Photo courtesy of Pamela Baron Designs
You’ve decided to make the move from renter to homeowner. Now it’s time to figure out what kind of homeowner you want to be.
Although single-family homes make up 88 percent of existing home sales, they’re not the only option. Maybe you’d prefer a condominium or co-operative housing? Or maybe you don’t want an existing home at all, but prefer buying in a new development. Not sure where you fall? Here’s your guide.
New construction or “move-in” ready are the most popular homes on the market, says Julie Dawson Williams, realtor with ERA Dawson Bradford in Bangor, Maine.
A move-in ready home has been recently remodeled, so it won’t require much more than a coat of paint before the owner can move in. Often times these homes were remodeled by investors looking to “flip” a property or they were simply well-maintained by conscientious homeowners. Either way, these homes are desirable and so they will catch a premium price, says Williams.
Best For: professional couples and young families who want to spend their weekends enjoying their home, not the aisles of a home improvement store.
Homebuyers seek out a fixer-upper for several reasons: They’re either looking for a bargain, looking for an investment property to fix and flip or want a place that they can revamp to fit their own design sensibilities. If you’re looking for a bargain, beware. A fixer-upper is only a good deal if you budget appropriately for improvements.
“Have a home inspection done that gives you a status report on the health of the house,” says Williams. Then get contractor estimates to find out how much money on top of the purchase price you’ll need to invest in the property. A federal loan program called Section 203(K) could provide you with low-interest funding for those improvements. “The ideal person for a fixer-upper has the creative power to say, ‘I have a vision of what I want, and I can make this house my home through my own actions or my own investment,’” says Williams.
Best For: Creative or handy types who want to put their own design stamp on their home (and either don’t mind doing the work themselves or have some extra cash to hire a contractor).
A condominium is a living space, usually an apartment, within a larger building or community. So while you own the apartment, you also pay common charges for the upkeep and maintenance of the entire property. A condominium board, made up of residents elected by the condo owners, works as the fiduciary, making sure that maintenance work is done, common areas cleaned and maintained and related bills are paid.
Condos appeal to people who don’t want to be responsible for things like fixing the roof, shoveling snow or weeding the garden beds. There is an application process that usually involves a credit check and tax returns. If the seller accepts your offer on a condo, the board either has to approve that sale or agree to buy the property itself for the same amount.
“Their only right to control who buys is a right of first refusal,” says Patricia Kantor, partner with the law firm Edwards Wildman Palmer LLP in New York City. “They have the right to match the offer of the legitimate third-party purchaser of the unit. That means the board has to buy on the exact same terms and conditions as the buyer who they’ve decided they’re going to exercise it against.” And since most boards don’t have that kind of cash on hand, buying and selling in a condo can be easier than a co-operative apartment.
Best For: workaholics, brown thumbs or empty-nesters who have no time or interest in mowing lawns or painting front doors.
Unlike a condominium, when you buy into a cooperative residential building you are not buying real estate, you are buying shares in a corporation. “Co-ops have so much more control over what goes on in the building, who buys, who sells, the rules and regulations, because you don’t own the real estate,” says Kantor. “You’re a tenant and so the operative document there is a proprietary lease.”
Some co-op boards limit the percentage of the purchase price you may finance, and many have an intensive application process.
“You are able to screen for people who have something in their past that may be a red flag that they wouldn’t be a good neighbor,” says Kantor.
As an example, Kantor knows of a situation where the board found out a potential buyer was running his current apartment as a bed and breakfast. “Do you really want that person to come into your building?” says Kantor.”That’s a security risk for everybody. A co-op can screen for that. A condominium cannot do that.”
Best For: Buyers who are able to put down a substantial down payment (some buildings require all cash) and want more say in who their neighbors are and what they can do with their space.