condo

Condos – Part 1 - Pluses

It is obvious to many that condos have filled a very important spot in the real estate landscape. With the cost of land in many urban and suburban areas accelerating at such a rapid pace for so many years, the cost of building a single family, detached home on its own lot has simply gotten beyond the reach of many potential homebuyers.

In fact I can remember at point in time in the early 1970’s when a builder in my then hometown was selling homes for $20,000. Today in California the “developer fees” paid by a builder to local jurisdictions for infrastructure and schools can easily top that. Then the builder has to buy the land, grade it, put in utilities, and build the home. No wonder that the final price of the average freestanding home will exceed $400,000 in my area.

The solution to the affordability issue has been to increase the density of homes on a property. This spreads the cost of the expensive land over more units, making them less expensive. The units are typically smaller in size too, which also make them more affordable.

The legal definition of a condo may vary from state to state, but in a condominium, you don’t actually own the unit itself. You usually own the volume of space contained within the walls, a three dimensional “box,” if you will. You have the right to occupy your box and sell it to someone else. The association typically owns the physical structure and has responsibility for maintaining it. Instead of owning a particular unit, you own a share of the land and structure. Your title report might read that your property is unit 34 plus, say, a 1/75 th interest in the entire parcel occupied by your projects 75 units.

Note that several types of condos are possible. There are the garden type, single or two-story homes that may be two, three, or four units attached in the same building. More common in many areas are townhomes, or row houses as they are sometimes known, that are built side-by-side. Then there are “stacked” condos that may be several stories high. Finally, there are high-rise projects that may be 20 or 30 stories high. These are most common in urban centers.

There are reasons other than low cost to buy a condo. In particular, young, first-time homebuyers might not be fully prepared for the rigors of homeownership. Other owners might like the ability to leave home for a week and not worry about their home. Others might like the amenities, such as a pool, tennis court, or golf course that is part of the community. So-called in-fill projects in downtown urban areas attract buyers who like a location within walking distance of their offices. Still others, particularly those who are retired, like it that they do not have responsibility for maintaining the property. My wife and I live in a condo and wouldn’t consider moving.

You can see that there are a number of homeowners who would be more attracted to such a home rather than the traditional home with a picket fence in front.

Finally, the value of a condominium is based not on just its intrinsic real estate characteristics, location, size, quality, and so forth, but also on the amenities, and, importantly, the financial health of the association. Not all associations are equal, and therein lies a potential problem.