Or "The straight poop as I see it"

This article will hopefully clear up any misconceptions concerning condominium ownership. Condos are probably one of the least understood portions of the Real Estate market, partially because they potentially have no true substance in the eye of the owner, and largely because they come in a dizzyingly large amount of forms, shapes, and sizes. To start with, up until a relatively short time ago, the mid 60's, they had no standing in law, and most finance companies simply shook their collective heads at the mere thought of lending money against "space" rather than what had traditionally been the norm of dirt, bricks and mortar. Please understand that by the laws of Canada, no bank can lend more than 75% of the appraised value of real estate, so that all of the rules pertaining to having Canadian Mortgage and Housing in the deal (less than 25% down) apply. The Government of Canada decided that to head off any problems with this new condo concept, they included in all laws affecting property, the word "space". This saved them all of the worry and headaches of changing established law in Canada that pertained to financing with one Act of Parliament. And yes, before you ask, you do pay property taxes on a condo, along with Land Transfer Tax at the time of closing. It is "real" real estate after all, and is no different from every other real estate purchase.

Condos really are a concept of law, literally, and please understand that when you purchase a condo, you possess "from paint to paint" and from "ceiling to floor". Nothing more, nothing less. You do own a percentage of the common area also, (in direct proportion to the number of units in the development), and this responsibility is reflected in the Common Area Insurance, (you own it, you insure it), which is part of your standard condo fees. Because of the way that condo corporations are set up with owners being a percentage owner in the corporation, you do get a vote in the day to day running of the corporation and a say in the priorities that the development sets as objectives. Basically you want your condo dollar, which is set by a budget over an extended period of time (possibly ten, fifteen, twenty years) to reflect the standards that you wish to live in. Condo fees reflect the actual costs that the condo will incur to maintain that development in your "life style". The people paying the "fees" are also the people that determine what that "fee" will be. Consequently they are torn between trying to find a bargain, and reflecting the wants and needs of the corporation and its members. Please remember that when the wallet overrides the brain and the condo fees can no longer support the quality of life that the purchasers originally sought, you find that the place starts looking pretty tired and the desirability drops noticeably. They then discover, when they try to sell, that they can't pull down the kind of money that they would like to get for their home (Re. diminished equity), and finally they discover that they're having a really hard time finding a buyer because no one wants to live there. (Re. it's a dump).

No one makes a profit off of condo fees. Condo corporations usually have the responsibility for the exterior shell of the building which includes windows, doors, brick work, roofs, patio walls/ fences, ground maintenance (which usually included parking areas, lawns and gardens, in other words all common area elements). In apartment style condos this would also include underground garages, hallways, party rooms, lobbies, pool areas if applicable, possibly laundry facilities if applicable, elevator maintenance, and in general all common areas which make up the complex. In a nutshell, condo fees are a direct reflection of exactly how you want to live.

I suppose that at this time, I should describe what a condo looks like. Condos are apartment style, townhouse style, semi detached, and wholly detached. They can be a Link Home, all joined together, or a Freehold condo. They can also be a Gated Community with property owners actually building their own designs (after consultation with the development owners) using their own builders, owning the actual structure, but leasing the land. What I'm trying to say is that there is no set form for condos, but there is a common theme that runs through all of these variations. This is, that some form of fees will be paid, because of an agreement, for maintenance or upkeep of the property, and potentially there will be minimum standards or rules that will govern the people living there. These fees may only reflect lawn cutting or snow removal, with no long-term property upgrades planned. These would then be the owner's responsibility. Sometimes due to changing circumstances, a vote by the membership might alter what your condo fees will cover. Some condo corporations allow pets, some allow only certain pets, (no exotic breeds), some don't allow pets at all. To break this rule means you will be given time to comply, then you will be asked to leave. Bylaws could cover satellite dishes and their placement, parking and the number of cars, use of common areas, gardens, damage or uniformity of the exterior of the condos, and upkeep for the areas that the condo allows you to use for personal usage. Always remember that you DO NOT OWN anything outside of your "living space", but they may let you have access to it. A condo purchase is a "LIFE STYLE" decision, and should be regarded as such. Sometimes good for retirees or people getting on in age, sometimes not. You may demand more than a balcony, and you may want to putter, garden, work in your driveway on your car, or work down in your shop. These things may not be available or allowed. On the upside, due to health or age, you'll probably never cut a lawn, re-shingle a roof, or dig out a driveway again. Apartment style condos with controlled entrances are sought after by single women for security reasons. Pensioners that travel for several months of the year like the ability to lock their door and just leave without worry over security and caretaking responsibilities. Condos sometimes have rec-centres with health clubs, party rooms and pools as part of the package. Downsizing (Re. empty nesters) and going to single level homes because of health considerations (Re. the first thing to go is the knees) are probably the number one reasons for moving. Condos also allow first time homebuyers the ability to live in neighbourhoods that they normally might not be able to afford. Always remember that the strongest point in favour of condos is that you pay for what you get, making them very affordable. When a potential buyer is ready to make the big step and put a formal offer in on a property, one of the conditions that his Realtor would normally include, should be the acquisition of a Status Certificate (requested and paid for by the Buyer for approximately $100). This certificate would be a reflection of the current budget, stating the amount of funds being held by the corporation, plans on how they will spend it now, and in the future, and any Special Assessment which the members have been notified of which will affect the amount of condo fees which the corporation will be charging its membership. Special Assessments are usually for unplanned for situations, improvements, or repairs which have caught the Corporation by surprise, (in my experience they don't happen very often). You as a buyer don't want to get nailed with the very thing that the seller is trying to dodge. This Status Certificate is then forwarded to the buyers Lawyer for his opinion on the condos Fiscal state. If he doesn't like what he sees, the deal is dead.

In this challenging economic climate, the market for condo's is surprisingly rock steady. Being VERY competative against the selling price of a comparable fully detached/semi detached home (in the same geographical location of the city), makes them affordable and in demand. This situation has been supported by a number of things, stable cheap financing over an extended period of time, a low minimum 5% down payment that would allow first time buyers to enter into the marketplace, the relative soundness of the Canadian economy compared to The United States and Europe, coupled with a strong Buyers Market. At the moment there are less Buyers than there are Listings in the market place. No matter what you may think about "The Sky is Falling, The Sky is Falling", life does go on with people doing what people do, Buying, Dying, Getting Married and Unmarried, Moving Away or Downsizing in the Latter Years, etc etc. When comparing your Rental dollar figure of about a $1000+/month, (which you will never see again once paid to your Landlord), to puting a minimum down payment on the purchase of YOUR property and paying a mortgage, the advantages are clear. Upon selling, you will conceivably get a substantial percentage of your money back, and/or a sizeable return on your investment (as the market and the length of time of ownership dictates). The public is dramaticaly more informed of Real Estate matters in general, due to the numerous articles/publications/newspapers available, innumerable T.V. reality shows, the astounding amount of info available on the Web, and REALTOR.COM in particular, and now truly understand the concept of Location, Location, Location as never before. Let me just explain that if you have a condo, a semi detached, and a detached single family home, all in the same neighbourhood, all with the equivalent number of bedrooms, bathrooms, rec- rooms, and general desirability. As you move up the food chain from condo to semi, the price has gone up approximately 35 to 40 percent, when you jump from semi to fully detached, you've again gone up another 35 to 40 percent or thereabouts. I'm not saying that there isn't some very expensive condo real estate out there that's expensive just because of what it is, outside of location. You get what you pay for, usually. This means that as homebuyers are looking to buy into the best areas that they can afford, the condo is standing out as the best deal. Even "fixer uppers" once sought after by first time homebuyers to increase their equity (Re. clean, scrape, and paint for sweat equity) are overpriced and when you add in the costs of upgrading, are pricing themselves out of the market. It makes much more sense to simply purchase a condo (Re. nice living environment) at a percentage of what you would have to pay for a single-family home in the same area, and then theoretically sit back and watch the fair market value escalate due to supply and demand.

All in all the purpose of this article has been to give the purchasing public an overview of the factors that affect the pricing of real estate and condos in particular. I've tried to de-mystify the process to make it more understandable, and on the whole I believe that I've achieved a balanced point of view gleaned from my experience as a Realtor in the London area, and always keep in mind "it ain't rocket science".

Graham Gerken
Realtor - Sales Representative

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