How Condo Buyers Can Avoid Paying Too Much: Ten Essential Tipsby Kevin Tomlinson
Whether you're a first-time buyer or a seasoned professional in the real estate game, purchasing a condominium can be an intimidating task, fraught with financial pitfalls as well as potential profits. It's an emotional process filled with difficult choices-and each decision you make has money riding on it. Finding the right condo for your family's needs is tough enough; knowing how to avoid paying too much for that fantastic living space is another job entirely.
As a professional Realtor® who has helped countless buyers find their dream home and save money at the same time, I've developed this guide to help you avoid the potential hazards inherent in the condo-buying process. I'll show you how to make certain you've found the right home, as well as how to negotiate a price to your advantage. These are lessons you truly can't afford to learn through trial and error.
Tip #1: Determine Your Condo "Minimums" Ahead of Time.
Understand that there are two condos out there vying for your attention-one that meets your needs and one that fulfills your desires. In a perfect world, you could choose that three-bedroom condo with room for your family to grow, and still have the perfect floor plan for entertaining and social gatherings. Is that big kitchen more important to you than a few extra rooms?
When you begin shopping for your condo, you'll encounter properties you'll fall in love with for different reasons. It's best to list the features that you want before you start shopping. Break your list into two categories-"Needs" and "Desires"-and prioritize the items accordingly. Understanding what you truly need in your condo as opposed to what you'd like to have will help you to keep your priorities straight as you shop around.
Don't let emotion cloud your judgment. Satisfy your needs first, and if you can fulfill some of your desires in the process, so much the better. What's important is to understand the difference before you get caught-up in the excitement of the hunt.
Tip #2: Equip Yourself with a Pre-Approved Mortgage.
If you're not buying with cash, getting a loan pre-approved is the smart way to shop for a condo. It tells sellers that you're a serious prospect, and you know in advance the maximum mortgage you can afford.
I've seen buyers make the mistake of learning what they qualify for, but not getting pre-approval in writing. You've gone this far, so take the next step-get it in writing.
The good news is that it's easier than ever to qualify for a home loan.
Tip #3: Communicate with Your Realtor.
From finding the right condo to inspections and negotiating the best deal, the condo search process can be exhausting for even the hardiest souls. That's why wise condo buyers have a Realtor® in their corner. Most sellers you encounter are certainly going to have professionals on their side. Having a pro on your team is the safest way to ensure that you get the best deal possible.
Once you have a clear, detailed picture of the condo you want, make sure your agent has the same picture. This communication is critical. Otherwise, you'll both waste time looking at homes that hold little interest for you.
Also, make sure your Realtor knows your priorities. Your shared goal is to find an excellent condo that meets all of your needs; your Realtor will then try to satisfy as many of your desires as possible.
Tip #4: The Cliché is True... Location, Location, Location!
The desirability and resale value of your condo-to-be depends on location more than any other single factor. Again, don't let emotion get in the way of a wise investment. No condo is an island, and the value of yours is influenced by what surrounds it.
There are several elements that combine to create a good location. Your first consideration is the neighborhood itself. Every neighborhood has its own unique character; you need to make sure you'd be comfortable in the one you're thinking of living in. Take a long walk and observe carefully. Do people take pride in their building? Talk to the neighbors and ask questions that give you a better feel for the property. But be careful not to appear judgmental-you might be talking to a future neighbor.
If the building is to your satisfaction, look for units on the market in the area. Extremely large units surrounded by smaller ones tend to appreciate less than a large condo among other large condos. Conversely, the smallest unit in the building tends to be "pulled up" by the other units in the building. However, it might take longer to sell a smaller unit when the time comes because many people are unwilling to pay extra for the neighborhood.
The outer edge of a neighborhood is usually not good for resale value. There are noticeable dividing lines between dissimilar neighborhoods. It could be a difference in architectural styles, property use or something else. Look for a condo in the middle of a neighborhood of similar buildings; it will hold its value better.
An exception to this rule is a building on the edge of a neighborhood bounded by water, parkland, a golf course or other open space. Natural boundaries appeal to buyers, and these "edge" condos can actually command a better price. Be mindful, however, of the planned use for the open space. A public park is nice; a new freeway, strip mall or industrial center isn't.
Other things that can negatively affect property values are traffic, sounds, smells, etc. Be sure to give the neighborhood a long, hard look. The condo you're interested in may be perfect, but if the neighborhood has problems, your investment won't be worth as much when the time comes to sell.
Tip #5: Enjoy the Present, but Consider the Future.
Buying a condo is a big investment. If you can stretch a little today financially to buy a unit that you can grow with-whether it's having a child, running a home-based business, or turning a spare room into your personal gym-do it. In the long run, it will probably be less expensive than moving up to a marginally larger unit when the need does arise.
Tip #6: Pay Attention to Red Flags When Evaluating a Condo.
When evaluating the advantages and drawbacks of a particular property, be sure you know the difference between acceptable and unacceptable problems. Some issues-peeling paint, worn carpeting, ugly wallpaper-are cosmetic and can be easily remedied. You can even use these "problems" during negotiations to lower the asking price. After all, you'll need to spend money to bring the condo up to snuff.
Make careful note of the issues you observe that can be used to your advantage. Don't nit-pick, however-if taken to extremes, you could end up alienating the seller and creating a hostile atmosphere.
In my experience, spending a few hundred dollars on a professional condo inspection is the best investment you'll ever make. A professional inspector brings experience in examining a great many homes, good evaluation standards, and an unbiased perspective. And a written report can be an excellent negotiating tool.
Don't let a condo's positive attributes blind you to very real problems. If you do, the chances are good that you'll end up spending much more money than you ever expected at some point down the line.
The good news for buyers is that the law now requires sellers to make complete disclosure of known material defects. Make sure to get this in writing. And carefully consider how these defects might influence what you're willing to pay.
Tip #7: Some Fixer-Uppers Are "Good-Byes," Not Good Buys.
You may be the sort of person who looks at a condo in need of significant work as "a challenge" and an opportunity to make money. Many people have bought fixer-uppers at below-market rates, invested a little sweat equity or more than a little money on renovation, and then eventually put it back on the market at a profit.
But if your unit isn't priced low enough, you won't recoup your investment of time, trouble and expense. Before you proceed, do a careful evaluation of what you'll have to invest. Then, consult with your Realtor to learn what you can reasonably expect to earn when you put the unit back on the market. And be sure to consider the unexpected-there's no such thing as a "sure thing."
Tip #8: Put on Your Best Poker Face.
One of the costliest mistakes you can make is letting the seller know how much you love his or her condo. Once you've let it slip, you can just about forget about negotiating the price-the other side knows how motivated you are. In fact, a seller may see this as an opportunity to squeeze a little more money out of you even when you've made a good offer to start with; no matter how wonderful a home is, keep it to yourself.
Keep your own situation to yourself as well. Information can be used against you. How much you're willing to spend, the size of mortgage you can afford, your move-in deadline-it all can be used to extract more money out of your pocket. Be sure to tell your agent everything he or she needs to know to be effective on your behalf-whether you plan to pay cash or the size of the mortgage you can afford, etc. However, keep your personal circumstances and timeline to yourself.
Inversely, knowledge is power. The reasons behind a sale can often be used to your competitive advantage during negotiations. For example, a seller whose company has transferred him to another city is probably more motivated to sell than someone who is still looking for a new home.
Other signs of a motivated seller include a vacant unit, or a condo that's been on the market for several months with reductions in the asking price.
Tip #9: Don't Be Pressured, but Do Negotiate.
While you want to move expeditiously once you're in negotiations, don't let the other side pressure you into a quick close. It may be a sign that there's something you should know, but don't. And the reason could be worth money.
Sometimes, the seller's Realtor will try to scare a hesitant buyer with the threat of another serious potential buyer. Don't fall into this trap-it will only cost you money. If there is another buyer, then the seller's agent will try to get a bidding war started. In these situations, whoever wins also loses because the buyer ends up overpaying.
If there isn't another buyer, there's a good chance that "the other deal" will fall through and the seller's agent will come calling. Be sure to let the other side know that you might be interested if this were to happen, before you walk away.
You may be the type of person who prefers a hard-and-fast price tag on everything. "I don't like to haggle," you say. But negotiation is the key to getting a good deal! If your goal is to get the best condo possible for the least amount of money, then you better be prepared to play. Your Realtor can assist you with these sometimes-stressful negotiations.
Tip #10: Ready - Set - Purchase!
Good properties move fast! Once you've made up your mind to buy a condo and you've lined up your Realtor, be prepared to make decisions quickly. If you find the right unit today but aren't ready to buy until tomorrow, you may already be too late. It's that simple-if you have fallen in love with a particular condominium, someone else in the market probably has as well.
If this all sounds like a lot of work, it is. But this is to be expected when you're buying anything of such great value. And you'll thank yourself and your Realtor when the outcome is to your satisfaction.
Please feel free to call me if you would like further explanation on any of these tips, or if you have any real estate questions at all.
My mission is to share the knowledge and insights I've gathered from years of experience in the industry in order to help you optimize your property investment.
The Most Respected Name in Miami Beach Luxury Condos.
About the Author
Kevin is a Realtor with Esslinger-Wooten-Maxwell [EWM], one of the largest real estate firms in America, and the top-producing, exclusive Miami-Dade and Broward County affiliate of Christie's Great Estates, Inc., a subsidiary of Christie's International PLC, the London-based art auction company founded in 1766.