How risky is condo buying?
As humans we all have a different tolerance for risk. Some of us like the 80-year-old woman whose harness malfunctioned while skydiving will try almost anything. Others are convinced that jumbo jets were not meant to fly. Most of us are somewhere in the middle, which is a good thing for the real estate market.
As we all now know, buying real estate, whether it’s a single family home, condominium, townhouse or commercial property, comes with some risk not unlike buying stocks and bonds. Since there are no real guarantees, every buyer needs to find what his/her risk threshold is.
The Florida condo market was severely impacted with foreclosures and short sales, which has created a mixed blessing for potential buyers. On one hand, prices are depressed making purchasing more affordable. On the other, future foreclosures and owners who may not be paying their condo fees become the responsibility of all owners.
Verifying the financial health of condo associations has always been important, but is even more so now. If the associations are short on funds, cutting back on maintaining the common elements could very well be the first thing to go. If you’re considering a condo purchase, walk around the community and pay special attention to the landscaping, pools, tennis courts, exterior paint and any other common elements that could be suffering as a result of a financial short fall.
According to Florida law, if you have a written purchase offer on a condominium, you will be given a set of homeowner association’s documents to review. These documents will include articles of incorporation, bylaws and rules and regulations which basically will govern the association. But more importantly, what you need to review carefully is the most recent budget and reserves. These two financial documents will give you a good idea of how much money has been saved for future repairs. They will disclose special assessments and will also indicate owners who are in arrears. Also ask if there are any pending lawsuits against the association which may or may not be part of the financial package.
You will then have three days to review all of these documents, and you also can stipulate that you want to include an attorney’s opinion. During this time frame, if you find anything objectionabl, you have the right to rescind the purchase agreement without penalty. Just remember, when you buy a condominium you become one of a collective body of owners, not all of whom have the same financial discipline you may have.
All of this being said, based on the April Manatee County condo sales statistics from the Manatee Association of Realtors, the market appears to be doing pretty well. Closed sales were up 6.1 percent from 2011, and pending sales were way up at 12.3 percent for the same period, which is a very important future indicator.
In addition, the median sales price was up 13.3 percent, as was the average sales price at 6.6 percent from last year. The new listings show a zero percentage change, which means fewer properties are coming on to the market which could push sales prices up even further.
Most financial advisors and certainly all real estate professionals think it’s a great time to buy. And with the way properties have been selling on Anna Maria with multiple offers not uncommon, I would have to agree. Although buying real estate at this time may not be as risky as jumping out of a plane, it could still hurt when you land, as by now we all should know.