Intro: It's never been a better time to buy a condo – falling prices, record-low mortgage rates and an array of newly-built, vacant units make it very affordable. However, it's never been harder to buy a condo with tighter borrowing guidelines for both buyer and condo associations.
There's a condo glut in most areas of the country. Overbuilt markets like South Florida, Las Vegas and Chicago are plagued by foreclosures and delinquencies; some condos are selling for as little as 10-thousand dollars. It might seem like a once-in-a-lifetime deal, but could quickly become a financial nightmare ... so you need to do your homework.
Take SOT:Donna DiMaggio Berger, Esq.
Managing partner of Katzman, Garfinkel & Berger (2:21-2:35)
" So, one of the first things I would recommend for people who are looking to buy condos today is find out what the percentage of delinquencies are in the community ... even better ... if you can get a copy of the budget so you can see what the bad debt is on the budget."
You see, when a condo owner gets behind on their mortgage, they most likely stop paying condo association dues. If enough owners fall behind on their dues, the association cuts the budget. What comes out of that budget could be the upkeep of common areas, vital maintenance issues like roof repair, or in some cases, insurance coverage for the building.
A copy of that budget will show you just how much debt is owed and what percentage of owners are not paying their dues.
And unless you're paying cold hard cash for a condo unit, it may be next to impossible to get a mortgage.
Take SOT: Donna DiMaggio Berger, Esq. (2:49-3:01) "For communities where they have high delinquencies or where there is a very high percentage of non-owner occupants, the FHA, especially in Florida, is making it tougher all the time to get FHA financing in those communities."
That's not to say you can't get a mortgage on a great-priced condo ... you just have to make sure the building meets the Federal Housing Administration requirements of no more than a 15 percent delinquency rate.
For those with enough cash to purchase a condo, you still should keep in mind that the less cash a condo association has – the more it will cut maintenance services and amenities.
Some associations also may charge unit owners special assessment fees to make up for the budget shortfall.
Take SOT: (17:06-17:29) "I do not want to discourage people from buying condominiums or cooperatives or homes inside of home owners associations. These can be phenomenal bargains, they can be phenomenal places to live, and you can find yourself using amenities and recreational facilities you could never otherwise afford on your own. I think it's just important to make an informed decision ... know what you're getting into ... make sure it's a good fit for you."
For more real estate guidance and tips, visit Bankrate.com. I'm Kristin Arnold.