Entry Into Home Ownership
A condo can be a good way to get into the housing market.
Real estate agent Tracy Palma notes condos sometimes go for about 10 percent over the asking price.
Photo by Clayton J. Mitchell
Are condos a gateway to home ownership? The short answer is maybe. If you’re considering a condo, here’s the scoop.
“I’m seeing a lot of new homeowners,” said Michaela To, a real estate agent with Climb Real Estate in Oakland. “Some younger people in their late 20s will buy a small condo just to get into the market. I’m also seeing a lot of first-time homebuyers in their mid-30s who’ve been renting because it’s so tough to get into the market.”
Said Tracy Palma, an agent with Bay Sotheby’s International Realty, “When I meet a new client, my first question is, single-family home or condo? They tell me their price range, and then I say, ‘condo.’”
Prices for condos have skyrocketed like everything else. One-bedroom condos in Oakland and Alameda start at $350,000—but inventory is even tighter than for single-family homes. Many condos list for $600,000 or more.
Palma recently showed a two-bedroom condo at the edge of Adams Point, a hot spot for this kind of property. The unit, built in the 1970s and remodeled in 2007, has two bedrooms and two baths, with a balcony terrace, fireplace, mounted flat-screen TV with surround sound, and an indoor parking spot. The asking price was $579,000. Palma said that, for a two-bedroom, this is entry-level.
“To me, it’s irrelevant what the asking price is,” To said, because people will overbid—sometimes by as much as 50 percent. But condos typically sell for around 10 percent over the asking price.
The good thing about a condo is that the homeowners’ association, or HOA, takes care of all the maintenance. But you pay for that in the form of a monthly HOA fee. The fee for that $579K condo is $386 a month. Palma advises buyers to reduce their price range by approximately $50,000 to account for HOA fees.
That fee is likely to go up every year, although how much it can increase is governed by rules known as the covenants, conditions, and restrictions, or CCRs. Condo fees are supposed to cover general maintenance and major repairs.
The building should have a healthy reserve to cover such costs; exactly how much is also covered by the CCRs. However, if the reserve is depleted, homeowners must pay a special assessment. Owners of single-family homes can face similar issues; but condo owners can’t decide to just live with a leaky roof until they save enough to fix it.
Potential condo owners should request the unit’s disclosure packet, which will include information on the ideal reserve amount, how much is in the bank, and whether major repairs have been budgeted for. If common areas are in disrepair, look elsewhere.
A lower price is great, but condos offer more benefits, Palma said. Much of Oakland and Alameda’s housing stock was built before 1940, and that means plenty of deferred maintenance for lower-priced properties. The idea of dealing with contractors, roofers, plumbers, or electricians can be intimidating. Condo ownership can help people ease into the responsibilities of home ownership, if that’s their goal. “Once they have some experience, then they’re ready to take on a single-family home,” she said.