LIVE BOZEMAN STYLE

Home buying should be one of the most exciting experiences in your personal financial life! There is so much to dream about as you navigate the process including: (my personal #1) pet ownership,  customizing your space to fit your needs, finally painting your walls that custom color you've loved for years, and growing your financial future! As you mentally hang those new drapes, it is important to stop and ensure you truly understand all the technical elements that define and affect the of the property you've chosen.

Did you know there is a difference in WHAT you own between a single family home, a townhome and a condo? Did you know all three properties could look the same on the exterior and yet function differently? Let's explore what makes a condo unique.

A condo can look just like a single family home. It can be stacked like an apartment complex, it could be side-by-side with other units and share a wall or walls, it could be a free standing structure in a neighborhood, or be part of a 2 or 3,000 unit homeowners association. So how can you identify a condo?! The consistent and singularly defining characteristic of a condo: a condo will have a legal description* that says the property owns: ____% of Lot ____, Block ____. 

Another unique element of condo living, there is nothing to keep your neighbor from using the space in front or behind your unit just as they would their space in front or behind their unit. Generally, owners stay to their own delineated space, but that is a curtesy only, not a requirement. 

Layout: Condos can be placed side-by-side, detached (free standing like a house) or stacked like apartments.  

Insurance: Exterior insurance for your condo is paid by the HOA. You insure the property from the “studs in” and the HOA insures the condo from the “studs out.” This translates to the condo association bearing all exterior maintenance costs. As a lender, condos can present more risk to the bank as the bank is no longer betting on just you paying your bills and being a reliable investment, but they are betting on the health of the HOA as a whole. That is why banks will ask for a “Condo Questionnaire” to be completed prior to approving your loan.

Expenses: All units (often) share one meter for the water and sewer service. That means each month as a condo owner, you pay a flat “dues” or “HOA” payment and the condo association pays the water and sewer bill which covers your personal use, as well as the water utilized to maintain the lawns, parks and any other area under ownership by the HOA. The financial health of a condo HOA is subject to review by lenders prior to purchasing. It is important when buying a condo to determine how many units are owner occupied, vs. renter occupied and how much money is in the HOA reserve account as well as how many units are delinquent on their dues. 

Financing**: Condos are considered higher risk than a single family home or townhome by a lender as each unit is subject to the use and bill payment of all owners in the association. That idea is a little confusing, so let me say it another way. The water bill, insurance bill and lawn care bills are all equally shared by the members of the condo association. Each month, each member of the association is assessed a monthly dues amount that is used to pay the water, insurance and lawn care bill. If the neighbor doesn't pay their bills, there is less money to pay the vendors providing services. If the neighbor doesn't pay their bills for months, it is going to fall on the paying owners to cover that cost until the non-paying neighbor is able to get current.