Tips and Traps When Buying a Condo, Co-op, or Townhouse

Good Investment?     1What Are They?     1Who Buys Them?     2What Do They Look Like?     2Where Are They Located?     3Why Have Condos and Co-ops Become So Popular?     4Will They Retain Their Luster in the Future?     6How to Decide If a Condo, Co-op, or Townhouse Is Right for You     7The Pros of Buying a Condo, Co-op, or Townhouse     7Maintenance-Free Lifestyle     8Facilities and Services     9Lower Entry Cost     10Better Location     11Luxury Amenities     12The Cons of Buying a Condo, Co-op, or Townhouse     12Rules and Restrictions     12Increased Density     14Monthly Fees and Assessments     14Participation in Governing     15Difficulties in Renting/Selling     16Nine "Red Flag" Questions You Must Ask Before You Buy     17Are the Monthly Fees Reasonable?     18Does It Look Rundown?     19Have There Been Big Assessments?     20Are You Responsible for Any Areas Other Than Inside Your Unit?     21Are the Reserves Adequate?     22What Isthe Tenant-to-Owner Ratio?     25Are There Any Lawsuits Pending?     26How Much Insurance Does the Board Carry?     27How Much Liability Insurance?     28How Much Disaster Insurance?     29Are There Any Unreasonable Rules and Restrictions?     29Buy Old, Buy New, or Buy a Conversion?     33Should You Buy New?     33What Are the Pluses of Buying Brand New?     34What Are the Drawbacks of Buying Brand New?     36Is Buying New a Good Investment?     42Should You Buy a Conversion?     43Was the Job Cosmetic or Thorough?     43The Big Difference between a Rental Unit and an Owned Apartment     45How Do I Know If a Resale Unit Was Originally a Conversion?     46What Do I Look For?     46What about Resale Potential?     48What's the Bottom Line?     52How to Evaluate What You're Buying     53Most Important-Location!     53The Location of the Development     53The "Curb Appeal" Factor     55The Location of the Unit within the Development     55The Design of the Unit Itself     60Getting to the Right Price      63Checking the Inspection and Disclosure Reports     65Why Disclosures?     65Can I Rely on Disclosures?     66What Should I Do with the Disclosures?     66Do I Need a Professional Inspection Report?     69What If It's a Conversion?     70What Will It Cost?     71Where Do I Find an Inspector?     71What Do I Do If the Inspection Reveals Serious Problems?     72Will a Home Warranty Plan Protect Me?     74Living by the Rules     75Why the Need for So Many Rules?     76There Is Conformity     76There Is Stability     77You Get Security     77You Get Investment Potential     77Where Are the Rules Written?     78What Are CC&Rs?     79Can CC&Rs Be Changed?     80What Do the Bylaws Cover?     81Can the Bylaws Be Changed?     81Can the Rules Restrict Who Buys into the Development?     82Living by the Rules     83Beware the Architectural Committee!     85How Do I Handle Myself When Seeking to Make a Change?     87How Do I Handle Myself When I Have Been Fined for Breaking a Rule?     88What Is My Recourse If I Feel I've Been Unfairly Treated by the Architectural Committee?     89Petition the Full Committee and Ask for a Review     90Appeal the Matter to the Board     90Ask for a Vote of the Membership     92Go for Mediation     93Sue the Board and the Other Owners     93Sell Your Property and Leave     94Is There Anything I Can Do to Prepare Myself?     94Fighting the Board     97People Who Run for the Board     97You and the Board     98How Do You Evaluate a Board of Directors?     100Is the Board Active, Proactive, or Passive?     101Is There a Newsletter?     101How Are the Meetings Conducted?     101Does the Development Have a Web Site?     102Is the Management Professional?     102The Duties of the Board     103How Does the Board Protect the Development and Owners?     103Why Does the Board Need an Operating Budget?     104When Should the Board Set Up Reasonable Reserves?     105What Must the Board Do to Collect Fees?     107Why Does the Board Need to Make New Rules?     109Why Must the Board Handle Requests for Alterations?     109What about Overall Operations?     110Additional Duties of the Board     110When an Owner Defies the Board     111Why Would a Member Go against the Board?     111Why Would the Board Not Be Able to Act?     112The True Meaning of Community     118Can I Rent Out My Condo, Co-op, or Townhouse?     119Are There Restrictions against Renting?     120Number of Occupants     121Number of Cars or Motorcycles     121Where Signs Can Be Placed     121Use of Recreational Facilities by Tenants     122Other Restrictions     122What Are Your Responsibilities to the Development?     123Tenant Must Abide by the Rules     123Tenant Must Maintain the Premises     124Tenant Must Meet Approval of Other Owners     124Do I Need a Lease?     125How Much Should I Charge for Rent?     126Should I Become a Landlord?     127Can I Write Off My Rental Costs?     128Tips on Financing a Condo or Co-op     129What Are My Financing Sources?     129Can I Get a Bank Loan?      130Will Builders or Developers Offer Me Financing?     132Can I Get a Credit Union Loan?     132What about a Loan from a Mortgage Banker?     133Should I Use a Mortgage Broker?     133What about Borrowing on the Internet?     134Should I Try a Savings and Loan?     135Don't Forget to Try the Sellers     135What Special Financing Features Should watch Out For?     136What Are Points?     136What Are Adjustable-Rate Mortgages?     137What Are Interest-Only Mortgages?     138What Are Option Mortgages?     138What Are Balloon Mortgages?     139Are There Other Types of Mortgages?     139How to Handle the Purchase     141Should I Check with My Attorney?     141What Should I Do Before I Make an Offer?     142The Right Approach     143How Do I Back Out After I've Made an Offer?     144How Can I Use the Inspection Clauses to Back Out of the Deal?     144What Other Contingencies Can I Use to Exit Gracefully?     146Can an Escape Clause Ever Backfire?     147What Happens After All the Escape Clauses Have Been Removed?     148Bring Your Checkbook to the Closing     150Are There Extras I Have to Pay?     151What If I Don't Want to Pay the Fee?     153Just for Condo Buyers     155What Is an Airspace?     155What Are the Benefits of Owning an Airspace?     156What Are the Drawbacks of Owning an Airspace?     157Can I Buy Insurance to Cover All Risks?     158If There Is Insurance, Will I Be Covered?     159What Other Specific Concerns Should I Have about a Condo?     160What Are My Personal-Use Facilities?     160What about Property Taxes?     161What about Utility Bills?     162What about Laundry Facility Arrangements?     163How Far Away Is Your Car?     163Just for Co-op Buyers     165Differences between Condo/Townhouses and Co-ops     166What Are the Advantages of Buying a Co-op?     167Big Profits, in Some Cases     167Lower Prices to Get In     168You Get Shared Ownership Benefits     169What Are the Big Disadvantages?     169Is a Co-op Financially Stable?     169Is a Co-op Difficult to Resell?     170Can I Get Financing on My Co-op Purchase?      170Why Aren't There Many Co-ops Outside the East Coast?     172Are Most Co-ops Conversions?     172Are There Any Problems with Buying Co-op Conversions?     173How Hard Is It to Buy into a Co-op?     174Why Are Co-op Fees So High?     176Can the Board Keep Me from Renting Out My Co-op?     176Can the Board Determine to Whom I Can Sell My Unit?     177Are There Any Special Rules?     177Can I Be Evicted?     177Can My Ownership Stock Be Sold against My Will?     178Will I Be Able to Vote?     178Is the Board of Directors All-Powerful?     179Will I Be Able to Deduct Interest and Taxes?     179Is a Co-op Purchase a Good Investment?     179Just for Townhouse Buyers     181What Is a Townhouse?     181Is a Townhouse Technically a Condo?     182How Is Title Held?     182What Is the Structure of a PUD?     183What Are the Advantages of a Townhouse?     184Increased Privacy     184Bigger Units     184Less Noise     185Garages and Utility Rooms     185More Open Space      185Better Layouts     186What Questions Should I Ask When Buying a Townhouse?     186Who Is Responsible for the Roof?     186Who Is Responsible for the Lawn, Garden, Deck, or Patio?     187What If I Want to Put in My Own Swimming Pool or Spa?     187Is a View Important?     188Is It Easy to Get Financing on a Townhouse?     188What about Insurance?     189Do I Pay My Own Taxes?     189Is a Townhouse a Better Deal?     189Tips for Selling Your Condo, Co-op, or Townhouse     191Why Would Anyone Want to Buy Your Unit?     191The Trouble with Showing     192Security Gate     193Security Guard     193Difficult-to-Find Location     193No Signs Allowed     194What about All the Documents?     195Should I Help with the Buyer's Financing?     197What to Watch Out for When Carrying Back Paper     198How Much Fixing Up Should I Do?     199What If There Are Structural/System Problems?     200Should I Use an Agent or Sell by Owner?     201Tax Differences for Sellers?     202Index     203