Condo Buyers: Why Bigger Is Better
While conventional wisdom holds that Americans are downsizing in an effort to save money, there are times when bigger is actually better for the pocketbook, particularly when it comes to condo purchases.
Here are three examples.
1. More homeowners to share the financial burdens.
Every condo complex is governed by a homeowners' association that sets monthly dues to cover the common expenses such as landscaping, facility maintenance and exterior building upkeep. HOAs are required to maintain a reserve should an emergency arise, and they also can pass assessments -- sometimes in the tens of thousands of dollars -- to cover the cost of major complex repairs.
Do the math: If you buy a unit in a smaller complex, a greater share of the burdens will fall on each homeowner. It's simple long division: 12 unhappy and financially strapped homeowners sharing a repair of $100,000 comes out to more per homeowner than when that $100,000 repair is divided by 50 unhappy and financially strapped homeowners. And if one of those homeowners falls under the financial of the recession big rig and can no longer pull his or her weight, the missed payments need to be made up by the rest of the pool.
2. Some lenders require that a certain percentage of the units within a complex be owner-occupied.
If they aren't, the lenders won't fund mortgages to new owners. What this means is that those who need to sell their units have to find a cash buyer. Again, being in a complex with more units helps skew the odds in your favor. There have been complexes where, in order to avoid these situations, the existing homeowners actually buy a troubled unit to keep the complex mortgageable. Again, the complex has to be large to do this.
3. More of us are still buying big than buying small.
Just 2 percent of all buyers bought units under 1,000 square feet last year, according to the National Association of Realtors. Compare this to the 16 percent who bought homes 3,001 square feet or larger. The median size of a home sold in 2010 was 1,780 square feet.
Popular wisdom says we are all downsizing. We may be trying to shrink our mortgages, and builders may be dishing up smaller new homes in the interest of shaving something off the price to remain competitive, but the numbers don't lie. Buyers like big more than they like small.
These AOL Real Estateguides can help, if you choose to buy:
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