Buying Your First Condo: Smart Research Pays Off

By Lisa Lee

For many people, a condominium is the first home that they own. It becomes a springboard that builds equity and enables them to move into something larger, like a single-family home.

If you’ve never bought a home before, doing smart research with the help of your REALTOR will ensure your first condo is your perfect condo. Here is what Stephanie Chan, a top-selling REALTOR and partner at Locations, advises:

Make sure the condo meets loan requirements

If you are applying for a government loan program, such as a Veterans Administration (VA) or Federal Housing Administration (FHA) loan, verify that the building is VA or FHA-approved. Many condos don’t meet the minimum owner-occupant ratios needed.

Also check to see if a single owner owns more than 10 percent of the building, or if the building has a commercial space, as “these can create issues for securing a regular loan. If they do, there’s a chance that a portfolio loan with 25 percent down payment would be needed.”

Make sure it meets your requirements

Pets, parking, laundry and common spaces: Don’t make assumptions about these based on what you see or are told. Read the building’s written rules and regulations.

Not all buildings are pet-friendly, for instance, and those that are may have different rules. “[They] typically limit the size and/ or weight of the pet,” says Chan. “Some buildings limit the number of pets per unit and some charge a one-time registration fee or additional safety deposit.”

Ask about maintenance fees and special assessments

Condo residents pay homeowners’ association fees to cover ongoing maintenance and repairs. Big-ticket repairs for elevators, roofs and lanai railings can quickly use up condo reserve funds, so these types of projects often result in extra assessment costs to owners. Older buildings tend to have more issues.

“Some assessments may last for a year or two, but assessments for up to 10 years are not uncommon either,” says Chan.

Compare the monthly fees to those at similar buildings. Fees that seem too low or too high could be red flags. Also, review the homeowner’s association budget to see if financial reserves are sufficient.

Find out the permit status of improvements

Ask to see the condo association approval letter and permit history. (Permit history is also available online.) “Buildings often require that a licensed contractor do the work,” says Chan. “If you purchase a unit with an enclosed lanai, check with the seller’s agent to confirm that the work was legal and permitted. Otherwise it may be in violation of the house rules and association bylaws.”

Chan also advises buyers not to lock in their interest rate until after they have confirmation of permit approvals. If permits are required but haven’t been secured, the permitting process can take longer than the anticipated closing date and you will be subject to weekly penalties on the rate lock.

Confirm the rental terms

If you plan to buy a condo unit as an investor, be aware of rental policies. “Don’t just assume you can rent out the property as you please,” says Chan. “Depending on the building, there may be a minimum number of days required for a rental. Thirty days is most common.” Other properties may be zoned “resort” and allow for day-to-day or week-to-week rental.

New: Reserved Housing

There are brand new condo options in Kakaako called “reserved housing,” which are geared toward new homebuyers and available below market value (if qualified). Work with a professional REALTOR to see if these condos are right for you.

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