Do condos depreciate in value or rise like houses?

[drusba]

You cannot know what any particular condo really costs until you start looking to buy one. Annual dues payable to an assoaciation mainly cover all the costs to clean, maintain and repair common areas (everything outside your internal condo), provide any security, cover any taxes chargeable to the association, and any other costs related to the common areas. The price of a condo, whether it has gone up and down over the years, and related dues, vary significantly from one condo project to another. A condo in a high rise building in the city, with a front desk, security, a pool, parking garage, and an exercise facility, close to a downtown area in a city can be very expensive and easily have monthly dues well north of $1,000. A 20 unit condo in a suburb of the same city with a small outside parking lot, little grass to cut and few trees or bushes to maintain, no security force, no front desk, can cost a lot less and have monthly dues of less than $200. Moreover, dues can be significantly affected by utilities although for those it is probably a wash -- if the condo association is paying for gas, electricity, or water that you use, your dues can be significnatly increased but then you do not pay for those services otherwise.

How much to budget for price and dues before you start looking is thus difficult to determine until you actually start looking at units that might interest you. Typically, the owner/broker will provide not only curreent price but also current dues and taxes, but if you have any real interest at all, you need to insist on seeing the condo documents that include all rules that apply and a dues breakdown. Condos are required to budget for many things inculding capital reserves for future projects, and it is important to study those before making any offer -- though the associations are legally required to do things they do not always get it right, e.g., if capital reserves to replace and repair common areas such as roofs, paved areas etc, is not adequately reserved you could easily be looking at high special assessments in the future. Moreover, you also need to check on the property taxes. What you get is the known amount being paid but the big unknown is the next year and researching what local authorities may be doing is important, e.g., if you were buying in Chicago in 2015, all of Chicago was being reassessed that year, creating for many higher assessed values and thus higher taxes for 2016, while at the same time, the city is in an effort to raise the tax rates to cover underfunded pension liabilities, with the net result that one buying in 2015 could easily see a 20% tax increase in 2016.

 

[DVC-Don]

Ten year old thread rises!!

 

[JaxDad]

Zombie!!!

 

[eliza61]

Not only that, you have to realize that you assume "risk" when you buy into a condo. My BIL bought a brand new vacation condo and guess what the builders didn't put proper storm sewers in, so they are currently suing. (it is a lake property)
In the meantime a "Special Assessment Fee" was instituted. You have no control over that and have to pay up. His was very expensive over a 2yr period!!!
So, bottom line you might have to pay up for something and lose some of your cash that you had not expected.

It is all about LOCATION & LUCK that is for sure!

Why is that any different than when you purchase??

Our first townhome was a money pit. new construction, builder use sub grade material AND left the country when the local teamsters found out his entire work site was illegal workers? first winter there our backyard sunk. literally. found out the builder goofed on grading the land and then backfilled it with sand. that was fun. the actual best thing that happened was the end unit caught on fire and the other houses suffered damage, our insurance paid enough for us to almost rebuild, but we still had to borrow 10k from my dad

I'm with everyone else, just like homes its all about location
:

 

[mnrose]

Our real estate agent (in the very busy, expensive SF Bay Area) said "condos are the first to depreciate and the last to recover" when the housing market takes a tumble. It tends to be an entry level market, and tends to appreciate much slower in value even if other properties are also appreciating. Some people absolutely WILL NOT buy a condo and therefore you eliminate those people as potential buyers.

 

[MickeySP]

well it's 10 years later has it appreciated?

 

[tvguy]

Yes, a Zombie thread on a topic that is still very current.
All I can say is the brand new 1,100 square foot, 2 bedroom 2 bath condo in a nice area DW rented in 1982....because they couldn't sell them.......was listed for $75,000. Zillow today lists it's value at $87.333. In 2005 it was valued at $233,000.
The 1,750 square foot house 6 miles away we chose to buy instead in 1983 for $100,000 is listed by Zillow as being worth $334,000. If I ignore that it was worth $497,000 in 2005, I think the condo would have been a bad financial move.

My nephew worked at UC Davis, and bought a condo in this college town. When he took another job, it took him 5 years to sell it. He had no trouble renting it out, but in a college town, a condo is nothing more than a fancier apartment, that few people want to buy.

 

[apirateslifeforme]

Well, for what it's worth...

DH bought his condo in the summer of 2005. Townhouse, 2 bedrooms, 1.5 baths, full private basement. We sold it earlier this year...after fixing up the inside (painting, new carpet, new toilets, new sink in the upstairs bath, new bathtub and fixtures, new kitchen and storm door, new light fixtures, etc)...we got $30k less than what he paid. A few doors down, a girl who gutted her place when she bought it, sold for $14k less than she paid. Several units have been put up for sale, then we watched the asking price steadily go down for about 6 months until it's taken off the market completely.

However, in this particular complex, the property owner has done NOTHING to keep up the outdoor appearances. The clapboard is literally peeling off. Every other year, he has someone "repair and seal" everyone's deck. This person (also a tenant in the complex) does a really lousy job. We still had rotted boards and rotted nails popping up, and he missed huge spots when he sealed it. It's not in a good location - there's a liquor store on one side, a gun shop on the other, and a Dunkin Donuts across the street (trust me - NOT a selling point!). There were 48 units, one parking spot per unit, and only 10 visitor spaces, so woe to those who have a 2nd car - and one (single) guy had three vehicles. There have been LOTS of foreclosures in the past 10 years, so that brought the value down as well. A lot of owners moved out, but instead of selling, they rent, and honestly, the people we were getting...the kind that let their kids scream outside until midnight on a school night, that get angry with you if you don't want their kids playing on your deck, that let their kids bust your screen door on Halloween, that say "What do you want me to do about it?" when you watch them hit your car twice in five minutes and call them out on it...

ETA: I should probably add that in the assessment, the value of the total property did go down by about $40k in these past 10 years. Comparable condos in other complexes in the same town (2-bed, 1.5-bath, private basement townhouses) - including one complex just across the street - turn over regularly for 3x what we were asking.

 

[tvguy]

Well, for what it's worth...


However, in this particular complex, the property owner has done NOTHING to keep up the outdoor appearances. The clapboard is literally peeling off. Every other year, he has someone "repair and seal" everyone's deck. This person (also a tenant in the complex) does a really lousy job. We still had rotted boards and rotted nails popping up, and he missed huge spots when he sealed it. It's not in a good location - there's a liquor store on one side, a gun shop on the other, and a Dunkin Donuts across the street (trust me - NOT a selling point!). There were 48 units, one parking spot per unit, and only 10 visitor spaces, so woe to those who have a 2nd car - and one (single) guy had three vehicles. There have been LOTS of foreclosures in the past 10 years, so that brought the value down as well. A lot of owners moved out, but instead of selling, they rent, and honestly, the people we were getting...the kind that let their kids scream outside until midnight on a school night, that get angry with you if you don't want their kids playing on your deck, that let their kids bust your screen door on Halloween, that say "What do you want me to do about it?" when you watch them hit your car twice in five minutes and call them out on it...
.

Okay, I'm confused. In a Condo, you own your unit, and YOU have joint ownership of the public/common areas which are under control of the Condo Association Board. How do you have a property owner? Is he the President of the Board, or an employee of the Condo Association? And if so, if the homeowners don't like what he is doing, all a majority has to do is tell them to fix things....assuming there is in money in the condo accounts for that.

 

[DebbieB]

Okay, I'm confused. In a Condo, you own your unit, and YOU have joint ownership of the public/common areas which are under control of the Condo Association Board. How do you have a property owner? Is he the President of the Board, or an employee of the Condo Association? And if so, if the homeowners don't like what he is doing, all a majority has to do is tell them to fix things....assuming there is in money in the condo accounts for that.

I own a townhouse, I also own the land it is on. My association dues include lawn care and care of common areas, $69 a month. The common areas are owned by the association. The board consists of homeowners and there is also a management company. Any outside changes must be approved by the board and they also do annual inspections. Last year I got a letter saying I needed to paint my basement door, it had rusted over during the winter. Rules are pretty strict, we call the board "the rules police". Like your Christmas decorations cannot go up before Thanksgiving and must be down by January 15. No inflatables. No signs except garage sales (day of only) and for sale. You can put sports signs up but only if they are in the finals. No flags other than the American flag.

 

[tvguy]

I own a townhouse, I also own the land it is on. My association dues include lawn care and care of common areas, $69 a month. The common areas are owned by the association. The board consists of homeowners and there is also a management company. Any outside changes must be approved by the board and they also do annual inspections. Last year I got a letter saying I needed to paint my basement door, it had rusted over during the winter. Rules are pretty strict, we call the board "the rules police". Like your Christmas decorations cannot go up before Thanksgiving and must be down by January 15. No inflatables. No signs except garage sales (day of only) and for sale. You can put sports signs up but only if they are in the finals. No flags other than the American flag.

This is what I would expect in a condo/townhome situation. And if a majority of the homeowners disagree with the board, they can overrule them.