Buying a Condo 101

What is Buying a Condo, Exactly?

So, you’re thinking of buying your first home – Congratulations! Home ownership can be very fulfilling and rewarding. It’s a powerful feeling knowing you will be paying your own mortgage (and building equity!) instead of someone else’s.

The first step, is to get a Mortgage pre -approval through your Mortgage Broker to see what you can afford. For the majority of First-Time Buyers, the most affordable options are Condos.

What is a Condo?

When you think of a “Condo” what comes to mind? Many people think of an apartment, either in a high-rise or low-rise building. But the term “Condo” has nothing to do with building style – it is actually a form of home ownership. A Condo can be a half duplex, a townhouse, an apartment, or even a stand-alone house! What makes a Condo a Condo, are Condo fees, where you are essentially owning shares within the 10,000 share Corporation. These fees go towards certain expenses of the Corporation.

Do all Condos have Condo fees?

Yes. Condos usually have a monthly fees, which takes care of the expenses of the Corporation and also the Reserve Fund – more on that later. A small number of Condos also have an HOA, or Homeowners Association Fee, which is usually paid annually. And, if you ever come across a newly-built Condo that advertises no Condo fees, that just means the fee hasn’t been set up yet. There WILL be a fee!

What is included in a Condo Fee?

That depends on the Condo, but all include insurance for the building itself and Common areas. It does not generally include anything from the walls in, which is the homeowner’s responsibility. Often, Condo Fees cover things like snow removal in the winter and mowing of the lawn and landscaping in the summer. Depending on what kind of Condo you buy, certain utilities may be included in that fee as well.

An important part of your Condo Fee goes towards the Reserve Fund. Think of it as a big piggy bank for the long-term maintenance of the property. There is a 25-30 year plan (Reserve Fund Plan) in place for replacement and repair of items that age out. This ensures that the property is well-maintained in the long term. It does not anticipate unexpected future expenses, but just what is typical based on an inspection (The Reserve Plan Study) every 5 years.

Condo fees can also include exterior maintenance items, such as roof, windows and doors. It is important to know what is covered and what is not.

Special amenities, such as a swimming pool, gym or social / recreation rooms can also be part of the fee. You pay for these amenities, whether you make use of them or not.

Property Management Companies are hired to manage the day-to day operations of the Condo Corporation, organize meetings, collect Condo fees, manage repairs and concerns, and take care of the financial accounting. You want to make sure the money is being managed properly and that repairs and maintenance are completed in a timely manner, and that Bylaws and rules are enforced. Part of the fee goes towards paying for that management as well.

But I Don’t Want to Pay Condo Fees!

All properties, whether they are Condo or Single Family (Non-Condo) have expenses attached. When you buy a Condo, you are agreeing to pay those fees every month, and these fees also get factored in to your pre-approval. Another thing to be aware of, is that Condo Fees are like taxes – they never go down. The key point here, is to determine if you are getting value from your Condo Fee or not.

How Do I Make a Decision With All These Factors Involved?

All real estate purchases have some level of risk. For example, you could buy a house and one week later, your furnace quits! Your sump pumps fails during a rain storm and your basement is flooded. Everything worth doing, like buying a home (your first home!) involves an element of risk. Knowing what the potential risks are, and your tolerance for that risk, can help guide you in your decision to buy.

There’s help for this! I always recommend potential Condo buyers to have a Professional Condo Doc Review done, as a Condition of Purchase. This ensures that you not only have access to all the information available, but it also helps predict potential problems that COULD arise in the near future. While no one has a crystal ball and can predict future events with 100% certainty, having a professional review can help provide additional information and clarity in making an informed decision. The more you know, the better off you are! The decision of where to buy or not is your own, but having additional information and getting questions answered can help bring clarity.

I’m here to help!

Have more questions about purchasing a Condo? Contact me (HERE) to set up a Buyer Consult and share with me what you are looking for in a Condo home. It doesn’t have to be scary and I promise I’ll be here to help every step of the way.