Question: I am looking at purchasing a condo. Is there anything that I should be paying attention to besides the overall appearance and size of the condo?
When buying a condo, there are several things to consider. Not all condos are the same nor are all condo buildings the same. Make sure to consider all of the following variables when purchasing a condo:
Floor Plan: Larger isn’t necessarily better. I have used the same example time and time again with my clients and in a previous column. I can show you a 600-square foot unit with an open floor plan and an 800-square foot condo that is not as open, and nine out 10 buyers will choose the 600-squeare foot condo because of the layout of the unit.
It is 2014 and most people love big furniture and flat screen TVs. Many of the older units don’t fit today’s styles of living, nor do the floor plans have large enough closets for all of our clothes and shoes.
Condo Fee: Make sure the condo fee associated with the unit is not outrageously higher than others in the local market. Obviously, if the building has more amenities or has more utilities included in the condo fee it will be more expensive. But when comparing apples to apples, make sure the associated monthly fee is on par with the market.
Special Assessments/Reserve Fun: Check to see if the building has any special assessments that it is dealing with. A special assessment is a fee that the building requires the unit owners to chip in on to repair an item or items in the building.
That leads me to my next topic, the building’s reserve fund. The reserve fund is a fund that every past, present and future owner will contribute to. If something needs to be repaired in the building, above and beyond normal building maintenance, management will dip into the reserve fund to pay for those repairs.
But if there aren’t enough funds in the reserve fund, a special assessment may be required, charging each current owner a percentage of the repair. The reserve fund is built up over time with a percentage of the condo dues being collected, capital contributions (two months of contributions that each owner must pay at settlement when purchasing a condo) and overall expense cutting and saving over time. The key to having ample funds in the reserve fund is paying your condo fee and making sure that everyone in your building does the same.
Investor Ratio: The investor ratio is the calculation of the building’s investor-owned units versus its owner-occupied units. There are several reasons for this, but the main reason is because of lending.
Most lenders will not lend in a building with a high investor ratio. If there are more investors owning units than owner occupants, lenders will consider the building too risky and therefore will not lend in it. Most lenders want the building to be at least 51 percent owner-occupied, meaning 51 percent of the buildings’ residents own their units.
This could also determine if you could rent your unit out in the future. The building may have restrictions on the amount of units that can be rented out at one time. The main reason for this is because of what I mentioned above. Management doesn’t want there to be a high investor ratio, nor does management want the building to turn into an apartment building.
Construction: Make sure you are aware of what is between your floors and walls. A condo is a unit surrounded by other units. Do not expect it to be 100 percent soundproof.
There are materials out there that are superior for soundproofing. Concrete in your floors and ceilings tends to be better for soundproofing than wood beams. Gyp-Crete is also a common material used to help with soundproofing floors. There is also a soundproofing material (it’s like another sheet of drywall) that can be installed to help soundproof your walls. That way you don’t have to depend on just the insulation that was hopefully installed.
I would like to make a quick note and clarify a misunderstood comment from my column on how Pike & Rose might impact the North Bethesda real estate market.
I labeled the White Flint Station condominium building as “inferior.” I didn’t intend to knock the building in any way. I was merely referring to the building’s size when comparing it to the neighboring Gallery and Sterling towers. White Flint Station is a unique building with a different feel than the standard condominium buildings in the area. The units are phenomenal and a great option for residents wanting to live in the area.