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Redfin Real Estate Forums :
Washington DC/Baltimore :
Re: Condo fee concerns
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Condo fee concerns
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snoopy
Newbie
Posts: 3
Registered: 06-24-2008
Message 1 of 10
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I am looking to buy, but am concerned about condo fees that seem low now but could go up unexpectedly -- jeoparding my ability to afford my monthly mortgage and condo fee payments. One new "luxury" condo complex in VA that I am potentially interested in has relatively low fees -- under $400 a month, which includes gas, water, heating, fitness room, and cable TV. But that seems too good to be true. Other condos, including new and older ones in VA, tend to have much higher fees of between $600-$800 a month. If I were to buy in this complex, how can I know whether my condo fees would double or triple 6-36 months after I move in? I seriously worry that the low advertised condo fee is a gimmick to entice people to buy, but that the intent is to jack these up substantially later on.
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06-24-2008 06:46 AM
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Re: Condo fee concerns
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JanelleS
Redfin Staff
Posts: 1262
Registered: 07-05-2007
Message 2 of 10
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Normally, home owner due increases are voted on by members of the home owners association. When this is done, it is usually to maintain/repair a large project such as a new roof through out the entire condo community.
But since this complex is new, I understand your concern that it may be a marketing gimmick. There are no old HOA minutes to review. I would suggest speaking with the listing agent to determine how the HOA will be created, and if they forsee any limits to the amount of the dues.
Good luck.
Janelle Saylor | Real Estate Operations
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06-24-2008 11:52 AM
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Re: Condo fee concerns
[ Edited ]
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Venturion
Super Contributor
Posts: 1282
Registered: 12-28-2007
Message 4 of 10
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First, all condos in NoVA are "luxury" LOL. I've never seen one advertising otherwise. Second, another factor for a condo is how many units have sold and are owner occupied. That gives you a sense of stability and solid base for dividing the common expenses. Third, ask the builder for a draft budget of common element expenses and upkeep. Divide that budget by the number of units to see how close it is to the initial dues forecast. Fourth, ask if a COA management company has been selected. There are some usual suspects in the area. You can make sure they are active members of CAI, the industry group. Fifth and finally, the fees will inevitably rise. You shouldn't see a greater than 10% annual increase (as another user pointed out) unless mismanagement or an act of god has occurred. If you can't handle a 10% rise in your dues, you may be buying beyond your budget. That said, many COAs are mismanaged and you should plan to be an active condo owner by attending meetings and holding accountable the Napoleons in charge. As a general rule of thumb, I count every $100 in dues as an extra $20,000 in purchase price. So if you buy a $400,000 condo with $500 in monthly dues, you could buy an equivalent house without HOA dues for $500,000.
Message Edited by Venturion on 06-25-2008 06:38 AM
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06-25-2008 06:36 AM
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Re: Condo fee concerns
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snoopy
Newbie
Posts: 3
Registered: 06-24-2008
Message 5 of 10
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Thank you. These are excellent insights and rules of thumb that will assist me in the decision making process. I certainly don't want to buy more than I can afford (the reason so many people are in trouble now). I owned a small condo years ago in Arlington (bought and sold at the wrong times); and was on my board, so I am fully aware that fees have to increase over time just to keep the property in working condition and to plan for future repairs. New buildings can be a problem in that we don't have a board or bylaws yet, and have no way of knowing what dirty laundry might be hidden (no board minutes to look at). And I heard that in Miami where there is a total meltdown in the market that condo owners are seeing their fees skyrocket, because of low occupancy and the fact that the fees now have to be spread out among fewer actual residents Thanks again.
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06-25-2008 09:46 AM
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Re: Condo fee concerns
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Venturion
Super Contributor
Posts: 1282
Registered: 12-28-2007
Message 6 of 10
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Snoopy - check the purchase contract. Some condo builders will take responsibility for making up the "denominator" if enough units haven't sold. We had this exact issue in our neighborhood with a recent building that went from condos to apartments. I feel so bad for the 17 owners in the 160 unit building. On the subject of the contract, lots of builders' marketing arms will give you some BS about not releasing the contract - that you can only see it in the office. Call their boss or their boss' boss until you reach someone with half a brain that can e-mail you the template agreement they require you to use so that you can have an attorney review it long before closing. Are you searching in Arlington again or elsewhere in NoVA? It might be interesting to start a condo thread since I may be buying another condo and I'm sure there are other lurkers here in the same boat. The bloom is off the rose for me for the same reasons you mentioned (being on the board and seeing the dirty laundry), so I'm also looking at SFH and TH.
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06-25-2008 10:34 AM
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Re: Condo fee concerns
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snoopy
Newbie
Posts: 3
Registered: 06-24-2008
Message 7 of 10
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Venturion: Again, great information I can arm myself with to do some due dilligence. Thank you. I am in the early stages of searching (probably won't buy until the fall). I am considering condos, but like you, have concerns about mismanagement and market forces (ie, lots of empty units) driving these fees out of control, so I am also considering SFHs and townhomes. I used to live in Arlington and have friends in No. VA, so would ideally like to live there. But it's expensive, so I may have to look at Silver Spring and Tacoma Park, MD, as well. Metro access is an issue -- I drive, but my significant other doesn't have a car, and I am an urbanite at heart, anyway. Would be happy to consider a condo thread.
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06-25-2008 12:49 PM
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Re: Condo fee concerns
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dzg
Visitor
Posts: 7
Registered: 06-30-2008
Message 9 of 10
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Keep in mind that condo fees are also a way of maintaining the common areas. I know it seems crazy to pay to air condition the corridors or fix a pipe in someone else's unit. However, imagine that you have a home and you have a roof problem. Let's say it leaks, uncovers a greater issue, and it costs you $15,000 to fix. Have you been saving a few hundred dollars each month towards repair and maintenance costs? Even if you saved $200/month for 3 years, you're not even halfway home on that expense. In a condo, your $400/month pays for not just common area maintenance, but common area repairs. Unfortunately, the older a building gets, the greater the fees. I agree that a good quality fitness room adds value as a gym membership typically is $60 per month. A doorman/concierge adds a lot of value as security and someone to receive packages. Property management and property maintenance are also a huge value. I assure you that if you own a single family home you can't put in a maintenance request from your desk at work, come home, and have the problem fixed. At the same time, that is just about everything positive I have to say about condos. Noisy neighbors, HOA's telling you how you may or may not make changes to your unit, non-responsive management companies...there are a lot of potential headaches in a condo building that are not in your control.
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07-08-2008 12:55 PM
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Re: Condo fee concerns
[ Edited ]
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FranklyRealty
Regular Contributor
Posts: 197
Registered: 02-26-2008
Message 10 of 10
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Snoopy, you are dead right about condo fees with new buildings.
They DOOOO skyrocket in the first year.
Sure it is decided by the condo board, and they hate to do it, but they have to. The builder puts in artificially low fees so that you get attracted to the condo. Then once the board is set, they are like "WTF" we have to cut everything AND skyrocket our fees.
I live in Clarendon 1O21 in Arlington and after the board took over we cut everything down the the free water and coffee maker. And our rates went up 10% the first year. I think another 5% the second year.
One big part of that was the reserve. The builder left NO reserve for the future. So we had to create a 5 year plan to build a $400,000 reserve (or something like that), which meant increasing fees to build this.
So YES, you have to watch out for that. But that is only 1 of about 5 tricks that new builders will do, so be VERY cautious, and whatever you do, don't go in without an agent. I'm certain that Redfin can guide you through this. Again, don't walk in without an agent. Many do.
Also Redfin just posted a blog on new construction that you should read:
http://blog.redfin.com/blog/2008/07/ten_tips_for_buying_new_construction.html
Frank Borges LL0SA
Broker FranklyRealty.com
Message Edited by FranklyRealty on 07-20-2008 12:25 PM
Message Edited by FranklyRealty on 07-20-2008 12:26 PM
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07-20-2008 09:18 AM
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