In this crazy 2022 real estate market, I have had a number of people consider purchasing a condo rather than a single family home or a townhome - and they want to know if there is any difference between buying a condo, townhome or single family home! So today's post will talk about buying a condo - look for my future post on buying a townhome!
The first thing you should keep in mind that many of the same principles you would apply to buying a single family home or townhome will also apply to buying a condo. You want to look at the location, the quality of the construction of the building, the layout, etc. But buying a condo has a few other layers to it that you don't get with townhomes and single family homes.
First, you need to know just what is a condo. It is really not a design statement - most condos tend to be in multi unit buildings that have several floors to them (think about 5100 Monument Ave. or Tuscan Villas or Shannon Green - all of these are condos and the buildings may have many units in each). But there are other neighborhoods in the Richmond area that look like townhomes, but because of the way the ownership was deetermined when the neighborhood was developed, they are really condominiums (think about Westleyen Condos in the Short Pump area for instance). With a condo you are not only buying the space inside your own unit (normally called a "walls in" type of ownership where you own and are responsible for everything inside the 4 walls of your unit, including the drywall) and you also own a prorated portion of the "common areas" (hallways, walkways, parking lots, etc). These common areas are maintained by the HOA and the maintenance is paid for by the monthly/quarterly/yearly condo fees each owner pays. Many HOA's will have a professional management group actually managed these things on behalf of the owners, but there are also a number of condo communities throughout the Richmond area that are self managed.
Some buyers automatically eliminate some communities based solely on the condo fees that are being charged. I would advise not to do that - an underfunded HOA may lead to issues in the future - for example, the HOA needs to maintain the siding of the building but doesn't have enough money to do the repairs when it first becomes a problem and so they put it off - at some point the siding will have deteriorated so much that now the owners have to pay a special assessment (in addition to the monthly fee) in order to cover the cost of the siding replacement.
One of the bigger challenges with buying a condo is the financing. Lenders now require a "Condo Review Questionnaire" to be completed by the HOA prior to closing. If the HOA does not fill it out, the lender could end up denying the buyer's loan. The buyer has to pay a fee to cover the cost of the Questionnaire. The reason for the questionnaire is to ensure that the condo community meets the guidelines for the loan. One of the questions that is asked on this questionnaire is if there is pending litigation. There was a case in Texas where an engineering study in 2005 indicated that there was a damaged retaining wall that needed to be repaired. The HOA did not repair this and it ultimately caused damage to the foundation of the building, which then allowed units to have moisture damage and mold. Two owners sued the HOA in 2005 and won their case but this was then appealed and it took until 2017 for this to be repaired. So the lender will want to know about this!
Other risks that could be with the condo community would include too many rental units in the complex, too much commercial space or not enough money in reserves. Other risks the lender may see could include the project is not yet completed, the developer hasn't turned the HOA over to the owners, the community allows short term rentals (as in AirBnB), or a single person or entity owns more than 10% of the units. If the lender feels that the complex is a risky complex they could deny the loan.
In Virginia, Virginia law says that the seller must furnish what is called a Resale Certificate and a Disclosure package, which is a full set of condo docs, including any amendments as well as the most recent budget. The buyer then has 3 calendar days to review these documents and during this time, the buyer is able to terminate their contract for any reason without penalty.
One more note: if you are going to be using FHA financing to buy your condo, you need to first make sure that the condo complex is FHA approved. There are a number of communities throughout the Richmond area, including in many of the older communities in the city of Richmond, which do not have FHA approval. And within some communities, such as in Shannon Green, you may find that certain sections of the community has FHA approval and other sections in the same community do not have FHA approval. It is important to find this out before you make an offer, or even before you go out and look at communities, to make sure that you will be able to get an FHA loan.
If you are thinking about buying a condo in the Richmond area, make sure you work with someone who understands the condo market in Richmond! As someone who has sold condos throughout the Richmond area, I am happy to help. Feel free to call or email me if you have any questions or I can help!