money sectionmoney sectionBuying a condo can offer several advantages over purchasing a single-family home. You typically do not have to take care of exterior repairs, mow the lawn, maintain the sidewalks or shovel snow. Like an apartment, a condo also gives you the opportunity to socialize with other building occupants. However, most condo owners have to pay monthly or yearly association fees, which are not tax-deductible.
Most condominium complexes are run by homeowners' associations, or HOAs. This type of association collects monthly dues from tenants in the complex and uses these funds to cover maintenance, repairs and other costs associated with the condo community. When a condo or homeowners' association is unable to cover these costs, a receiver steps in.
When negotiating a purchase contract for a condominium, one possible point to settle is who pays the special assessment. While it can be the buyer or seller, one factor many consider when participating in this negotiation is the completion date of the project the assessment covers.
Whether residents flock to condominium units because of their no-maintenance lifestyle or the convenience of communal areas such as workout rooms and swimming pools, residents must provide the financial support necessary to maintain those attractions. Whether a condo association refers to these payments as dues or fees, it's merely a matter of nomenclature: They periodically assess condominium owners with a charge used to insure the building and provide the maintenance necessary to keep a condo unit's property values and facilities up-to-date.
An escrow is a neutral third party that handles transactions between buyers and sellers where money and legal documents are exchanged at closing. Escrows are commonly used in transactions involving real estate. On Federal Housing Administration (FHA) loans and conventional loans, the escrow fee is negotiable between the buyer and seller; however, the fee is customarily split 50-50. On Department of Veterans Affairs (VA) loans, the buyer is not permitted to pay the escrow fee.
Condo owners or potential owners should understand the differences between condo fees and assessments. In addition to the costs of buying the condo, owners generally pay fees and may pay assessments from time to time. Both of these charges can create substantial costs for the condo owner. By understanding the purpose of these costs of condo ownership, a buyer can take steps to reduce her risk from these fees.
It is possible to sell property in Arizona without using a title and escrow company. However, it is to the advantage of the buyer to use a title and escrow company to help facilitate the transaction. The title company searches the title on the property, verifying the seller has a title to convey, with funds held in escrow until the transfer records. The seller typically purchases a title policy for the buyer, and the buyer normally purchases a title policy for her lender. The buyer and seller typically split the escrow fees, yet not always.
Buying a condo requires diligence and attention to detail. After the seller has accepted your offer, you place condo fees -- the earnest money deposit, or EMD -- into an escrow account as a measure of good faith. The EMD binds the contract with the seller. If you walk away from the transaction after the due diligence period, you forfeit the deposit. Avoid costly mistakes when placing condo fees in escrow by reading the escrow instructions carefully.
Condominium purchase agreements include a provision that hold owners of condos responsible for payment of condo fees to the condominium association. These fees become due on a monthly or annual basis; if they remain unpaid, the association has difficulty meeting its financial obligations. Most owners pay their fees on or before their due date; however some may fall far behind in payment. When that happens, the condominium association needs to take steps to effect collection.
People who own units in condominium complexes are supposed to pay fees to their condo association on a regular basis. These fees pay for upkeep of the property, as well as other items like community events that help residents know and feel comfortable with their neighbors. Late payments from residents are a reality for many associations. Reducing these late payments requires corresponding with residents courteously but firmly, altering payment penalties or methods and using legal options.
