- The Washington Times - Wednesday, January 17, 2007

You have seen the cranes. You have listened to the hype about plasma televisions, hardwood floors and lack of closing costs. And you have heard the rumors about a free-falling real estate market.

So the question remains: Is now a good time to buy a condo? The answer, surprisingly, is yes.

“It’s a great time to buy,” says Brenda Small, president of the Greater Capital Area of Realtors. “There’s more inventory choice, favorable interest rates and more incentives than ever.”

Condominiums seem to promise something for everyone. Especially popular in urban areas like the District, condominiums offer a virtually maintenance-free lifestyle with access to amenities like shopping and cultural institutions.

In the District, condos represent more than a quarter of the city’s ownership units, says William Rich, vice president of Delta Associates, an Alexandria-based company that provides data and analysis of the real estate industry.

Despite what you’ve heard about the market downturn, things in the greater Washington area are looking up, relatively speaking.

“The fundamentals of the market are still good,” Mr. Rich says. “There’s job growth, a relatively affluent population; and worsening traffic congestion means that people aren’t willing to make that long trek from the suburbs.”

Of course, suburban condominiums offer their own allure, from gated communities to a maintenance-free lifestyle in a less urban environment.

“Suburban Maryland has been steadily increasing its share of sales activity,” Mr. Rich says. “Places like Prince George’s County have been late to the party in terms of development, so they’ve just caught up in the last year or two.”

There is interest in condos in places like Arlington and Alexandria, too, where access to Metro and other amenities is key, says Dewita Soeharjono, a Realtor with Hollar & Co. Weichert, Realtors in McLean.

“Some people like having a swimming pool and fitness center,” says Ms. Soeharjono, “but being near Metro is really important.”

To be sure, the market for condominiums is not what it was a year or two ago.

“In 2005, condos were selling at a rapid rate, with 14,000 units sold in the metropolitan area,” Mr. Rich says. “That’s compared to 6,600 units for 2006.”

Those cranes you keep seeing? Not all of them are building condos any longer.

A number of projects in the District, like View 14 in the up-and-coming 14th Street Corridor, have transformed midstream from condo projects to rental ones. The View 14 project is scheduled for completion in 2009.

“Dozens of projects have canceled or switched to rentals,” Mr. Rich says.

In other words, the condominiums might take too long to sell. Of course, that’s not to say that View 14 and other projects won’t switch back again if the market changes.

Meanwhile, plenty of developers are still building condominiums.

“There’s development happening all over,” says Ms. Small. “You see all kinds, from larger projects to row houses and old Victorians.”

Area condo inventory is still up, according to the National Association of Realtors (NAR).

“The rapid build-up in inventory will take a little time to draw down,” NAR spokesman Walt Molony says. “But that is favoring buyers.”

So instead of 20 contracts on a property, you may have just two or three. But that provides buyers with another amenity: time.

“Now people have choices,” Ms. Small says. “They have the opportunity to think things through carefully, in contrast to the last few years when things were so fast-paced.”

More time also means that sellers and developers are dangling amenities that would be unthinkable a few years ago.

“Sellers and buyers are very motivated,” Ms. Soeharjono says. “Assisting at closing costs would have been unheard of until last year. That’s usually 2 to 3 percent of the purchase price, so that can make a difference to a buyer.”

So if you’re a prospective buyer who has been standing on the sidelines until now, this might be a good time to try out that pool, especially since interest rates are lower than they were a year ago.

Don’t wait too long, though. Even though the lines may be shorter, you won’t be the only buyer out there.

“There’s still competitiveness in the market,” Ms. Small says. “You don’t want to dillydally. If you like something, there’s probably someone else out there who likes it, too.”

But before you start reaching for your checkbook, here are a few factors to consider:

Do you really want to live in a condominium versus a single-family home?

“Space is going to be very different than if you were in a single family home,” Ms. Soeharjono says. “Six hundred to a thousand square feet is not going to be a lot if you are used to a two-, three-bedroom home.”

Ms. Small counsels buyers, particularly first-time home buyers, to consult a real estate professional to guide them through the process.

“I encourage buyers to start with their own research, like the Internet,” she says. “Familiarize yourself with the loan process and the feel of various housing communities. But there’s no substitute for face-to-face contact.”

Ms. Small recommends working up a needs/wants list to help you narrow your focus when you actually start to look.

“Consider things like location, size and number of bedrooms,” she says. “Do you want washer and dryers inside the unit? What are the accessibility issues? Are you looking for frills like a concierge? Decide what you must have and the things that you can live without.”

A real estate professional can also help you determine how much condominium you can actually afford.

If you are planning on taking on an adjustable rate mortgage (ARM), consider carefully whether you can still afford the monthly payments should interest rates rise.

You should also consider how long you are planning to live in the condo. If you plan on less than three years, renting may actually be the better option.

“If you are only going to be in the place a year or two, you should be renting,” Mr. Molony says. “Otherwise you’re not going to recoup your investment.”

Remember that living in a condominium is not the same as living in a single-family home. Talk to residents about how noisy the place can be. You may also want to drive around the area during some high-activity times, like Saturday night.

“Ask people how they feel about living in the building and the area,” Ms. Soeharjono says.

Check out the rules and policies related to amenities and other particularities of the building. When does the pool open? Where will your guests park? What happens if you lose your key? What about pets? In other words, will the building schedule and lifestyle work with yours?

As a condo owner, you’ll need to deal with the condominium association.

Checking out the minutes of meetings before you buy is a good way to find out what concerns the people in the community and could provide clues to potential problems and large cost outlays ahead.

Finding out the percentage of residents who pay their condominium association dues on time can also be a good litmus test. Nonpayment or late payment of dues might indicate an overall dissatisfaction with the community. An underfunded condominium association could indicate problems ahead.

Review the documents related to the condominium association, including Covenants, Conditions and Restrictions (CC&Rs;); bylaws; and the association’s financial statement. You’ll want to see what they reveal about upcoming major projects, including capital improvements, cash reserves and the possibility of dues hikes.

Hiring a real estate attorney to help you wade through the morass of paper here can be very helpful.

You may also want to have the association checked out at the local courthouse to determine if any owners have filed suit against it.

And who’s running things on a day-to-day basis can make a difference.

Although the costs of a professional management company may be higher, the payoff comes when negotiating for services. Since professional managers represent more than one community, they tend to have more bargaining power.

Ask residents about their own experiences with management.

In fact, there are a number of ways to look more closely at the financial health of a condominium community.

Has there been a recent review of the reserve fund? Lester Giese, author of “The 99 Best Residential & Recreational Communities in America,” recommends the following formula: If the complex is one to 10 years old, the reserve fund should have 10 percent of the cost of replaceable items (roof, roads, tennis courts, etc.). Between 10 and 20 years old, the repair fund should be at 25 percent to 30 percent.

At 20 years, that amount should be 50 percent or more. In other words, maintenance costs shouldn’t be too low; because you might find yourself hit with a hefty bill in the future should one or more of the replaceable items fail.

Find out exactly what your condo dues are getting you. And how do the dues in this community compare with those in comparable ones?

If you are looking to buy a condominium in an older building, you’ll need to consider the effects of wear and tear and other costs. Older buildings are known for a number of amenities not found in their newer counterparts, including high ceilings, hardwood floors and, often, larger rooms.

However, building codes change over time, and repairs within your building will need to follow the newest codes. You should see if the building insurance will cover the cost of bringing the place up to code, if need be.

And make sure you understand your own insurance responsibilities. What does the condo association cover versus what you are expected to cover on your own? This will probably include your own personal belongings as well as other items within the unit that may not be covered by the association’s policy.

Bottom line: “Make sure you do a good job in assessing and laying out realistic expectations,” Ms. Small says. Consider the market, but also consider your own needs. Read the fine print, and if it doesn’t make sense, get help.

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