Nolo's Essential Guide to Buying Your First Home (9 page)

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Authors: Ilona Bray,Alayna Schroeder,Marcia Stewart

Tags: #Law, #Business & Economics, #House buying, #Property, #Real Estate

BOOK: Nolo's Essential Guide to Buying Your First Home
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But buying new also has these drawbacks:

It costs HOW much?
New houses are generally worth more, but they tend to cost more, too. Developers often offer unique financing alternatives (discussed in Chapter 7), which may make a new house purchase more affordable.

Who’s this guy?!
You might have to deal with the developer’s salesperson or representative, without the benefit of your own real estate agent to protect you.

Not time-tested.
While it’s exciting to get a brand-new home, you’ll be the first to discover whether all the lights work, the dishwasher runs, the water heater heats, and more.

It will be done
when
?!
Developers don’t always finish houses when they expect to, and often don’t compensate purchasers for the delay. Instead, the fine print may release them of liability.

More rules?
As we’ll discuss when we get to condos, some PUDs require all owners to live by a set of written rules. Short of selling, there’s often little you can do to get out of these rules if you don’t like them.
 
Sharing the Joy, Sharing the Pain: Common Interest Properties
 
Maybe a traditional house isn’t for you—perhaps it’s out of your price range, you’re looking to avoid all the maintenance, or you want to live in an area that just doesn’t have many regular houses. In that case, you may want to consider an alternative, like a condominium (“condo”) or co-op.
These types of properties are often referred to as common interest developments (CIDs), because they involve shared ownership or responsibility for common areas like hallways, recreation rooms, or playgrounds. How a place looks physically doesn’t really make a difference—any of these three might look like an apartment, flat, loft, or townhouse; old or new; in the city or the country. (Houses in PUDs count too, but since we’ve already covered those, we won’t include them in this section.)
Are you picturing yourself out on the roof with a hammer, doing your share for the common good? Don’t worry, you won’t likely be asked to perform repairs or fix elevators. But you
will
have to become a member of a community association, which makes sure those things are done. Your monthly membership fee will help keep common areas in good shape and provide a cash reserve for unanticipated or larger projects like replacing a roof. If you want to actively participate in the association, you can attend meetings and voice your opinion—or even get yourself elected to the board of directors. If you don’t, you just write the check and hope the more active owners are like-minded.
There are three types of community associations: planned community associations (for PUDs and townhouses), condominium associations, and co-op associations. We’ll point out any significant differences among them as we go.
 
TIP
 
What the association leaders do.
Though every CID homeowner must join the community association, the board of directors handles the day-to-day work and decision making, such as coordinating repairs and collective services like trash pickup; managing amenities such as swimming pools, playgrounds, and tennis courts; preparing annual budgets; and conducting meetings.
 
Condominiums: Benefits and Drawbacks
 
When you buy a condo, you buy the interior space of your home. Your walls, ceiling, and floors define your boundaries instead of fences and sidewalks. Everything in the common space—be it stairwells, swimming pools, sidewalks, or gardens—the whole community owns together and is financially responsible for. Some of the benefits of condo life include:

Affordability.
A condo often costs less to buy than a house (although in major metropolitan or resort areas, the opposite is sometimes true). Maintaining a condo can also be less expensive, since costs that otherwise might be duplicated—like landscaping, roofing, and some insurance—are shared.

Convenience.
If you aren’t into maintenance, you’ll appreciate that the condo association—particularly in a larger complex—is likely to hire a management company to take care of the common areas. You may also get valuable on-site amenities like a gym or pool.

Community.
Because you’re all part of the same community association, you’ll get the opportunity to know your neighbors, whether you wish to or not.
 
Every rose has its thorns. Some of the drawbacks to condo living include:

Rules, rules, rules.
You’ll be subject to a document called the master deed or Declaration of Covenants, Conditions, and Restrictions (CC&Rs). This sets forth not only rules for the community association management to follow, but rules governing all owners. You’ll be told what you can do in the common space, and even what you can do with or in your own unit.

Buy for less, sell for less.
Condos generally appreciate at a slower rate than houses.
Diet-Time for Fido?
 
What kinds of things do CC&Rs limit? Common examples are:
• whether you can have a pet, and if so, its maximum height or weight
• whether you’ll get a parking space, or whether your guests can park in the lot
• whether you can change the color of your curtains or paint the outside of your unit
• the location or appearance of things like your mailbox, clothesline, TV antennas, and wreaths
• how long visitors can stay with you
• whether you can rent your unit to someone else, and
• whether you can smoke in your unit.
 
 

Privacy.
Since you’ll be sharing common areas and usually walls or ceilings, too, you’ll be giving up some privacy. Also, if having a large outdoor space to garden, entertain, or keep a pet is important, you might be frustrated by the outdoor spaces, which are usually either miniscule or communal.

You share all costs, whether you want to or not.
It may be frustrating to see your monthly membership dues spent on things you never use, like the swimming pool. And if you’re the kind of person who can live without a repair until you have spare cash, tough luck—you’ll be forced to pay your share on the association’s schedule, sometimes in excess of your regular fees.

It can cost more than you expect.
In addition to your monthly membership dues, you may have to pay additional fees called “special assessments.” These are one-time fees collected for major purchases the association can’t afford to make with its current reserves (for example, to replace the roof). Do your research: In recent years, with many new buildings not fully occupied, the few owners in some CIDs have found their special assessments very high.
 
 
TIP
 
Size matters in condo developments.
Your experience will be a lot different in a Boca Raton megaplex than in a Brooklyn brownstone. In a building with fewer units, you may find the rules less constricting—but you may also be more responsible for day-to-day-operations and costs.
 
Townhouses and Duplexes: Benefits and Drawbacks
 
One compromise between a single-family dwelling and a traditional condo is a townhouse. Townhouses are usually built in rows and share at least one common wall (also called “row houses”). Like single-family houses, each townhouse owner has title to the building and the land it sits on. Like condos, townhouses may share some common areas, governed by a community association (but unlike condos, the community association usually owns the common area).
Just be sure, when you start househunting, to find out for sure what type of property you’re looking at. If a careless ad or agent calls a property a townhouse, but it’s really a condo, you’d own a little less personally (because the land isn’t yours, nor is the outside of your unit) and should pay less accordingly.
Celebrities Who’ve
Owned Co-ops
 
Among the big names who’ve made a co-op home (or maybe one of their homes) are Jimmy Fallon, Chloe Sevigny, Sean Combs (a.k.a. Diddy), Matthew Perry, and Kelis.
 
Co-ops: Benefits and Drawbacks
 
Co-ops sounds so glamorous, don’t they? But what are they, other than swanky apartments in New York City for the rich and famous?
Like condos, co-ops are defined by their ownership structure. When you own a house or condo, you own a piece of physical property. When you own a co-op, however, you own shares in a corporation. The corporation, in turn, owns the building you live in, and you get a proprietary lease to live in a specific unit within the building. The lease allows you to live there as long as you own your shares and spells out any restrictions on your use of the unit.
As with any corporation, your shares also give you voting rights. Shareholders elect the board of directors, who make most of the decisions and manage daily operations or hire staff to do so. The shareholders pay a monthly “maintenance fee” to cover these and other costs. Usually, the more desirable the unit a shareholder has, the higher the maintenance fee.
Because of your limited ownership and other financial issues (discussed in Chapter 6), co-ops are sometimes difficult for the average first-time homebuyer to afford. The limitations also mean that co-ops haven’t appreciated at the same rate as condos in the past few years.
Factory Made: Modular and Manufactured Homes
 
Buying a prefabricated home no longer means living in an insubstantial-looking box. In fact, it’s a creative possibility and a growing trend. Modern, multistory dwellings, now known as “modular homes,” are built in blocks in factories and transported to properties, where they’re fully assembled to comply with local building codes. If you decide to buy a property and build a home on it, a modular home might be a relatively low-cost option.
However, you’ll have to consider additional expenses like transporting the home; getting the proper permits and access to utilities and sewer lines; hiring professionals for installations; and adding features like landscaping, driveways, or fences. A local contractor may be able to give you a brief overview of the costs, players, and timeline.
Million-Dollar Mobile Homes?
 
Yes, you’ll find them in Malibu: Even the rich and famous (like Minnie Driver) sometimes retreat to manufactured home communities.

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