If you are thinking about buying or selling a condo you have some different considerations from buying a house, or even a townhouse. One that you may not think about is financing, which has become more challenging for condos in the last few years.
Measuring the number of properties available for sale relative to how many properties are actually selling gives us the months supply of inventory. When looking at the supply by housing type, you can see from the chart above that houses, townhouses and condos were all selling at about the same rate relative to supply and demand in 2005 and 2006. In 2007 the over-supply of new condo developments started to cause them break away from houses and townhouses a bit. Then 2008 changes in financing made it more difficult to buy a condo and months supply of inventory jumped significantly for condos... and has remained higher than for townhouses or houses ever since.
If you are a buyer looking specifically for a condo this can be a good thing... higher supply can mean lower prices. You may need to bring more cash to the table, however... and the condo association sometimes raises red flags for your lender.
- The whole complex must be FHA approved to use 3.5% down FHA financing... or DVA approved to use veteran 0% down financing; newly built condo complexes often have this approval, but many older complexes do not
- Conventional financing may require a 5-10% down payment, sometimes even more depending on whether your lender feels the association raises any red flags
- Because of financing challenges and depressed prices, cash sales are more common; if you are a buyer financing your purchase, this can put you at a disadvantage if you are competing with a cash buyer
- Red flags include...
- high percentage of rentals
- any law suits
- high rate of association fee delinquencies
- large number of special assessments in a short time period
- inadequate association reserve funds
- property showing lack of proper ongoing maintenance and high upcoming replacement costs without adequate plans to cover them
- lack of a functioning homeowner's association
- How to find FHA or VA approved condos
- What is the difference between owning a condo and a co-op?
- Condo vs Townhome vs House
- No Dogs Allowed...about CIC association restrictions
- About dogs and townhomes...
- Detached townhomes...isn't that a house?
- Townhouse Styles, Part One - Detached and Quad/4 Corners
- Townhouse Styles, Part 2 - Side by Side
- Condo Styles
- Cooperatives (Co-ops, Senior Coops)