Condo Ownership is the perfect lifestyle for some, but not for others. If you’re thinking of buying a condominium, you must do your due diligence regarding the Condo CCR’s (Covenants, Conditions and Restrictions). Also important is the financial stability of the Condominium (Budget and amount in Reserve Account).
“Condominium” is a form of ownership, not a physical description. In Georgia, stacked flats, mid-rises and high-rises are almost always condominiums. However, town homes can be fee simple ownership or condominium ownership. In condominium ownership, the unit owner owns everything from the sheetrock in as well as from the floors up to the ceiling. The outer walls and roofs are commonly owned by and maintained by the HOA. The land is also commonly owned and maintained by the HOA. There have been cases where a contract is written up as fee simple, and at the last minute the closing attorney’s title report shows it as a condo, and the entire loan has to be redone, causing a long delay in the closing.
Suzie Homeowner is thrilled that she has found a lovely condominium that is in her price range in a wonderful location. She has her agent submit an offer with a prequalification from her lender stating that she qualifies with an FHA loan for that price range. The offer is accepted, but a few days later Suzie finds out that the monthly HOA fee is $300 per month, and this amount will be added to her monthly payment in the qualification process, just as the property taxes are. After sweating it out, Suzie’s Loan Officer tells her she still qualifies.
Suzie loves plants and flowers and plans on filling her patio and front stoop with as many pots as possible and planting seasonal coloring in her front yard. Her fiancée will be filling up his pickup truck (he works for a landscape company) and bringing the flowers from Home Depot shortly after she closes. She will be working from home, so the den will be perfect for her office. This is a pet-friendly condo, so her little dog will be moving with her, and her fiancée’s two Rotweillers will be visiting frequently.
A week before closing, the Loan Officer discovers while doing the mandatory HOA check that the monthly HOA fee delinquency is at 14.8%, so they just squeaked by, as lenders will NOT close if this delinquency exceeds 15%. This is a recently passed strict lender requirement that is causing contracts not to close. Also, a condo complex must be FHA approved in order to close with an FHA loan, and fortunately this condo complex was FHA approved. FHA no longer does spot closings.
Two days before closing, Suzie finally gets her hand on the CCR’s and condo documents, and fortunately the Budget and Reserve Fund are healthy. She is relieved to see that they will allow her to work from home, as long as this does not increase traffic and/or vehicle count. There is a limit of two decorative items/plants on the front stoop, and individual homeowners are not allowed to plant anything in their yard. No vehicles with business branding are allowed, but luckily the sign on her fiancée’s truck is magnetized and can be removed when he comes to visit, but he will not be able to park his boat on the property. There is a limit of two pets per unit, and no dogs over 30 pounds are allowed. No way to shrink those Rotweillers down that much! Oh well, when they get married she can just rent out her unit, and they can move somewhere else. Oops, no they can’t – no rentals are allowed at this condominium!
Suzie weighs the pros and cons and decides she wants to go through with the closing (after all, she will lose her $2,000 earnest money if she does not close, as at this point she is no longer protected by the Due Diligence clause which expired two weeks ago). She is told by her insurance company that the condo has a master hazard insurance policy (cost is included in the monthly HOA fee), so she will only have to obtain a “condo” policy, which covers the inside including her flooring, appliances, etc.
After she moves in, Suzie discovers that her next door neighbor parties at night on a regular basis, but fortunately the Condo rules designate “quiet time”, so they must cease during those designated hours. However, the neighbor’s barking dog apparently hasn’t been told about the quiet time! After getting no results by mentioning this to the homeowner, Suzie will have to report this issue to the Board or Management to get it resolved.
To sum it up…
Condo rules are made and enforced in order to protect the appearance and the value of the complex as a whole. Potential condo buyers should thoroughly check out all aspects of the condominium they are considering, assuring that it fits their individual lifestyle. This must be done early on, while they are still under a Due Diligence period. What is positive and totally acceptable for one person may be totally unacceptable to another!
Special thanks to Carolyn Nicholes for her help in putting this together!
Tags: ann bone, atlanta, atlanta real estate, Better Homes and Gardens Real Estate Metro Brokers, Buyers, CCR's, condo, condo ownership, condominium, covenants, down payment, fee simple ownership, FHA, first time homebuyers, georgia, high-rises, hoa, home ownership, homeowners association, insurance policy, Metro Brokers, mid-rises, mortgages, Real Estate, real estate agent, stacked flats