Monday, 25 March 2013
6 Reasons for Never Buying a Condo
When you buy a free standing house, this means that you own the land on which your house sits. When you buy a condo, you only own the space in your unit. You don't own the land right beneath your apartment or even the walls, or the balcony. In many cases you are only a shareholder of plumbing systems that run through your unit. Nevertheless, when you are assigned a title to the unit you become classified as a homeowner.
Even though you are the titled owner of the unit, you are not the only one with a key. The superintendent will often come into your unit to let the maintenance crew check your fire alarm system and clean your central air conditioning. So much for privacy.
2. When the real estate market goes south, condos are usually hit the worst.
When the downturn hits, condos usually are the first to decline in both sales and price. Back in 1980s during the last housing bubble in Toronto, condos were the first to decline in value and also their price declined the most compared to other housing options. So much for having a condo as an investment.
3. Condo boards can be nasty.
Condo associations can dictate what kind of curtains you are allowed to have on your windows, whether you can store bicycles on your balconies and what weight your dog should be. By dictating what you can do and what you can't, board directors often alienate the unit owners and sometimes board politics gets prioritized by the directors over the real job of maintaining a building.
Often board directors are very inexperienced as usually they are volunteers who are elected by the buildings occupants. In most cases they don't get paid a penny for their effort in running and maintaining the building. When condo owners start complaining to board members, they usually quit within a year or two and more amateurs become board directors who have no idea how to run a 100+ unit building.
4. Shared walls
When you sign away 25 years worth of mortgage payments for a 600 square ft. condo apartment you sign up for a life of the vacuum noise coming from the unit above, the loud music coming from the unit to the right, and loud Eastern European couple fighting every night. It is a game of Russian roulette when it comes to what kind of neighbors you would get. Unlike many rental apartment communities where you can call your management office and eventually get your neighbors evicted if their noise level doesn't drop, in condominium things are not as easy.
5. Sudden repair fees and special assessment
Congratulations, the water chiller on your condo's rooftop is broken. It cannot be repaired and needs to be replaced. In order to that your condo corporation needs to rent a crane which would lift the chiller on top of your roof. If your building does not have a necessary reserves to cover the costs of repairs, the condo board may introduce a special assessment.
A special assessment is when a condo board has to impose an additional payment on top of your maintances fees. This happens when there is unexpected shortfall or unexpected expenditures occur in the budged. For example, the water chiller that needs to be replaced and there is not enough money in the reserve fund to cover the replacement. You can read some horror stories about special assessments here.
Now think about all the glass condos that had been built in Toronto during past decade. They already experienced glass falling off the balconies and windows seals breaking. As those glass condos age, their inhabitants might be on the hook for the multi-million dollar repair bills. Glass skin condos are nowhere near as durable as the brick skinned buildings which can last centuries. On top of that, new glass condos in Toronto are as energy efficient as huts built a millennium ago.
6. Condo fees
This reason for not buying a condo mostly effects new buildings as developers try to artificially keep condo fees to the minimum to attract buyers. New condos often charge as low as $0.40 per square foot in monthly fees. In most cases anything above $0.70 per square foot is considered expensive depending on what sort of amenities the building has and what kind of utilities are included in your monthly payment.
Once the developer turns the building maintenance to the homeowners association, directors often discover that individual fees must be set higher in order to pay for the expenses. For example, a new condo building at 22 Wesley St. had a 37% condo fee increase in it's first year alone mainly due to moving to a 24 hours per day schedule for security guards. Overall the building doubled its condos fees during the span of four years.
As the building gets older, condo fees will go upward and it may affect the value of your unit. No one wants to buy a place with high maintenance fees so in order to attract the buyer you may need to reduce your selling price. Glass buildings will be potentially hit the worst in the long term as they will require more extensive repairs than brick skinned buildings and thus require higher condo fees.
6 Reasons for Never Buying a Condo