Should You Buy a Single-Family Home
or a Condo?  By Dian Hymer, Inman News

For decades, the single-family residence has been the favored investment for buyers who wanted to purchase and occupy a property. Condos were looked at as a poor second choice. Some ownership rights are given up when you buy a condo. Also, you own parts of the complex with other people with whom you or may not get along. With a house, you're the sole owner and ruler of the roost.

Sometimes condo complexes end up in litigation. For example, many condo associations have had to sue the builder for shoddy workmanship. It can be difficult to sell a condo while there's pending litigation affecting the complex. However, perhaps the major reason why condos haven't been the investment of choice is that they have trailed single-family residences in terms of home price appreciation.

For decades, single-family residences appreciated at much higher rates than did condominiums. In 2003, however, the rate of condo appreciation surpassed the single-family rate for the first time. This trend has continued.

Just as condos are coming into their own as a respectable investment, there are exciting variations on the condo model to choose from. Loft complexes have been springing up in urban areas like Portland, Ore., Jack London Square in Oakland, Calif., the South of Market area in San Francisco and in New York City, to name a view.

Although these complexes may have a trendy new name, many of the loft complexes are actually condominiums. In most cases, the buyer purchases a unit to which he has ownership rights to all that lies within the unit walls. He also owns a fractional interest in the common areas of the development and he shares this interest with the other owners in the complex.

There's a homeowner's association that takes care of the governance issues. There are rules and regulations (called CC&Rs-Covenants, Conditions, and Restrictions) that apply to all co-owners in the complex. And there are homeowner's association dues, usually paid monthly, that provide for such things as insurance for the complex common areas and some maintenance.

House Hunting Tip: One of the most enticing reasons to buy a condominium rather than a single-family residence is that it provides a simpler, low-maintenance life style. If this is your goal, make sure that you'll actually be getting what you bargained for. Don't assume that your homeowner dues will take care of all exterior maintenance. You may even find variability within one complex. The dues in one phase might cover exterior paint and roof replacement, but not in another.

Before buying a condo, find out exactly what is covered in your homeowner association dues. Also, find out if there are owners who are delinquent in their dues, and find out how much the dues have been increased over time. In a new development, the initial dues assessment may not be realistic in terms of handling future problems. In older buildings that require a lot of upkeep, you may find that the homeowner's dues are exorbitant.

Investigate any pending litigation against the complex. If the project is new, check out the builder's reputation. Have homeowner's associations of other complexes he built sued him? How does he deal with routine complaints and requests for repairs?

Read the minutes of recent homeowner's association meetings to find out if there are issues you should be aware of. Is the reserve fund adequate to handle unexpected expenses? Or, should you anticipate further assessments to repair a tennis court or replace a furnace?

The Closing: It's a good idea to talk with several current owners to find out what they like and don't like about the complex. If the soundproofing is minimal, or the water pressure is low, you may want to consider buying elsewhere.

Copyright 2004-2006 Dian Hymer. Distributed by Inman News.