10 Important things to consider before you purchase a condominium. (Part 1, 1-5)

When it comes to buying real estate, condominiums are interesting alternatives to single-family homes. Whether for first time buyers or seasoned investors, condominiums have some inherent advantages but also pitfalls that can snare the unaware. In fact, they say there are two main reasons people buy condominiums: Because they're cheap, and/or new. While those may be significant factors in many buyers' decision making, there are pros and cons to condo ownership.

Of course, when you purchase a single-family house you get the land underneath, not just the space between the walls, but SFR’s tend to appreciate better and their values stay more stable. They also afford more privacy from neighbors and pride of ownership as you can improve them at will. But condos afford a low-maintenance lifestyle and amenities that are hard to match in a house.

Therefore, if you are considering purchasing a condominium, understanding the unique traits of condos can make all the difference between the dream home and the nightmare purchase.

1.  The value paradox.

In many hot real estate markets, condominiums sometimes appreciate precipitously in value, especially when they are brand new. But research shows that condo values also drop much more quickly that single family homes when the market declines and even in normalized markets.

2.  Hidden restrictions and ratios.

There are a few key condo ownership statistics to follow before you buy and even during your tenure as owner. Why? Banks and lenders considered condominiums somewhat of a different animal than single-family houses, duplexes, halfplexes, and even townhouses. They understand there is much more risk involved with lending mortgages against condos, so they buffer their risk by looking at a few key factors. If these ratios don’t measure out, then the bank will not issue a mortgage. For instance, most banks have an owner/investor ratio they consider. If too many units in your condo complex are owned by investors and rented out (compared to owner occupied units,) then they see this as a signal of value volatility, therefore might not lend against the property for a new buyer or a refinance. To combat this, condo associations often restrict the number of units that are allowed as rentals, or even dictate a no-rental policy.

The same is true with delinquencies. It’s hard to get a mortgage for a unit in a complex where too high a percentage of owners aren’t paying their association dues. Fannie Mae, Freddie Mac and the Federal Housing Administration, which buy or insure most mortgages, do not approve condos with delinquency rates higher than 15 percent. Complexes with a significant number of foreclosures, short sales, or delinquent property taxes may also raise red flags in the lending process.

These are big problem if potential buyers have difficulty getting loans. Even if the sales price is deemed fair and the condo appraises, the owner oc./rental ratio may negate the deal. And no buyers = no closed sales = a possible severe decline in values.

3.  Supply and demand.

The balanced scales of supply and demand can be tipped very quickly (and not in your favor) if a developer comes in and breaks ground on another condo complex in your area. All of a sudden, your complex will be “cold product,” dropping your values. Also, there are far more condos in one concentrated area than single family homes, so there’s little to differentiate you other than lowering your price when it comes time to sell.

4.  Location and neighborhood.

Words of wisdom to live by are that “The neighborhood makes the condo and not the other way around.” The most beautiful condo development in a marginal area can mean they are overpriced and still inconvenient, as tenants need to drive far to enjoy their surroundings. Of course, if they are developing restaurants, nice parks, and shopping areas around your condo, it could be a wise time to get in.

5.  Developer reputation.

The great thing about condominiums is that you know who the builder is so it’s easy to look at their track record. Do a little research into other condominium projects they’ve developed and how they’ve done and over time, with resale, design, maintenance, and the strength of the ever-important condo association. Are they brand new to the development game or not based in the area? You will also know how much of their sales model is based on hype and promotion versus building quality projects with long-term value and a solid reputation in mind.

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Stay tuned for part 2 of this blog next week, when we outline condo associations and fees, special assessments, and other things to consider when buying a condominium.

15 Charming house warming traditions.

1. The term “house warming,” originates from the actual act of warming the home.  Going back centuries, long before central heat, neighbors and friends would celebrate a new home by bringing firewood over as a gift.  They’d try to fill up every fireplace and light them, heating the new home as a literal and symbolic gesture of warmth.

2. But the lighting of fires and warming of the house also had another practical use, as it was widely believed that it expelled any evil spirits that might be residing in the home.  It was commonly believed that homes that sat vacant were considered occupied by “spirits” over time that needed to be exorcised before it was safe for children to live there.

3. In aristocratic England in the 1800’s, King Edward III mandated that housewarming parties were to be restricted to ‘certain ranks,’ or wealthy people.  For those who qualified they were elaborate affairs, sometimes with 10,000 guests attending a house warming party!

4. A traditional housewarming gift consists of bread, salt, and wine, still popular at some churches in Northwest Florida.  Bread is so the house will never know hunger, salt so life will always have flavor, and wine so joy and prosperity may be enjoyed forever.  

5. In French, the housewarming party is called a pendaison de crémaillère, or "hanging of the chimney hook,” a term that dates back to medieval times.

6. When the house was done being built, the new owners invited everyone who helped with construction to dinner as thanks.  The food was made in a large pot hung over the fire.  They regulated the temperature by adjusting the chimney hook up or down.  So the tradition became that the hook was the last thing added to the house for good luck, and a celebration of those who helped.  

7. The tradition of potluck and universal meals from friends and neighbors stems from this tradition of a large pot of food hanging from the chimney hook.

8. In ancient Germany, oak trees were considered the “trees of heaven,” and so Ancient Norseman deemed acorns the symbol of protection.  They placed acorns on windowsills to ward off evil spirits and bless the house with safety, a tradition that’s translated into acorn-themed housewarming presents. 

9. Offering pineapple as a housewarming gift goes back to the time of Christopher Columbus, when he came upon the Caribbean island of Gaudalupe.  The island was rich with pineapples so Columbus and his crew started taking some with them on return trips to Europe, so they became a symbol of hospitality, safe return, and a welcome gift.  

10. In some countries, bluebirds are given as a gift as they’re believed to bless the new home with happiness and good luck.  Still to this day, people sometimes give bluebird-themed gifts, like china or wall hangings, as gifts.

11. Germans celebrate a house warming with characteristic practicality, bringing gift certificates as presents and also a homemade dish for the first meal, and of course something to wash it down with.

12. In Thailand, Buddhist monks come perform rituals at the house alongside family and friends for good luck and blessings.

13. In India, the house warming ceremony is called “Gruha Pravesh,” or “Gruha Pravesham,” which translates to “Entering New House.”  In some predominantly Hindu areas, a sacred cow is the first to enter the new home.

14. “Burden baskets,” are a tradition that originated with the Apache Indians.  They placed these baskets at the front door to capture the worries and stress of daily life, or to symbolically leave their burdens at the door.  Baskets that were woven together also symbolized community, family, and wholeness.  

15. In Scotland, a frog is seen as an omen of good luck and fertility, so a frog (or wooden or ceramic likeness) is often given as a housewarming gift.

The 25 Biggest Mistakes Home Buyers Make.

1. Over borrowing:

Homebuyers sometimes get caught up in the frenzy when searching for homes and start putting offers down for much more than they can afford.  Your dream home will be a nightmare if you can’t really afford it!

2. Underestimating home improvement costs.

The rule of fixing up or remodeling a home is this – expect it to take twice as long and go double the budget as planned.  The little things – towel hangers, window treatments, and doorknobs can add up to big bucks and once you get started you won’t want to stop!

3. Estimating initial moving and settling costs.

It usually costs more than anticipated to pack up your former home, get everything moved, and settle into your new home.  Those quick trips to Target and Bed, Bath & Beyond can add up faster than anticipated!

4. Buying the ‘outlier’ house.

It may seem like a good deal at the time but you’d be wise to avoid the biggest home on the block, the house with the funky floor plan, houses with garage or patio additions, or any strange characteristics that may come back to bite you when you try to resell. 

5. Don’t buy out of frustration.

Putting offers down on homes and not having them accepted can get super frustrating, especially in market with tight inventory.  Stay cool, calm, and collected when buying a home – anticipate that it could take months of searching and during that time you stick to it like any other financial plan, not an emotional purchase. 

6. Don’t be over cautious.

Buying a home can be such an intense and overwhelming process that buyers sometimes suffer from ‘paralysis by analysis,’ scrutinizing every single decision and losing so much sleep over it that they shut down from fear – often losing out on great deals and opportunities.

7. Not listening to the market.

If you want a mansion for $200,000, by all means go looking, but if there just aren’t any mansions anywhere near that price then the market is telling you something.  Listen to it.  Just like sellers need to adjust their strategies and do price reductions based on market conditions, so too should buyers make sure their expectations are realistic. 

8. Don’t buy just on price.

Getting the lowest possible price doesn’t mean you got a good deal if you’re not happy in the property.  Price is one factor but remember that finding the house you love and want to stay in for as long as possible is what really determines the overall value of a real estate transaction.

9. Don’t buy too small.

If they say “location, location, and location,” are the biggest factors when buying a home, I’ll add a fourth, “square footage.”  It’s easy to remodel and fix up a home but it’s difficult and incredibly expensive to add square footage – and your house will always be worth what similar square footage floor plans are going for.

10. Not talking to your CPA.

Even if it’s not tax time, communicate with your CPA or tax preparer before and after the real estate transaction.  When you close on the house, what you can write-off, and other strategies may save you a lot of money –or cost you – so it’s important to get your tax professional in the loop.

11. Listening to the wrong advice.

The moment you start the buying process (or selling) it will seem like everyone is an expert and has advice for you.  Be careful who you listen to – unless someone is a successfully and wealthy investor or real estate professional, you might want to take their advice about the market, interest rates, and the economy with a grain of salt – or block it out all together.

12. Not using your agent to the fullest.

As a buyer’s agent we work for YOU and only you, so please utilize our services to the fullest.  Ask questions, discuss strategy, and share any thoughts, circumstances, or factors that are influencing your home buying decisions.  We are on the same team so we love it when a client sees it as such so we can work to get them their dream house!

13. Not getting fully prequalified first.

Buyers are wasting their time and precious money if they don’t go through the complete process of getting preapproved with a lender before they start looking at homes and putting down offers.  Don’t worry – it’s painless with a good lender and you’ll feel empowered by knowing exactly what you can afford and how much your future payment will be.

14. Not looking at your credit score 6 months ahead of time.

It’s a good idea to get a copy of your credit report 6 months or more before you’re ready to even start the home buying process.  Up to 40% of credit reports have some sort of errors, and surprises, duplicates, or even identity theft are very fixable – but can take time.

15. Overpaying for charm.

I know you love the tiny, overpriced home because the bathroom and kitchen are remodeled, but please realize that’s the exact reason it’s overpriced!  Cosmetic remodeling and basic redesign like paint, flooring, landscaping, fixtures, and tile are weekend projects that shouldn’t make you toss your buying strategy out the window.  Too often, buyers pay too much for small homes that have been remodeled – a big ‘no-no.’

16. Not looking at the neighborhood.

Remember that you’re not just buying the home but you’re buying into the neighborhood, and while you can remodel and change your home, you have no control over your neighbors.  Walk the neighborhood, talk to a few neighbors, ask questions, look at reports, and go by at night or on weekends a few times.

17. ‘Shotgunning’ unrealistic or non-serious offers.

Just like some buyers suffer from ‘paralysis by analysis,’ others become too aggressive, shooting off offers like they were flying paper airplanes.  As a general rule of thumb, don’t submit an offer for a property unless you will be happy – and willing – to go through with the transaction if it’s expected.

18. Not thinking long-term resale.

Yes, you have to pay more for a great property, but that value will grow under your care, allowing you to cash in even bigger when you sell it down the road.  The better the property, the better you take care of it, and the longer you hold it, the more cash it will put in your pocket.

19. Thinking the Good Faith Estimate is set in stone.

Remember that it’s just an estimate, and what time of the month you close and other factors can swing your actual closing costs widely higher or lower.  Expect variations and keep a cushion so you won’t be out of money after the closing.

20. Not negotiating.

Everything is negotiable!  Of course you don’t want to waste everyone’s time by asking for the bizarre or ridiculous, but don’t be afraid to bounce back with reasonable counteroffers that “sharpen the pencil” on terms and conditions.  The longer you keep a seller (or buyer) negotiating, the more invested everyone becomes in the deal so it can get done!

21. Waiving a home inspection.

If there is a #1 mistake buyers make, this would be it.  Not getting a home inspection is like buying a million dollar racehorse without checking to see if it has bad knees.  You’re not saving a few hundred dollars – you’re taking on huge amounts of liability, future costs, and disappointment in the future.  Get a home inspection, and carefully review your pest inspection, disclosures, and possibly a roof certification with your agent. 

22. Falling in love with one house.

It’s easy to become emotional about the “one” house that was just “meant to be,” only to become distraught when you don’t get it but remember – a lot of other people are out there buying with the same sentiment in mind.  Think of the home buying process as a long term financial transaction and you won’t feel married to just one house. 

23. Making contingent offers.

Though less prevalent these days, an offer that’s contingent on you getting your home before closing might have more pitfalls than benefits.  Be sure to go over the pros and cons of contingent offers – and other options - with us before you get too excited and sign on the dotted line. 

24. Not understanding short sales.

Over the past few years, buying a short sale resulted in great deals for a lot of buyers, but it’s so important to understand the nature of the transaction before you jump – from timing to costs to what it will be like to deal with the bank.

25. Expecting to find everything on your wish list.

When we first meet and start talking about the ideal home you have, broken down into a wish list, I’ll encourage you to prioritize what’s most important in a home from 1-10.  It’s almost impossible to find absolutely everything you wanted in a home, but if we find the most important factors – price, neighborhood, size, floor plan, etc. then the minor, end-of-the-list details will be forgotten by the housewarming party!