Condo Fees - Easing First Time Homebuyers into Homeownership
Condo fees have something of a bad rap. Often misunderstood, I find that a lot of first-time home buyers can be hesitant about buying a condo or townhome because of the condo fees. Yes, these are an additional expense that you will have to pay, but the point that I think is being missed by first-time home buyers is that these condo fees are covering costs that they would need to pay anyways if they owned a freehold home.
I don’t want to say condos are the lifestyle for everyone, because there are definitely people who would be happy shoveling their own driveways and mowing their own grass, but it’s so much more than that. So what are the perks of condo fees, you might ask? There might be other amenities within the common elements (shared space between condo owners) such as pools, gyms, saunas, etc. that are available for your use. Your home insurance is much less, as you are typically only getting insurance for the interior of the unit, the exterior is insured by the condo corp. And for property taxes, when compared to a similar detached home, the taxes are much less. When the time comes for the roof to be replaced or the driveway to be repaved, the condo corporation/property management deals with the contractors, and you don’t have to pay a huge lump sum, because you’ve been paying it in manageable chunks over the time you’ve lived there. Now you may be thinking, what if they don’t replace the roof in the five years that I live here? I still paid all those fees. Well, yes, but the roof wasn’t falling apart, was it?
Not all condo corps. are made equal, so it’s really important to ensure that there is some due diligence done in researching the one you’re specifically looking at buying into. This will be up to your lawyer when they look at the Status Certificate — a document containing information regarding the financial status of the condo corp., any legal issues, any proposed work to be done and if the reserve fund is adequate to cover it, etc. — and by your Realtor, who will do basic research or have an existing knowledge of the condo corp. (another reason why hiring a local Realtor is so important).
So what are the cons of condo fees? If new work is proposed that the reserve fund doesn’t have adequate funds to cover, then a special assessment is put in place where each unit owner has to pay extra for a period of time to cover the additional costs. Unfortunately, this can happen at any time and can be for any amount. Good condo corps. will make it reasonable, but that isn’t always true. Again, this is why the reputation of that condo corp. and the research done by your lawyer and Realtor is vital.
Overall, using a condo for a short term as part of your home ownership plan isn’t so bad. Having a pool in the summer that you don’t have to maintain, well that’s pretty great! Not having to worry about shoveling snow in the winter, that’s not so bad either! Someone else taking care of hiring contractors to replace the roof or pave the driveway might be a weight off your shoulders. This also leaves you more money for indoor renovations, to make the place your own and to build more equity into the home for resale. And look, condos don’t have to be your forever home, but they are definitely a good stepping-stone to full-on, single, detached home ownership if that’s what you choose to pursue for your next home.