How to Buy a Condominium or Townhouse: Practical Advice from a Real Estate Expert (How to Buy a Condominium Or Townshouse) PDF
Preview How to Buy a Condominium or Townhouse: Practical Advice from a Real Estate Expert (How to Buy a Condominium Or Townshouse)
Find the Condo, Townhome HOW TO BU Y A HOW TO BU Y A or Co-op That’s Right for You HOWTO BUY A CONDOMINIUM CCOONNDDOOMMIINNIIUUMM CC Whether you are just starting out, looking to own with all the OO extras or transitioning to simpler living conditions, How to Buy a Condominium or Townhouse explains how to find the best condo, NN TOWNHOUSE TTOOWWNNHHOOUUSSEE townhouse or co-op for you. DD OR OR OO • Find the biggest space with the most amenities MM • Finance your purchase—even with less than perfect credit II • Find a real estate agent who will work just for you NN • Negotiate your sales contract to get the lowest price II UU • Participate in your homeowners association MM Plus,gain that extra edge with bonus material that can save you big money. Mythbuster boxes expose common myths about community OO P r a c t i c a l Advice from a Real EstateExpert RR developments.Insider’s Tip boxes reveal crucial negotiating techniques. The Top 20 Frequently Asked Questions answers your most pressing TT o n B u y ing a Condo, Townhome orCo-op questions. Convenient charts and sample forms make it easy to compare OO properties,calculate financing and much more. WW 3 Find a development that suits your lifestyle How to Buy a Condominium or Townhouse is NN 3 Find a development that suits your lifestyle 3 Negotiate your contract your essential guide to finding and buying a new HH 3 Examine all your financing options home in the community that fits your lifestyle. 3 Examine your financing alternatives OO 3 Negotiate your contract for the lowest price UU 33WWoorrkk wwiitthh yyoouurr hhoommeeoowwnneerrss aassssoocciiaattiioonn SPHINX® PUBLISHING Real Estate $14.95 U.S. SS 33BBuuyy wwiitthh rtehsea rlees vaalleu vea ilnu em iinn dmind ANIMPRINTOFSOURCEBOOKS,INC.® $20.95 CAN EE ISBN-13:978-1-57248-556-3 NAPERVILLE,ILLINOIS ISBN-10:1-57248-556-6 33 AAnndd mmuucchh mmoorree...... Evans C N P A U E DiaDnae nBisroed Lm.aEn vSaunms,mAetrtso,Arntteoyr naety Laat wLaw How to Buy a Condominium or Townhouse Practical Advice from a Real Estate Expert Denise L. Evans Attorney at Law S P PHINX® UBLISHING ANIMPRINTOFSOURCEBOOKS,INC.® NAPERVILLE,ILLINOIS www.SphinxLegal.com Copyright © 2006 by Denise L. Evans Cover and internal design © 2006 by Sourcebooks, Inc.® All rights reserved. No part of this book may be reproduced in any form or by any electronic or mechanical means including information storage and retrieval systems—except in the case of brief quotations embodied in critical articles or reviews—without permission in writing from its pub- lisher, Sourcebooks, Inc.®Purchasers of the book are granted a license to use the forms contained herein for their own personal use. No claim of copyright is made in any government form repro- duced herein. First Edition: 2006 Published by: Sphinx®Publishing, An Imprint of Sourcebooks, Inc.® Naperville Office P.O. Box 4410 Naperville, Illinois 60567-4410 630-961-3900 Fax: 630-961-2168 www.sourcebooks.com www.SphinxLegal.com This publication is designed to provide accurate and authoritative information in regard to the sub- ject matter covered. It is sold with the understanding that the publisher is not engaged in render- ing legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. From a Declaration of Principles Jointly Adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations This product is not a substitute for legal advice. Disclaimer required byTexas statutes. Library of Congress Cataloging-in-Publication Data Evans, Denise L. How to buy a condominium or townhouse : practical advice from a real estate expert / by Denise L. Evans. p.cm. ISBN-13: E978-1-57248-556-3-556-3 (pbk. : alk. paper) ISBN-10: E1-57248-556-6-556-6 (pbk. : alk. paper) 1. Condominiums--United States--Purchasing. 2. Row houses--United States--Purchasing. 3. Real property--United States--Purchasing. I. Title. HD7287.67.U5E93 2006 643'.12--dc22 2006001897 Printed and bound in the United States of America. CHG — 10 9 8 7 6 5 4 3 2 1 Contents Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi Top 20 Questions of First-Time Condo or Townhouse Buyers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv Chapter 1: The Difference Between Condos and Houses. . . . . 1 Condominiums Townhomes Major Differences Between Condos and Townhomes Co-op Apartments Major Differences Between Co-ops and Condos Financial Comparison of Condo, Co-op, Townhome, and Apartment Planned Unit Developments Common Interest Developments Chapter 2: Different Types of Condo Developments. . . . . . . . 13 Vacation Condos Kiddie Condos Game Day Condos Kosher Condos iv how to buy a condominium or townhouse Leasehold Condos, Co-ops, and Townhomes Condotels Limited Equity Condominiums and Co-ops A Style for Everyone Chapter 3: The Condo Lifestyle . . . . . . . . . . . . . . . . . . . . . . . 19 Are You Willing to Share? Can You Give Up a Little Control? Are You Willing to Participate? Test: Is a Condo Right for Me? Chapter 4: Legal Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Specialized Law Who Owns What? Who Owns What in a Condo, Townhome, or Co-op Development? Who is Responsible for What? How Much Independence Do You Have? Owners’ Constitutional Rights Typical Condominium Rules Typical Townhome and Co-op Rules What if the Condo Developer has Financial Problems? What if a Co-op Board has Financial Trouble? Chapter 5: Social and Political Considerations............39 Condo Government The Homeowners Association The Cooperative Board Noise Privacy Developments with Residents of Similar Interests Chapter 6: Deciding What You Can Afford...............47 Working Up a Housing Budget Calculating the Monthly Housing Expense You Can Afford Preapproved Loan Amounts Dues and Assessments in Condos and Townhomes Co-op Rent and Maintenance contents v Converting Housing Budget to Purchase Price Purchase Price Worksheet (with Examples) Monthly Loan Constants for a Thirty-Year Mortgage Loan Mortgage Interest Tax Deduction Calculate Home Mortgage Tax Deduction Savings Special Considerations for Co-ops Vacation Rental Income Overall Financial Analysis Chapter 7: Financing Options. . . . . . . . . . . . . . . . . . . . . . . . . 65 Overview of Mortgage Lending Shop for Financing Early Know Your Credit Score Improving Your Credit Score Less than Perfect Credit Comparison of Loan Interest Rates and Terms Points Common Lender Traps Prepayment Penalties Fully Amortizing Loans Balloon Loans Adjustable-Rate Mortgages (ARMs) Interest-Only Loans Growing Equity Mortgages No-Document Loans The Right Loan Arrangement for You Chapter 8: Different Types of Lenders ..................83 Traditional Sources of Residential Mortgages Specialized Co-op Lenders VA Guaranteed Loans FHA Insured Loans USDA Loans HUD Loan Guarantees for Native Americans Fannie Mae, Ginnie Mae, and Freddie Mac Mortgages from Stock Brokerage Houses Assumable Loans Using Retirement Money vi how to buy a condominium or townhouse Creative Financing Sources A Dangerous Lending Alternative Loan Comparison Loan Comparison Worksheet Chapter 9: Deciding on Home Features You Want . . . . . . . . . 97 Location Considerations Length of Ownership Use of the Home Your Particular Unit Features The Development Area Amenities Utilities and Technology Develop a Checklist Home Features Checklist Comparing Properties Chapter 10: Real Estate Brokers and Agents ............105 Real Estate Professionals How Agents Are Paid Sellers’ Agents Buyers’ Agents Transaction Brokers Limited Consensual Dual Agency Who Does the Agent Work For? Determining the Type of Broker that is Right for You Finding a Broker with Condo and Townhome Experience Special Considerations for Co-ops Chapter 11: Finding Properties on Your Own. . . . . . . . . . . . 119 Properties You Won’t Hear About From an Agent Working without an Agent How to Find Properties Special Considerations for Co-ops Real Estate Agent Etiquette Sources of Information about Recent Sales contents vii Chapter 12: Asking the Right Questions as You Shop. . . . . 127 Getting Information from the Listing Agent Talking Directly to Sellers Ten Questions to Ask Sellers about the Unit Special Questions for Mature Projects Special Questions for New Projects Co-op and Condo Conversions Nine Questions about Finances Meeting the Neighbors Health and Safety Issues Curb Appeal Chapter 13: How to Negotiate Successfully. . . . . . . . . . . . . 145 Basic Negotiation Tactics Price vs. Terms Concentrating on Deal Points Understanding Offers and Counteroffers Negotiating Directly with a Seller Negotiating through an Agent Negotiating with the Developer of a New Project Documenting Verbal Negotiations Chapter 14: Writing a Contract. . . . . . . . . . . . . . . . . . . . . . . 155 Earnest Money How to Personalize Real Estate Forms Important Clauses You Want in Your Contract Contingencies Objectionable Clauses Miscellaneous Other Matters Chapter 15: Important Contingency Clauses . . . . . . . . . . . . 171 Contingencies that Favor Buyers Common All-Purpose Back Doors Contingencies the Developer Wants Clauses the Seller Wants viii how to buy a condominium or townhouse Chapter 16: Preparing for Closing . . . . . . . . . . . . . . . . . . . . 183 Assistance from the Real Estate Agent Choose a Closing Agent Select a Title Insurance Company Deliver Information to the Closing Agent Finalize Loan Details Read the Closing Checklist Order Inspections Obtain Important Letters Review Documents Secure Proof of Association or Co-op Building Insurance Order Homeowners Insurance Assist the Appraisal Process Check with Local Governments Contact Utilities Chapter 17: The Closing............................195 Closing Procedures The Settlement Statement Other Closing Documents and Procedures Deductible Closing Expenses Tax Deductions for Home Purchase Expenses Chapter 18: Ownership Responsibilities................201 Participate in Governance Manage the Management Company Understand Your Community Personality Vote Intelligently on Dues and Assessments Avoiding Problems Proper Management of Rental Units Miscellaneous Considerations Chapter 19: Thinking Ahead to a Sale of Your Condo . . . . . 211 Buy What You Can Afford Buy Smart to Sell Smart Know the Neighbors Stay Informed about Your Market contents ix Deciding Whether to Remodel Recouping Your Investment and Closing Costs Calculating Profit on the Sale of a Condo, Townhome, or Co-op How Long Must You Own Your Condo Before You Can Make a Profit on Sale? Investing in Rental Properties Estate Planning Issues Flipping Overcoming Analysis Paralysis Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 Appendix: Websites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241 About the Author .................................250
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