For those looking to buy their first condo, the business of real estate can be a strange, daunting process. Keep in mind that as home prices continue to fall throughout the U.S., it’s important for any prospective buyer to be aware of a few must-know’s:
1. Get pre-approved
“If you’re not paying cash for your condo, you must get pre-approved before you start shopping. By doing this ahead of time, you will avoid many frustrations and also make yourself a more desired buyer. It’s also recommended that you obtain a copy of your credit report on your own. By doing this, you will prevent the mortgage companies you shop with having to run your report before can qualify you. Make sure to order a ‘tri-merge credit report’ with credit scores.
2. Note the condition of the condo building
Not all condo buildings are alike, especially when buying in a renovated vintage building or older building. When you buy a condo, you don’t just buy a condo — you buy ownership in the entire building. And if that building needs a lot of work, then you, along with all the other owners, are going to be responsible to take care of it. When comparing one condo to another in terms of price, often first-time buyers overlook this critical factor and find themselves having to pay for extensive repairs to the common elements on top of what they paid for their unit. That doesn’t mean that a building that needs some work should be avoided, it just means that you need to keep any deferred maintenance in mind when you determine how much you should pay for any given condo.
3. Be aware of the market conditions
You must take the time to see what similar units are selling for in the area. Your real estate broker should provide you with a CMA (comparable market analysis) that will show recent (last six months) sales of similar properties in the area. When looking at this data, you must focus on the most recent sales for the last 3-6 months and also make sure you are comparing apples with apples. What a property sold for one or two years ago is irrelevant. What is being sold now is what really matters. Also focus only on what has sold — what a homeowner is asking for a property does not mean anything, so pay attention to the listings with status ‘closed’ and nothing else.
4. Make an extra payment
Make one extra mortgage payment per year. This effectively turns a 30-year mortgage into a 23-year mortgage. It’s easy to do at tax-return time, or by auto-scheduling half a mortgage payment every two weeks (26 half payments equals 13 whole payments, versus 12 if you pay one per month).
5. Ask to read the minutes
Ask to read the minutes (for the homeowners associations’ paperwork) for the last six months to a year to see what is happening “under the table” before you put in the offer. Most buildings will allow you to read them while in the management’s office. Look specifically for bank loans or outstanding loans and major capital improvement for the next 5 years. Bank loans indicate a red flag as to how financially solvent the building is.”
