Condo Q&A #1

Q:

“Why does this HOA payment feel like someone is out to get me?”

A:

Well, HOA payments aren’t meant to “get” anybody.

In fact, the whole reason for HOA payments is for the beautification and maintenance of the respective property. Everyone pays into an account called the reserve. The reserve account is meant to be used to pay for anything from general maintenance to upgrades or big projects like a common area remodel.

In a perfect world, the association will be run in such a way that the HOA dues create a reserve fund sufficient to cover the costs of maintaining the property and the necessary upgrades.

Since it isn’t a perfect world, the costs of building maintenance sometimes exceed the amount in the reserve account. When this happens, a special assessment is levied against each homeowner in the association for them to split the cost(s) of the project.

Remember that even in associations that are run flawlessly, a special assessment may still occur. This could be due to an emergency expense, or some other uncommon issue.

While the goal is to mitigate risk when searching for your home, it is helpful to remember that there is no risk-free solution, so make sure when you buy a condo, you factor in unforeseen costs in your budget.

This helps avoid surprises!

What is a CMA?

If you’ve ever talked to a real estate broker about selling a home, or what the process involves, you’ve probably heard the term “CMA.” It sounds very technical, and if there’s anything true about the real estate world, it’s that there is no shortage of technical terms. Don’t worry though, while CMA’s are technical, they are actually quite simple.

CMA stands for “comparative market analysis” and the name is self explanatory. The purpose of a CMA is to get an idea of what your home is worth. And by comparing your home to similar homes in the market that have recently sold, we are able to get a fairly accurate estimate of what your home should sell for.

How does it work?

Your broker will need your address and preferably access to your home so they can walk through the building, get a feel for your unit and gain a broader understanding of what your home offers (e.g. hardwood floors, views, building amenities, etc.) Next, they will analyze the current market by looking at what has sold and compare the units that have sold to yours. (tip: an expert broker may have already walked through some recently sold units, associations, or know about your neighborhood’s local market history. This is very helpful.) By comparing what your home offers to the other homes that have recently sold, your broker will be able to triangulate where your home falls in the market price wise.

How do I decide on a price?

The main thing to remember about CMAs is that they are not a science. The only way to know what someone will pay for your home is for someone to pay for your home. The variables in the housing market are simply too numerous to predict when your home will sell or what it will sell for.

The CMA exists to provide a reliable starting point. Think of it as setting up a guideline. Use the information the CMA gives you to help you make a decision with your broker about where to price the home. Remember that choosing a competent broker is important, and having a competent broker will help you greatly when faced with questions like what your home is worth.


What are HOA fees for?

You’re thinking of buying a condo because you don’t want to maintain a house, but one of the big deterrents is that you see HOA fees and you think, what gives? Why do I have to pay another bill every month to live in a condominium with no yard, shared walls, and (usually) less parking?

Well, it’s a give and take. When you buy a single family home, you are buying the house and the land. You own it, and you are responsible for maintaining what you bought. That means everything from a leaky roof to mowing the lawn.

When you buy a condo, you’re buying into a community. Let’s say a six unit building has six owners paying six individual payments every month on top of their mortgage payments, utility bills, and whatever else. These payments are the HOA payments. Every owner is a member of the homeowners association and pays into a “pool” of money. This means when the landscaping needs attention, the responsibility doesn’t fall on to just you. In this case, there are 5 other owners whose money goes towards paying for the landscaping to be maintained. The same thing goes for when the roof needs to be replaced, the building needs to be painted, or even when light bulbs in common areas burn out.

Your monthly HOA payment goes towards keeping where you live in top shape, and if you compare a years worth of HOA payments to a years worth of maintaining a house and property, HOA payments are often cheaper.


Rent is Expensive...

Rent is expensive. Welcome to Seattle! Unless you are one of the truly gifted when it comes to patience, commuting for upwards of an hour a day each way just so you can live somewhere that you can afford a 20% down payment on a home simply doesn't make sense..

Luckily, you don’t need a 20% down payment anymore to get approved for a mortgage.

The cost of a 3 bedroom apartment in the Bellevue area is around $3,000 a month. Using $3,000 for the sake of an easy example, that could afford you the monthly payments on a mortgage of around $620,000. There are still many 3 bedroom condominiums available in the Bellevue area for under $620,000, which means that with a much smaller down payment than has been required in the past, as well as historically low interest rates, you could be paying the exact same amount per month or less than renting. All while building equity with each payment as opposed to spending money you will never see on rent each month.

If you could have a shorter commute, less money spent on rent per month, and have the money you spend go towards your financial future, doesn’t it make sense to explore your possibilities?


Patience Goes a Long Way

When you’re looking for a home, it’s easy to be impatient. You’ve searched zillow, looked through craigslist ads, and it seems like nothing you come across is going to work. Over the course of a day or two, there isn’t usually much activity, so you see the same ads, and get discouraged. What if you just can’t find the home you really want? Do you really have to compromise so soon just to find a place to live?

It’s easy to be worried about these things, and easy to think that the real estate market just doesn’t hold what you’re looking for. That may be true over the course of just a few days or even a week, but over the course of a month, there can be drastic changes in what is available. Taking your time when shopping for a home can mean the difference in a compromise, or getting what you really want.


Why You Should Never Rent if You're Able.

You’re approaching the end of your time at university and you’ve found a job. This is the time when you start thinking, where am I going to live after graduation? Clearly, you have to live somewhere and you’d like it to be close to where you work. Maybe now isn’t the right time to buy a house because you don’t want to deal with the commute or the maintenance. You’re looking for apartments because it’s quick, easy, and you just don’t want to think about applying for another loan yet. Makes sense, right?

The problem with renting is that you will never see the money you spend every month. It’s a sunken cost. A good financial way to categorize renting is that rental apartments are essentially long-term hotels with cleaner carpet. Hotels are easy to stay in, but you pay once for a specific time period and never see the money back.

Purchasing a home sounds scary, because it is significantly more complicated than renting, and when things are happening so fast after college, it makes sense to keep it simple and rent. But even renting for a year can look like tens of thousands of dollars you will never see again. That’s a down payments sum of money going out the window.

Interest rates are lower than they have been in years, and although prices seem high, they remain steady due to the Seattle area’s fantastic economy. This means that with even a small down payment and average credit, there’s a chance you could get into a condo straight out of school and pay less per month than a rental would cost you. So the money you earn can go straight towards your future, and not to somebody else.

Obviously, nothing is perfect, and there’s no guarantee that you can get approved for a loan and afford the exact one that you want right off the bat, but if you could leave renting back in your college days and own a home already, isn’t it worth it to just see?


Spring is Here!

Every year around the fall, the real estate market cools off with the weather. School starts and it just feels like the time to stay indoors. Every spring brings with it the sun and the need to get outside. Something else that happens is the need to spend money! The housing market picks up again and the same thing happened this year in March.

According to the latest press release from the NWMLS, listings surged in the month of March, and we are on the way to another very hot real estate season.

Two factors contributing to the surge for the month of March aside from the weather change are interest rates continuing to fall combined with a broader selection of properties to choose from. The Seattle area real estate market remains strong, with signs pointing to an increase in overall strength as the year progresses. The condominium market has remained steady, with an increase in inventory as well as a slight decrease in the median sales prices.


School Districts - Do Your Homework!

Shopping for a home when you have children is difficult. Not only do you have to find something in budget with the right amount of space.. You have to research school districts, find out which is best for your children, and then find something in budget with the right amount of space!

School districts are not required to be disclosed when a home is listed on the NWMLS, so it’s extra important that you find a broker who is knowledgeable of your local market.

Visiting the website of the school district in question, or consulting your county records database is a great way to do the research yourself. Most school districts have a way to lookup district lines per address, and it provides peace of mind when being in the right school district is such an important part of your home buying process!


Know Your Market

Listing at different times of year can mean tens of thousands of dollars difference in selling price. Knowing who else is listing in your area means knowing exactly what your home is competing against. This affects how quickly your home sells, and what it sells for. Knowing your market could be the key factor in getting exactly what you ask for.

If you decide to list your home for $750,000 and your neighbor with a better view one floor up has listed theirs for $735,000, there’s a good chance that will make your home look overpriced, even if it is not. Having a broker who knows your local market means when it comes time to list, you will know exactly what sells, and what is viewed as overpriced, or underpriced.

The difference is between having your home overlooked in the critical first few weeks of it being listed, and closing in a reasonable amount of time. When you have the confidence of knowing your market, your home sells faster, and you have a higher chance of getting what you ask for it.

Plan Ahead

If you’re thinking of selling, work your way backwards from the day you get an offer. Ask questions like: How do you set your home apart? When is the best time to sell? What should I list my home for? Questions like these are also easy for a competent broker to answer, and that will help you choose who to list with.

Choosing who to list with is a very important decision. Unfortunately, the market is saturated with brokers, and brokerages claiming they offer the “best” or “most personalized” services. As a result, most people looking for a broker pick the first one they meet with or have a conversation with. This certainly makes the decision process easy, but it can lead to problems down the road.

If you don’t know the right questions to ask a potential broker during a meeting, or a listing presentation, you could end up in contract with someone offering inferior service. That’s an easy way to lose valuable time and money.

Taking the time initially to learn how to select a competent broker and brokerage is a skill that pays dividends to those who learn it. Kappes Miller Real Estate Services is a brokerage with a team of brokers dedicated to answering your questions and solving your problems.