or something major crept up on you. But with a house, it’s your sole responsibility and decision as to how to handle it.
This is where you really need to be able to trust your HOA; that they know what they’re doing and that they’ll stay on top of these. Nothing would be worse than an association that gets a single quote for major repairs and starts throwing out your money.
Condo Association Finances
Before deciding on buying, it’s a really good idea to check out how the association is doing financially. Some are thriving and have funds set aside for unexpected expenses. Some are about to fall apart and couldn’t afford to patch a crack in the wall.
This is something that you might be able to get your realtor to do. If you don’t know what you’re looking for, they’ll likely have some experience with this.
It could be really frustrating to live in a condo that lets things fall apart, or that patches things back up with duct tape, instead of being smart with the fees that you’re paying.
Condo Management
People can be characters. Sometimes the condo management is easy going and does a great job. Sometimes they’re so strict that it puts you in a bad mood whenever you see them. Some are so lax that you wonder what they actually do.
It’s a good idea to get to know them before committing. Beyond that, though, ask the people who live in the condo what they think about the management! Don’t just ask one person, though. Maybe you’ll end up talking to the old lady with 63 cats that loves her place. Make sure you also talk to the guy that lives below her, who’s ceiling is stained with cat urine.
Don’t dismiss this step in the process. There are a lot of people that have really lived to regret being a part of a poorly managed condo.
CC and R’s
If you hate it when people tell you what you can and can’t do, this could be a total dealbreaker for you.
CC and R stands for Covenants, Conditions, and Restrictions. Now really, you might have this with a house, too, if you’re a part of a neighborhood association. But this is always a feature of condo life.
Basically, this is the list of rules of what you can and can’t do. Some condos are laid back, some are not. Here are some examples of the CC and R that you might be subjected to:
- Restrictions on noise levels
- Limitations on pets
- Restrictions on appearance/decoration (for example, some condos will not allow you to display a flag on your balcony, or you’re not permitted to have a shed)
- There could be some kind of code of conduct
- Restrictions on smoking
- Even more restrictions on what kind of renovations are permitted within your condo unit
This is by no means an exhaustive list. You’ll want to very carefully review the CC&Rs to see if they’re acceptable to you. Brace yourself, though, these are often written in some pretty serious legalese.
Technically you might be able to fight some of these clauses after signing if you feel that they violate your rights. You’d have to consult a lawyer to see if this is possible. Either way, taking legal action can be expensive and stressful.
On the other hand, you might find these CC&Rs to be totally awesome. For example, if you don’t have pets and cringe and the possibility of being kept up at night by a neighbor’s yapping dog, this contract can be great. Just carefully review the agreement to see if it suits you.
Neighbors
You can’t control who lives around you whether you’re in a house or a condo. Thing is, condo living means that you’re a lotcloser to them. This can be uncomfortable.
For example, maybe the CC&R is pretty slack. Maybe someone does have a yapping dog, or is constantly smoking something potent, or likes to party. You might be in a position where you’re really affected by your neighbors and there’s nothing that you can do about it.
Or maybe your neighbors like to cook really stinky food. Who knows. The point is, you can’t just build a tall fence to block them out. You could potentially really be stuck with them.
Lack of Control
This relates to a few other topics mentioned here, but it’s worthy of consideration by itself.
If overall you’re the kind of person that needs to feel independent without restrictions, condo life might not be for you. There are a lot of things that happen where you’ll have little say.
For example, generally the HOA will allow condo members to vote on decisions that affect everyone. Maybe something like when they’re thinking of adding more security and need to bump up the fees. Or they’re going to repaint the exterior of the building and you can’t use your balcony for two weeks. Or they’re painting the hallways and your place reeks of fumes. You get the idea.
You’ll probably get the chance to vote on a decision, but ultimately you’re in a majority-rules situation. If people don’t see it your way, too bad for you.
Loans
Here’s something that’s totally unexpected for most people: it can be harder to get a loan for a condo.
This will really depend on where you live and who you’re dealing with, but this can be a major issue as you’re perusing realty ads. Just because you’re pre-approved for a mortgage, that’s no guarantee that it’ll go through.
For example, some people have been turned down simply because there were no sales within the building within the past few months, and the broker wasn’t sure how to value the condo after some upgrades. This sounds totally ridiculous, but it’s happened to some.
This is especially true when the FHA is involved. An FHA (Federal Housing Administration) loan is a government-backed mortgage that enables people with lower credit scores to purchase property with a lower minimum down payment. This is really popular with first-time homebuyers.
The FHA is generally fussier with condo purchases compared to houses. They’ll have an approved list of condos that they’re willing to finance. If the condo isn’t on the list, you’ll be stuck to conventional loans. Formerly they had something that they called a spot review – if it wasn’t on the list you could request a review for acceptance, but they no longer offer this.
Here are a few other things to know about FHA loans that apply directly to condos:
- If the condo is too far from your job. For example, if you’re planning on telecommuting with the occasional trip in to work, you could be denied.
- At least 80% of FHA loans in the complex need to be owner-occupied. If there are too many FHA units are turned into rentals, then your request can be denied.
- The majority of units in the complex, whether FHA insured or not, need to be owner-occupied. Apparently the thought process here is that owners take better care of the facility than renters, so if there are too many renters in the condo building, this’ll be a no-go.
- The building must have been completed at least one year ago, and have no pending additions or construction phases. This means that for the first year, there will be no FHA-backed mortgages in the condo.
If you have no problem paying a standard down payment and have good credit, then this probably won’t be a problem for you.If not, just be aware of this potential hitch.
The Market for Houses and Condos are Not the Same
This will vary wildly by location, but people that like houses vs people that like condos are generally two different groups. The buy and sell market can be totally different.
You really need to do your homework up front. Talk to realtors, friends and family that own condos. How long is a condo typically on the market? Sometimes condos can take 10x longer on average to sell. The flipside is that is some areas, condos are snatched up quickly once they’re put up for sale.
You Might Not Be the Condo Type
Aside from not having as much personal space, you just might not like condos. There’s nothing really wrong for this; some people prefer condos, some prefer houses, some prefer renting.
Buying a condo is a big commitment. It might not be quick to sell if you want out. So if you’re not sure if you’re the “condo type”, here’s my recommendation:
Try renting an apartment for a while. Generally, it’s fairly similar to condo life. If you live in an apartment for a year, it’s very likely that you’ll find out if these large buildings suit you.
Plus, if you’re only trying it out for one year, you’re not going to lose a lot of opportunity for building equity. Lots of mortgages are 25 years long now, and finishing one year later won’t change much in your grand scheme.
What will be a total pain is if you buy a condo, hate it, and can’t sell it. Or if you lose money on the deal. Even the fees associated with realtors and processing can be pretty hefty – most people pay around 2-5% of the purchase price to sell it. On a $200k condo, that could be around $10k down the drain!
Advantages of Owning a Condo
All that said, some people are a perfect fit for condo ownership. Here are some examples of what might make a condo really appealing to you:
You’re a busy person and don’t want to be bothered by a lot of home maintenance.
For condo ownership, you generally only have to deal with the stuff on the inside. The HOA will take care of a lot of the external/shared stuff that you just might not even want to deal with.
You want a smaller place that’s easy to take care of.
This isn’t always the case, but condos are often a bit smaller than houses. That means that they can be easy to clean and organize.
You like apartment living but want to build up equity.
Some people actually find condo ownership to be cheaper per month, but it’s just a matter of being able to come up with a down payment. If you can pay cash for a condo, then it’s definitely cheaper. If apartments suit you perfectly fine, then buying a condo can be a great way to ease potential financial strain in the future.
About The Author
Geoff Southworth is the creator of RealEstateInfoGuide.com, the site that helps new homeowners, investors, and homeowners-to-be successfully navigate the complex world of property ownership. Geoff is a real estate investor of 8 years has had experience as a manager of a debt-free, private real estate equity fund, as well as a Registered Nurse in Emergency Trauma and Cardiac Cath Lab Care. As a result, he has developed a unique “people first, business second” approach to real estate.
Check out the Full Author Biography here.
This article has been reviewed by our editorial board and has been approved for publication in accordance with our editorial policy.