What is a Condo?

 

What is a condo?
In a condominium (commonly known as a condo), some parts (your residence) are owned privately, while others (common areas) are owned collectively by all of the condominium's residents.

A less technical way to think of a condo is an apartment that you own. In practice, condominiums often take the form of an apartment or similar shared complex, but theoretically, a condo could physically look like anything.

Condos are especially popular in places with high property values, vacation hot spots and urban settings are both places where you can expect to find them on the market. This is largely because buying a single-family home can be prohibitively expensive in places where additional building space may be scarce. As such, condos can open home ownership to whole new groups of people. Therefore, if you're ready to own your own home, but don’t want the expense of a house, a condominium could be a way for you to get into the market.

 

What are the costs I need to know about owning a condo?

 

Here are the costs that are associated with buying and owning a condominium.

 

·      Purchase Price – This is the price you will pay for the condominium itself. This if often expressed as a price per square foot or square meter. You must add to the asking prices deposits that are required for taxes, HOA fees, and the transaction costs. The current asking prices for ‘class A’ condos in the United States are the lowest that they have been in years and often far below construction or replacement cost.

·       Transaction Costs – These are costs, sometime called closing costs, that are associated with recording the sale with the local authorities and having the validity of the ownership chain verified, commissions to agents, fees to lawyers and taxes imposed by government authorities. You have the right to have of these cost listed and reviewed by you before you close. These costs will be given to you, prior to closing the transaction, in what is called a closing statement. You should insist on seeing and reviewing a closing statement prior to transfer of funds. In the United States, commission to sales agents are normally paid by the seller only, not the buyer. You should expect to pay from between 1% and 3% of your purchase price for other closing costs. You may also be required to pay in advance (at the closing of your transaction) a portion of the annual taxes and management fees that will be charged to you monthly by government or the condominium association.

·        Property Taxes – In the United States taxes are levied annually on real estate. These taxes are imposed by the local government and tax rates are set every year by the local governing authorities. These monies are used to run the local government, schools, police, etc. The local rates are approximately 1.6% of the assessed value of any property. The assessed value is based on the recorded purchase price of the unit as well as on the values of surrounding like-kind properties. These taxes are paid annually in arrears (for the previous year). For this reason your closing statement may have an adjustment by the seller that shows him paying you, the buyer, a pro-rated share of the taxes. For example, if your condo transaction closed at the midpoint of the year, the seller will pay you his share (½ of the annual taxes) because you will be responsible for the full annual taxes at the end of the year. We highly suggest that foreign buyers have their management company set aside (on a monthly basis) an amount that will be used to pay the taxes every year.

Condominium Association Fees
– As you have read above in the description of what a condominium is, “
A condominium (commonly known as a condo) some parts (your residence) are owned privately, while others (common areas) are owned collectively by all of the condominium's residents. ” To manage the commonly owned areas, all of the owners contribute money on a monthly basis for the upkeep of these common areas. This money is used for the up keep of the roof, parking lots, common areas, electric, water, insurance and landscaping, as well as to build reserves for the replacements of any components of the building in the future. They also pay for the upkeep of the amenities like a fitness center, swimming pool or other features that are available for the use of all residents. The condo documents supplied to your by the seller will specify the amount of the fees and spell out that they cannot be changed without notifying all owners and and/or an elected board of directors made up of owners in the project. An annual budget is prepared by this board and sent out to all owners in the project. Included in this budget maybe an amount specified to be held in reserve for major periodic expenses like a new roof, pool, air-conditioning unit or for example, painting the exterior of the building every 7 years.

·         Special Assessments - It is possible that from time to time there will need to be major expenses in the common areas that there were not enough reserves for. In this case there will be a special assessment voted on by the board in order to raise enough money to pay for the item. If, for example, there were no reserves in the budget for a new parking lot or a new roof, there would be a vote and then an assessment (an invoice) sent to each owner for their respective share of that additional expense. This is common on older condos where the owners voted down any reserve assessments.

·         Furnishings - You are responsible for everything INSIDE your condominium, including the paint. All of the condos we handle are move-in ready. This means that they are painted, have flooring and are equipped with working appliances. They do not have window shades or light fixtures. Market America Realty Group has contracted with various suppliers to provide turnkey solutions for furnished condos (not only furniture but everything needed to rent the condo to a seasonal tenant). We recommend furnishing your condo if you plan on renting it out seasonally. If you plan on renting out your condo annually, it is advisable to supply ceiling light fixtures. We also recommend having the rugs and tiles treated with sealers to increase the life-span and durability of the flooring.

·        Interior Maintenance and Utilities - Condo owners are responsible for maintaining the air conditioning, electric, plumbing and appliances in their condominium. A vacant condo will consume from $50 - $100 a month in electricity. If the condo is vacant, it is advisable, in our Florida humidity, to keep electric on for the HVAC system so the humidity can be kept low. We also recommend to install a humidistat in your condo (a one time cost of about $250). This is a device that will run on the air-conditioning only when it is needed to keep humidity low. We will provide a monthly inspection to run water, check for window leaks, check security and generally inspect the condominium for any issues that need to be addressed. During these inspections, water is run into all plumbing. Inspection contracts cost minimum a of $50 per month. We also suggest a contract to inspect the air conditioner every six months in order to clean it, change filters and recharge the system if needed. In occupied condos, the tenant should be obligated to change the filters monthly.

·         Move-out refurbishing - Should you rent your condominium annually, you will have some costs associated with refurbishing the condo when it is vacated. This may entail carpet cleaning or replacement, deep cleaning of the condo and painting. Painting the condo is about $1.00 per square foot, deep cleaning about $200 total and carpeting will depend on the cost and quality use, but a good rule is about $1.50 per square foot for builder grade carpet.

·         Insurance - The condo docs at High Point place require you to purchase, independently from them, condominium insurance. This costs about $500 year and will protect your investment from expenses associated with any loss due to fire, water damage, etc. It will also cover your liability for damage caused by a fault in your condo to the adjoining units.