QUESTION: Although you often give helpful hints about purchasing or selling single-family homes, we cannot recall seeing any such advice about condominiums. We are contemplating purchasing a condominium in the District in a recently converted rental building. What thoughts do you have about these units?
ANSWER: "You pays your money and you takes your chances." That's a short summary of my views about the many condominiums that are now on the market in the Washington metropolitan area.
Consider a condominium as equivalent to community living: It has its pros and cons. On the positive side, you probably cannot find a comparable single-family house in the District for the price of most condominiums. And you don't have to water the lawn or shovel snow.
On the negative side, however, you cannot be your own boss. All major (and even many minor) decisions are made by the condominium board, the property's governing body. And a majority of those voting--which could be a small minority of the total condominium membership--elects that board. Thus, if you do purchase a condominium, you must take an active role in the operation and management of the association. Otherwise, it will be no different from a rental unit, except for the tax benefits of condominium living.
Unlike a cooperative, where the unit owner generally owns a share in the building but not the apartment itself, the owner of a condominium apartment owns the unit. Therefore, it is recorded in the local land records, and can be taxed and foreclosed upon. Thus, lenders can have security in the condominium unit, and are willing to lend money to a condominium purchaser.
I am concerned about resale, however. With all the unsold conversion units still on the market, why should anyone buy your unit when the developer down the street can offer a better deal, such as lower interest rates, warranties, and perhaps a few free months occupancy?
This is not a blanket condemnation of conversion condominiums. Many units are excellent investments, and I am satisfied that you usually will be able to rent units in the District of Columbia, even if you have trouble selling them.
If you plan to purchase a unit, here are some suggestions:
* You will be given a large volume of documents by the condominium developer. Read them carefully, and discuss them with your attorney and other experts on real estate before signing the contract to purchase.
* Analyze the financial data. How much money has the developer placed in reserve to be used for repairs of such items as elevators, roofs or heating equipment? Remember, in a few years the developer will be out of the picture, and if the cash reserves are not sufficient to correct problems, you will be obligated to pitch in through a special assessment made by the association.
* Investigate the seller's reputation, especially any earlier projects which will give you an opportunity to check out the ability and stability of the developer.
* What warranties will you get? Some builders are offering the shortest warranties (i.e., the statutory one- and two-year term), while others are giving up to 10 years through the national Home Owners Warranty program.