Sometimes the documents are electronic or online, or often they come in a big binder for your reading pleasure.   Some of the items that are supposed to be included* the resale package are:

-          Bylaws, rules, and regulations of the community (e.g., pet, noise, and rental policies)

-          The annual association budget

-          Two months of Board minutes

-          A statement from the property manager about whether the unit is currently in compliance with rules (do NOT assume that if there is a violation the seller will remedy it prior to settlement!)

-          Master insurance policy

*Unfortunately sometimes items are missing from the resale package.  You can ask for the missing items, but it does NOT extend your three day window for rescission.

There will be a lot of information to read through in a short amount of time, so I recommend buyers first prioritize these three items:

-          Review the rules and regulations to make sure you can live with them.  Even if you’ve verbally been told otherwise (e.g., “oh, no one actually carpets over the hardwoods and it’s never a problem” or “there are lots of owners with dogs even though the policy says no pets”,  or “of course you can install a washer/dryer.”  These are the rules and you should be prepared to have them enforced.  There are no guarantees that a lax Board will always remain lax.

-          Look at the percentage of units that are more than 30 days past due on fees.  Could it be indicative of a financially strapped community with short sales and foreclosures to come?

-          Compare the reserve balance to the engineering study, which is a study that estimates the remaining useful life and cost to replace or repair for community items such as parking lots, roofs, and common areas.  Engineering studies are typically performed every five years.

-          Is there a move in fee or capital contribution required at settlement?  This is becoming a big trend for condos to assess buyers a fee to help fund their reserves, sometimes it can run into the thousands of dollars.

The three day period can be a stressful one, because it’s difficult to get more details if needed in such a short amount of time.  Property managers are often restricted from giving information to non-owners, further complicating the ability to get details related to a buyer’s concerns.  The remedy is to negotiate with the seller for an extension of the period, or to void the contract, so it’s best to read the documents immediately upon receipt to identify any potential issues early.

More resources:

Search the MLS for properties

Contact us to discuss your home search

Attend a free First Time Buyer Seminar

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What’s included in condo fees varies—sometimes widely—from building to building.  First you need to be sure that you’re looking at a condominium, rather than a co-operative.  While they may appear similar, in legal terms that are very different (see my page on condos vs co-ops here.)  When it comes to fees, co-ops appear much higher because they include property tax and occasionally an underlying mortgage, which results in fees that look much higher on paper, but when a buyer calculates their all-in housing expense, can actually be a bargain compared to condos.

Condo fees generally include a master insurance policy for the dwelling.  You will need to have an HO-6 (aka “condo rider” or “walls-in”) policy, but this is much cheaper than the policy you would need to purchase for a townhouse or single family home.

Units in older buildings generally are not individually metered, meaning that certain utilities are often included in the condo fee.  Heating and air conditioning bills can add up!

Are there expensive amenities like an indoor pool or a staffed front desk?  These drive up fees quickly.

Is the building new construction and still being managed by the builder?  Builders are notorious for underestimating fees (and often not adequately funding reserves.)

Finally, a buyer needs to look at reserves.  There is no right or wrong answer on funding reserves.  Condo boards make decisions annually about the amount they need for their annual operating expenses, and the amount they want to put aside for future capital repairs and improvements (new roofs, new windows, redecorating common areas, etc.)  Board members are owners that are elected by other owners.   Just like some owners save for a rainy day, so do some Boards.  And just like some owners live paycheck-to-paycheck and pray that nothing breaks, so do some Boards.  So having fees that are too low could indicate that a building is not properly funding its reserves, which could lead to future special assessments.

More Resources:

Search the MLS for properties

Contact us to discuss your home search

Attend a free First Time Buyer Seminar

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This report comes on the heels of another direct hit on buyers: FHA’s recently announced increase in the monthly mortgage insurance premium of .25% beginning with case numbers assigned on or after April 18, 2011. FHA Commissioner David Stevens said “After careful consideration and analysis, we determined it was necessary to increase the annual mortgage insurance premium at this time in order to bolster the FHA’s capital reserves and help private capital return to the housing market,” said Stevens. “This quarter point increase in the annual MIP is a responsible step towards meeting the Congressionally mandated two percent reserve threshold, while allowing FHA to remain the most cost effective mortgage insurance option for borrowers with lower incomes and lower down payments.”  This means that FHA buyers who have a ratified contract AFTER that date will have a higher monthly payment, so plan accordingly and get those offers in during EARLY April!  On a $400,000 loan it translates into an extra $83 in your monthly payment.

Interest rates have a huge impact on affordability, especially for first time buyers who typically have lower down payments than 2nd or 3rd time buyers who are rolling equity over from a previous home.

Related posts:

1. Proposed Changes All Point to Higher Interest Rates to Come The DC area mortgage market is about to get hit...

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The Jefferson is a Sunrise Senior Living Community.  It consists of two high-rise condominium towers within a block of the Ballston Commons Mall and Ballston metro, and as such they get plenty of hits from buyers looking for affordable options along the Orange Line in North Arlington.

So why are these condos so cheap? First, you must be 55 or older to purchase there, and all units come with not only a condo fee (about $100-150/month for a 1BR), but a hefty Service Fee which is mandatory for all residents.  Service Fees start at approximately $1925/month for a 1BR and can go up to over $3700 for a 2BR/den and even more for larger units.

But the Service Fees, while high, sure make life more comfortable for the Jefferson’s senior residents: it covers one meal a day in the restaurant-style dining room, weekly housekeeping and linen service, scheduled transportation, lifestyle and leisure activities, exercise and wellness programs, an indoor pool, spa and fitness center, and a host of other items.

Condos are available for sale or for rent (from private owners).  There are plenty of units available.  At the time of this writing, there were 32 units available, ranging from $115,000 (1br/1 ba)  to $649,000 (3br/3ba).  Be warned though: financing one of these units for purchase is very tricky.  And given the amount of inventory available, selling them in certain markets can be quite tricky as well.

Not a senior but still looking for an affordable option along the orange line?

That’s a tall order, but try Colonial Village, Taft Towers, Adams House, the Circle, Cardinal House, or the Chatham.   River Place also remains affordable, but since it’s a co-op on a land lease, I don’t recommend it.   (Co-ops are much more common, and not on land leases, in the District, and come with some nice advantages.  Read more about condos vs co-ops here.)

For more options, drop me an email or give me a call.  I’d be happy to talk to you about pricing and options on condos along the orange line, where I live.

If you’re looking to buy a unit at the Jefferson, contact me.  I visited this and many other local communities while searching for a home for my own Mom recently and would be happy to share what I learned on my tours.

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- The credit (yes, that’s a CREDIT, which is much more valuable than a simple deduction) will be $7500 .

- Eligible properties will include condos, co-ops, and single family residences.

- The credit is available to those with an AGI of less than $70K ($140 for joint returns), and is phased out above that limit.

- Credit is available only to first time buyers, defined as those who have now owned in the previous 3 years and who purchase between April 8, 2008 and June 30, 2009.

- A portion is to be repaid each year for 15 years, so it’s not exactly free money, but rather will operate more like a ‘loan.’ However, it is a ‘refundable credit’, which means that even if you owe absolutely nothing in taxes, you can get this money refunded to you when you file. If you sell the property before the 15 years are up, then you will be required to repay the balance of the credit. Clearly Congress is trying to gear this opportunity towards those who intend to stay in their residences for the long term.

Though this isn’t as generous as first planned, this nonetheless is a great way for first time buyers to get an up-front $7,500 to help with down payments and closing costs, enabling them to take advantage of this buyer’s market sooner.

As I’ve commented in this blog many times, I find it takes first time buyers a minimum of 3 months to find a home they want at a price they’re comfortable with, so this deadline of June 2009 gives buyers about 9 months to get started, in my estimation. However, real estate prices often fall sharply in the Fall and Winter, so you may want to get started sooner than later, so you can maximize how far that $7,500 goes!

Stay tuned as this bill makes its way through committee.

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I have a client who is very interested in co-ops, so I wanted to try to get some facts to support the potential resale issues; broadly speaking, my impression of co-ops was that they were cheap to get into, but very tough to get out of when it’s time to sell.

I was surprised to find that for the most recent six month period, MLS data showed that in zip code 20009..
Statistic: Condos / Co-ops
Units sold: 156 / 33
Days on Market: 60 / 53
Avg Sold Price: $366,574 / $304,321
Source: Metropolitan Regional Information System

Now, I already knew that the average price of co-ops was much less, and the number of units sold would be much lower, after all, there are many more condos than co-ops in Washington, DC. But, I was certainly surprised by the Days on Market total–turns out co-ops sell just as quickly, if not more quickly, than condos. My guess is that this is because of the low price point–an entry level buyer, and $52K is quite a difference for someone trying to get into their first place. Not to mention that co-ops, often in older buildings, are frequently much larger units than today’s condos.

My point? Perhaps just that I may have been too hasty to condemn co-ops–though I am still adamant about the land lease co-ops. And there are still major pitfalls for a buyer to be aware of: Board Approval, possibly higher required downpayments, limited options for financing, the potential inability to rent the unit. But for the right purchaser, co-ops could be a great opportunity, and the topic deserves more study and I’ll post again soon.

And now for my legal disclaimer: Information deemed reliable but not guaranteed. Do not rely on this information without verification.

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First, a disclaimer: I am just not a fan of co-ops. Something about having to get approval of a Board before you can buy property just rubs me the wrong way. And the captive financing–by which I mean you can only use the one or, if you’re lucky, two approved lenders, who certainly know that if you want the unit you have to go through them (guess what that does to your rates?), well, it’s just not in keeping with the capitalist spirit. The MBA in me bristles at it. Co-ops are almost always cheaper than comparable condos, and for good reason.

The financing is one disadvantage, but the biggest drawback I’ve learned of is the “land lease” co-ops. Here’s how it works: when the co-op is formed, they only have a lease on the land that the buiding is on. It’s usually very long term, say 99 years. River Place in Rosslyn is like this. Guess what happens when the lease is up? Everyone gets kicked out, and the building and all its improvements (that means your unit too!) revert to the LAND owner. You get nothing! It’s just like having an apartment that you pay to remodel, but when the lease is up, your landlord gets it all at no cost. River Place’s lease is up in about 50 years. That ‘s why the units there are so darn cheap compared to condos…they decline over time as the lease end approaches. I wonder whether people within the 30 year window at the end will even be able to get a loan? It will sure stink to be an owner in that window. Good luck trying to sell!

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