Despite my earlier mixed feelings, I have returned to Robert Irwin for another read-through. He's the author of one of the only books I can find that specifically address buying a condo. Condos are certainly dwarfed in the national real estate market by traditional single-family detached homes (SFDs), but in certain markets, particularly older urban ones like mine, they're a significant force, and often the best or only choice for first-time home-buyers. I was tired of being an afterthought in real estate books, and wanted something with more focus.
On the whole, I enjoyed reading this book more than Irwin's earlier book on negotiation. That probably says more about me than it does about the relative quality of the books - I don't particularly enjoy negotiation, and I DO enjoy condos. The earlier book occasionally irritated me when Irwin described high-pressure tactics and said things like, "I consider this approach to be unethical and would never suggest using it, but you should be aware of it." There's almost none of that in this book - it's more more descriptive than prescriptive, focusing on informing you rather than advising how to act.
It fulfilled its main purpose of providing a high level of detail on purchasing properties like condos. I have to say that I didn't glean too much additional knowledge from the book, but that's because I've spent more than six months patiently grabbing bits and pieces of info from a wide variety of sources. I really wish I had read this up front, it would have saved me a lot of time. I had a lot of basic questions early on that were surprisingly hard to answer: "When I buy a condo, what, exactly, do I own?" Irwin gives an extremely clear answer: you own an "airspace", defined as the region between the walls of your unit. You own this space "fee simple title," which is the same kind of ownership that an SFD buyer gets, and means that you have nearly unlimited freedom within that airspace. Additionally, you own a proportional share of the land, common property, and everything else run by the association. That last point is what used to confuse me - I knew that land was valuable, and was curious how exactly owning land works when multiple units are stacked on top of it.
He also digs deeper into the implications of this ownership structure. Because all condo owners own their airspace "fee simple title," it can be very hard to enforce a noise ordinance against someone who plays their stereo loudly. Unlike a co-op, where the association owns the property and can kick out someone who violates the rules, a condo association is more circumscribed - they can talk to the owner, fine them, place a lien on their condo, but can't just kick them out.
Irwin also writes a fair amount about condo conversions. I read about these all the time - they're hugely popular in San Francisco with a very long waiting list - but he addresses all the implications. Conversions generally offer a trade-off between a better location in exchange for an older building that may not last as long.
The book also forced me to confront an idea that I was familiar with but hadn't let myself think about very much: things wear out. I was comfortable with the idea of a condo association repairing a roof, or repainting, but what if the building itself became decrepit? This is especially worrisome if I think about buying, say, a 40-year-old condo unit. If the average lifespan of a building is 50 years, then what happens to me when the time comes for massive changes? According to Irwin, the condo association should take ALL maintenance and replacement costs into account, including the buildings themselves. That doesn't necessarily mean that every board will do this responsibly, but at least in theory, the buildings should continue replenishing themselves over generations.
There are quite a few areas where I was learning actual new stuff for me. A lot of these concern what happens AFTER I would buy a unit. I've had a vague idea that there's a "board" that does important stuff, but Irwin goes into the details about the Architectural Committee, the enforcement committee, the board itself, and so on. He confidently declares that YOU will want to run for the Board, even if right now you think you never would. (I don't, so that makes me nervous.) He talks about people burning out on the Board. He describes the frequent lawsuits that Boards are involved in: against the developer, against residents, against guests. All of which makes me a little concerned. On the whole, though, the book maintains my goal of moving into one of these. Now that I understand how they work a bit better, I feel more confident about what I'd be getting into.
At the same time, it impresses on me again the importance of buying into the RIGHT condo. The difference between a well-run condo association and a poorly-run one is enormous. Irwin gives some good advice on how to determine which is which: ask to read the minutes of recent board meetings, details on any current lawsuits, and phone numbers for board members. If the board refuses, they're likely hiding something, and you should continue to look.
The other big concern is the unknown of a new development. A few of the places I'm considering are new construction. These hopefully have really high quality materials and the whole "new home smell" thing, but as Irwin points out, there's a huge unknown factor involved. If the developer runs into financial troubles, they may never finish, and the value of existing units will tank. Even if everything is satisfactorily completed, you're getting into an unknown situation: you don't know what the Board will be like, how responsible they will be with money, and so on. With an existing development there is a track record that you can examine. It takes guts to spend a lot of money to live under uncertain leadership.
Oh, and I was glad to see that Irwin tackled a question I had wondered about recently: whether the HOA fees include insurance. While there may be exceptions, in general the HOA will purchase property (and often liability) insurance, so the owner just needs to buy a cheaper policy that covers only the replacement value of their goods.
One thing that is kind of funny about this book is that it was published in 2007, at the very height of the speculative real estate bubble. Irwin allows that moment in history to infect some of his outlook - he writes about how "Condos usually appreciate more slowly than SFDs, but in the last few years, they've been appreciating much more quickly!" Well, duh... that was part of the problem. In the financing chapter he writes about negative-amortization and option-ARM loans. Those things are long gone now.
While this book isn't perfect, it's certainly the best book that I've read yet on the specific issues facing a potential condo buyer. I'd highly recommend checking out this book early on to orient yourself and make sure whether you want to go down this road or not.
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