A newly built condo shares many of the same benefits as a newly built home.
Increased technology and new, warrantied parts spell out fewer and less immediate repairs, as well as energy savings. And like any new product, newly built condos are designed to meet the needs of current, in-market shoppers.
The benefits of a newly built condo are obvious; however, there are some differences in owning a condo than a single-family home that buyers should know, says Milo Anderson, Realtor with Re/Max in Calgary, Alberta, Canada. “So, it’s important to fully understand the building, the builder, the project and future additions to the project that may impact the building [your clients] are purchasing.”
Here’s what your clients need to consider before purchasing a condominium:
Condos have a multifaceted management system. Most condos are run and regulated by both a condo board and a homeowners association (HOA).
The condo board is a management team comprised of building owners and overseers. In order for your clients to get the best representation in their investment, encourage them to sit on the condo board, says Anderson. This way, clients are guaranteed transparency regarding any building issues, knowledge of pending decisions and even a voice in new decisions being made. “The wrong decisions or poor management could result in your investment dropping in value over the years if not well cared for,” says Anderson.
The benefit of a newly built condo in regard to management is that “there are no entrenched personalities able to push their personal agendas,” says Kyle Alfriend, managing partner of the Alfriend Real Estate Group in Dublin, Ohio. “This dynamic is a reality of condo living.”
In addition to the condo board, condominiums are further regulated by an HOA. This association may be established by a third party or by the condo board itself.
Typically, HOAs manage the activities and amenities offered by a condo. They charge an annual fee to cover the costs of amenities such as pools and gyms. These fees are generally inexpensive, says Anderson, usually costing around $250 to $500 a year. However, different facilities lend different amount of power to their HOA, “so know how votes are collected and what power the management has in decisions,” says Alfriend.
Financial Stability and Reserves
“When purchasing any condo … I always advise clients to consider the condo as an investment in a corporation, the same as if they were looking at a public or privately held company,” says Anderson.
Because a client only purchases an individual unit and not the entire complex, they essentially become a “shareholder” in the building. Because of the volatility of such an investment, it’s critical for clients to assess the financial health of a condo before entering into purchase. “The Reserve Fund Study is vital to review,” Anderson says. “(It) tells you all about the schedule for things to be repaired or replaced over the next number of years and an appropriate amount of money has to be set aside in order to ensure there is enough to cover ongoing upkeep.”
Typically, reserve fund dollars are built into the cost of monthly payments, but when it comes to newly built condos, most repairs won’t be required for a number of years. In the case of a financially healthy condo, the builder should have properly funded the initial reserves, says Alfriend. “However, since raising condo fees is always difficult, it is in the interest of the association to begin the fees at a number high enough to not require any increases for several years.”
Be wary of condos offering price reductions or promotions, as these are red flags pointing to financial insecurity.
As is the case with any property, owners tend to care more about their residence than renters do. “The higher the number of renters in a building, the greater chance that less care is being taken,” says Anderson. Whether it’s removing garbage or pet waste, maintaining the facilities or controlling noise levels in the evenings, your clients are more likely to encounter more problems with renters than fellow owners.
Ideally, you should have clients seek out a renter ratio below 25 percent, as anything over this amount has the potential to affect resale value, says Alfriend. However, many condos put in place damage deposits and other measures like routine check-ups to protect against renters’ neglect. Before purchasing a condo, “it is critical to know how the [condo] association tracks, verifies and enforces its rules,” says Alfriend, as renter and owner ratios will be continually in flux.
Lifestyle and Amenities
Despite their similarities to single-family homes, it’s important to note that condo living is different from single-family living. “This sounds obvious, but I have had many buyers regret their decision after moving into one,” says Alfriend.
These community-oriented residences require extra attention be paid to neighborly courtesy; they lack lawns and sometimes immediate parking and may require residents to bus their own trash, for example. For home shoppers considering a condo, Alfriend recommends they rent one for six months or so before making the decision to buy.
Condos also come with a host of convenient amenities. Depending on what’s important to your buyers, there’s likely a condo with amenities to suit their lifestyle.
But the lifestyle benefits of condominiums extend beyond basic amenities to include features such as great locations, access to underground parking and close proximity to public transportation. “Additionally, many new businesses tend to pop up around new condo projects and many are closer to the downtown core if you happen to work there,” says Anderson.
Because condos are often located in high-density areas, future zoning is another important consideration for buyers to make as this can affect things such as balcony views and resale value. “Zoning is always determined well in advance of change in most communities,” says Anderson. So once your clients express interest in a specific condo, it’s important to undergo research prior to purchasing.
The local municipal office is an ideal place to start. In addition to looking at the plans for the area in which the prospective condo is zoned, it’s important to also look at neighboring areas. Something as close as a block away could be in a different zone, says Anderson. Likewise, something farther away could still affect your zone. “For example, a new runway is built at the airport that is 20 miles away, but the flight path just happens to have been changed just above your newly purchased condo suite,” says Anderson.
Newly built condos have much to offer — from great locations and views to convenient, luxury amenities, layouts designed for the modern lifestyle, increased technology and energy savings, condominiums are the ideal choice for many buyers.
However, it’s the job of a real estate agent to help their buyers navigate the nuanced world of financial health, condo rules and regulations, future zoning and resale potential, as well as lifestyle considerations that could make or break the deal.