4 Money Misconceptions About Condominiums

Homebuyers may opt for a condominium (condo) over a single-family home for several reasons. A condominium can be a less expensive way to enter the housing market. It can also be a low-maintenance downsizing option for older adults.

However, misconceptions about condo ownership sometimes keep potential buyers from considering them as an option. Here, we dispel some of the most common misconceptions about condo living.

Key Takeaways:

• A condo is similar to an apartment, except that it is a sellable property.
• A condo owner must pay fees that cover some maintenance and other costs associated with the property, such as heat, water, sewer, and garbage collection.
• In addition to the condo fees, a buyer should consider any special assessments that might arise that would require additional funding.

1. Owning a Condo is Just Like Owning a House

When you buy a condo, you become a homeowner and gain access to most, but not all, of the rights that come with buying a freestanding property. If you’re wondering which rights condo owners don’t have, they’re related to the fact that a condo involves shared ownership. So while you have the right to make changes to your unit, you won’t have quite as much freedom as you would with a house.

You may not have the option of making changes to the plumbing or electrical by yourself, as most condo rules require the use of a qualified professional. (After all, if your new toilet leaks or your wiring job starts a fire, this will become a problem for other people in the building.) You also may not have control over the portions of your unit that are referred to as limited common elements, which may include windows, patios, and balconies.

In addition, this communal ownership means that you’ll have to pay condo fees, which are used to maintain the property.

2. Condo Fees Aren’t Worth It

Many homebuyers look at condo fees as an additional expense compared to owning a house. However, before assuming these fees are a waste, it’s important to look at what they cover. Typical condo fees generally include a contribution toward the building’s upkeep and maintenance, but they may also include heat, water, sewer, garbage collection, and even electricity and cable TV in some cases. Consider how much these line items would cost if you lived in a home. Also, consider that, in a condo, you don’t have to mow the lawn or shovel snow yourself, which ultimately means you will have to chip in to hire someone.

Condo fees that are too high can be a sign of poor money management on the part of the condo board, but you will have to review the condo documents before being able to say for sure. Also, remember that condo fees are determined by the condominium’s board of directors, which is made up of owners just like you. In other words, no one is profiting from these fees—they are decided by owners who have to pay them just like you do.

3. Special Assessments Are Wasteful

Even a well-managed condominium can fall prey to what is called a “special assessment.” This is an additional (often large) fee that condo owners must pay when the regular condominium fees (and the reserve fund they contribute toward) are insufficient to pay for a major repair. Many condo owners assume that their fees will take care of everything, but as an owner of the condominium, you are ultimately responsible for its upkeep, no matter what happens.

This is not unlike living in your own single-family home. Even if you routinely save money for repairs, a major unforeseen expense, such as a foundation or roof repair, can leave you with a big bill. In fact, special assessments are often much better for condo owners than the alternative of raising condo fees over the long term. This is because a one-time fee will cover whatever repairs need to be done without putting a (typically much bigger) dent in the overall value of each unit.

4. Fees Shouldn’t Keep Going Up

Unfortunately, condo fees, like most expenses, tend to rise on a regular basis. This is based on inflation and the costs of running the building. Condo fees are calculated based on projected costs for the coming year and should include additional amounts to put toward larger repairs.

Important

Remember that no one is making any money on these fees, and if they are not appropriate for the building requirements (whether they are too high or too low), owners will eat this cost when they try to sell their units.

In other words, most condo owners will have a hard time escaping from a necessary cost, whether this occurs because the board tries to avoid repairs to keep costs down or owners try to sell to get out of paying their share. Savvy buyers will want a discount for a poorly maintained building or one with soaring condo fees. As is often the case in real estate, this discount is likely to cost more than just paying for the problem in the first place.

What Is the Difference Between a Condo and an Apartment?

A condo is like an apartment, except it’s sellable. That is, you own a condo, and rent an apartment.

What’s the Average Price of a Condo in the U.S.?

The average price of a condo in the U.S. was $348,300 as of 2023.

Do You Have to Pay Property Taxes on a Condo?

Yes, condo owners must pay property taxes.

The Bottom Line

Many of the misconceptions that prevent homebuyers from considering a condo—or leave them frustrated and angry when they do own one—often stem from a misunderstanding about how condominium ownership works and what owners are ultimately responsible for. Many condos are poorly managed, which can lead to money problems. However, no condo board is really looking create hardship for owners, as this punishment will also apply to board members themselves. In a single-family dwelling, owners will have more control, which can make expenditures easier to swallow and perhaps less noticeable. Perhaps that’s why homebuyers are left mistakenly believing this type of ownership is so much cheaper.