I've heard a lot about condominiums. What exactly is a condo, and why should I
A condominium can be defined as "The absolute ownership of a unit in a
multi-unit building, plus an undivided interest in the ownership of the common
elements, which are owned jointly with the other condominium unit owners." (Modern
Real Estate Practice in Illinois, fourth edition, Galaty, Allaway and Kyle,
authors. Copyright 2001 by Dearborn Financial Publishing, Inc.)
Condominium ownership has proven very popular because it is a great way to
receive the benefits of home
ownership, at about the price of market rent! Why waste another dollar with a
landlord, when you can be building something of value for yourself? Did you
know that at only $850 a month, you as a tenant will be giving your landlord
$51,000 in a mere five years? Surely there is a better use of your hard-earned
money! You have to live somewhere, but why live under a landlord's roof, where
you're doing nothing other than paying his bills! Condo ownership can be the
perfect stepping stone into something larger someday, such as a house, or a
condo can be a great place to live as long as you wish. A condominium is
property, which can even be passed along to loved ones or anyone else of your
In addition, communities as a whole typically benefit from condominium
ownership. Why? Because the residents have a financial stake in the property,
versus apartment dwellings.
What are the benefits of owning a condominium?
In condominium ownership, the owner has control, unlike an apartment setting.
Want a full wall of artwork or family photos? Want border paper around the
room? Want a vividly-colored wall and exotic carpet? It's all your choice as a
condo owner. Other benefits include equity, which can build with each payment
you make, unlike rent, in which you own nothing, even after years of payments.
In addition, real estate traditionally appreciates over time. Another potential
benefit, depending on the individual situation, is the tax advantage that may
be realized by home ownership. Of course, be sure to check with an accountant
or financial advisor for more information. OwnACondo.com is giving no tax
How do I purchase a condo?
We're more than happy to accept your check for the total price, but most
homebuyers make a down payment,
obtain a loan from a lender, and then pay back the loan in monthly
installments. The total amount loaned to the buyer is called a
mortgage The monthly payments to the lender include
principal and interest, and often also include an amount for
property taxes and an amount for
Private Mortgage Insurance, or PMI, which is discussed below.
Once a month, a condo owner will make this payment to the lending institution,
and the condo owner will also make an assessment
payment to the condo association.
How do I obtain a mortgage?
Generally speaking, the first step is to get pre-qualified by a loan officer or
other financing professional. We typically have a lender present at our open
houses who is available to speak with visitors about basic information such as
income, debt and the projected amount of the loan. There is never a charge or
obligation for pre-qualification. Following pre-qualification, the loan officer
will work with you on a more complete loan application, which will include more
detailed information such as a credit report, employment history, etc. You're
now on your way toward pre-approval and final approval for your loan!
How much do I have to put down, and what will my
monthly payment be?
The greater the down payment, the less the monthly mortgage payment will be.
The lenders we work with offer programs that feature down payments as low as 0%
to qualified individuals. These lenders will review your credit report with you
and even offer advice on how to correct inaccuracies and/or rectify problematic
Who loans the money, and what will the interest rate be?
A lender can be a bank, mortgage company or anyone who is willing to make a
loan, including a friend or family member. Since most condo buyers seek loans
from financing professionals and not personal friends or family, we are pleased
to be associated with lenders
who work closely with us at our various projects and know our product. These
professionals specialize in condominium financing. Of course, our clients are
always welcome to seek the financial services of any lender of their choosing.
Interest rates are variable but can generally be described currently as among
the lowest in decades. Low interest rates are attractive to buyers because they
have to pay back less money in interest during the course of the loan. However,
there is no guarantee that low interest rates will be with us forever. Acting
now can lock in today's low rate for the entire life of the loan. This is a
fantastic time to buy!
What about property taxes?
A condominium is a piece of property, and condominium owners pay property
taxes. Like income taxes, most buyers prefer to pay property taxes a bit at a
time, rather than at once, so lenders will include an amount for taxes in the
payment you send in each month.
What's an assessment?
A condo assessment, sometimes called an association fee, is a dollar amount
paid each month by the condominium owner to cover a proportional share of the
common expenses of the property. These expenses can typically include, but are
not limited to: gas; sewer; water, electricity for common areas; scavenger;
lawn cutting; snow removal; hallway cleaning; insurance for common areas;
professional management, parking lot maintenance; legal and audit fees; as well
as short- and long-term replacement reserve.
Be sure to consult the budget for any particular property to learn what is
covered in the assessment for that property.
How is the assessment calculated?
Assessments are based on the annual estimated expenses for the property.
The assessments are calculated by using what is known as the Percentage of
Ownership of Common Elements. The Percentage of Ownership of Common
Elements is based on the value of the individual units in relation to the
value of the property as a whole, and the monthly assessment is
proportioned in the same ratio as Percentage of Ownership of the Common
Elements. Assessments are always subject to increase or decrease based on
changes in budgeted expenses.
What's the reserve?
As time passes, the necessity arises for repair and/or replacement of items
such as the roof, balconies, heating system and the like. Should the condo
association wait until these issues actually arise, a large amount of money
would have to be collected in a short amount of time from the condo owners, in
the form of a "special assessment." Rather than wait until that time, it is
typically more sensible for the association to save a bit of money every month
from each condo owner's assessment fee and put it toward the reserve, where it
can grow and earn interest until such time when it is needed.
Do I have to obtain my own insurance?
It is recommended that a condominium owner obtain insurance to cover any loss
within his or her own condominium in the case of fire, theft or other
unforeseen circumstance. Insurance for the common
elements and general liability around the property is covered
in the monthly assessment fee. In addition, a third type of insurance is often
discussed when buying a home. Called PMI, or Private Mortgage Insurance, this
insurance is required of buyers who put down less than 20% of the total
purchase price. PMI is usually made part of your monthly payment to your
mortgage lender, although you may purchase it yourself. PMI is no longer needed
after you reach 20% equity in your loan. Be sure to monitor this from time to
time so you can stop paying this insurance when you no longer need it.
Please define "common elements."
Areas of the property that are to be used by all residents are called common
elements. These can include, but are not limited to, laundry rooms, halls,
walkways and lawns. Each condo owner has an undivided ownership interest in the
Who takes care of things around the property?
The developer or a professional management firm typically runs the day-to-day
operations in and around the property while condo sales are underway. After 75%
of the condominiums are sold and closed, the developer turns the reins of the
condo association over to the condo owners, who elect
directors and officers among themselves to handle the future
decision-making and operations. The directors may then choose to manage the
property themselves, or they may seek the services of a professional management
firm. Arrangements with management firms vary, but services typically do not
include maintenance and repair within the individual condo units.
How does the condo association work?
The association's main purpose is to control, regulate and maintain the common
elements of the property. Through the bylaws, the association's board of
directors is authorized to regulate and administer the affairs of the property,
especially in regard to maintenance and repair of the common elements. The
association has the authority to assess and collect sufficient money to
maintain the common areas and to ensure the financial stability of the condo
What do the directors and officers do?
Simply stated, the condo association directors make the major decisions about
the property, and the condo association officers implement those decisions. For
instance, the directors may meet to decide that the hallway cleaning
service is no longer satisfactory and that a new provider needs to be found.
One of the officers, typically the president, will then be responsible
for gathering bids and bringing this information to the board. The president
will then follow the wishes of the board and hire the cleaning service which
best suits the needs of the association.
In addition to the president, other officers' positions typically are: vice
president, who assists the president; treasurer, who handles the financials;
and secretary, who keeps records of the meetings and maintains the
association’s important paperwork and files.
What if I don't want to be involved to that extent?
The reality is that most condominium owners do not serve in a director's or
officer's capacity, simply because there are usually more condos in a property
than there are director and officer positions. Every condo owner has a vote,
and a say-so, in the running of the property, even if an owner chooses not to
serve as an officer or director.
OK, I'm interested in condo ownership! How do I get
You’ve already arrived at OwnACondo.com, the best place to buy and sell condos,
and we’re here to help. Our dedicated customer care representatives and condo
sales specialists are just a phone call or email away. Please give us a call at
866-696-2266, or drop us a line at
firstname.lastname@example.org. We look forward to serving you.