Tips for Condo Buyers
Get pre-approved for a mortgage before you make an offer
When a developer plans a new condo project one of the major transaction hurdles they face is financing. Construction lenders gage market interest and finance-ability on the developers pre-sales. When there are adequate pre-construction sales reservations, the project will move forward. Pre-construction reservation pricing is generally below that of completed condo units which translates into savings for buyers who are willing to reserve or purchase units at this early stage.
Set enough money aside to cover closing costs
You have deposited your down payment. Now there is a long list of expenses you may have to pay at closing, depending on where you live and who your lender is. Closing costs can add up to between 1% and 5% of your loan amount. Ask your lender or mortgage broker to give you a Good Faith Estimate of the loan-related fees you'll have to pay as early as possible.
Coordinate taking possession of your new condo with your move from your old home
If possible, avoid a situation where you have to find short-term accommodation because you must vacate your old house or apartment before you can move into your new condo. Moving once is enough.
Insist on a condo inspection
The first really hot day you spend in your new condo is way too late to find out that the air conditioning unit does not work. The one condition you should always include in an offer to purchase is for a condo inspection. Find out how much it will cost to fix any defects and have the seller fix them before you agree to buy the condo or deduct the estimated cost from your final offering price. If the seller won't help bear the costs and you want to go ahead with the purchase, make sure you can afford the necessary repairs on top of your mortgage.
The most important factors in effective negotiation are:
Information
Once you've found a condo, the first step in negotiation is to determine its fair market value. Condo.com or an appraisal affiliate can prepare a Comparable Market Analysis (CMA) to show you what similar condos have sold for. However, what a condo is listed for does not always mean that is what it will sell for or can be bought for. There can be a big discrepancy in the two figures. Gather information.
Condition
Does the condo that interests you shine above or fall below those recently sold? Make a realistic comparison of condition, then adjust your thinking up or down according to what you see.
Extra Amenities
Does the condo you've chosen have more or less amenities than comparable condos? Although amenities won't affect the value as much as location or condition, they can be a factor.
Preparation
The most important factor is your emotional frame of mind. Never let emotions override common sense. Excitement is normal, but keep it in check during negotiations or you'll lose the value of the information you've gathered.
In addition to your emotional frame of mind, your finances should be in order. An offer carries more weight if there are no dangling financial problems.
You can't be afraid to let the condo go. Convince yourself that if the price is not to your liking or is outside your budget, you'll walk away. Set a realistic limit and stick to it. Overpaying for a condo is an epidemic among buyers who let their emotions rule their better judgment. It is a mistake you will regret every 30 days for years to come.
Finally, organize your information and have it readily available.
Realism
Don't throw away all your information gathering and preparation by making a ridiculous offer on a well-priced condo, Nothing turns a seller off more than a low-ball offer on a condo that is realistically priced. Often, negotiations will stop, rarely to be revived again.
Buyer Tips
Get pre-approved for a mortgage before you make an offer
When a developer plans a new condo project one of the major transaction hurdles they face is financing. Construction lenders gage market interest and finance-ability on the developers pre-sales. When there are adequate pre-construction sales reservations, the project will move forward. Pre-construction reservation pricing is generally below that of completed condo units which translates into savings for buyers who are willing to reserve or purchase units at this early stage.
Set enough money aside to cover closing costs
You have deposited your down payment. Now there is a long list of expenses you may have to pay at closing, depending on where you live and who your lender is. Closing costs can add up to between 1% and 5% of your loan amount. Ask your lender or mortgage broker to give you a Good Faith Estimate of the loan-related fees you'll have to pay as early as possible.
Coordinate taking possession of your new condo with your move from your old home
If possible, avoid a situation where you have to find short-term accommodation because you must vacate your old house or apartment before you can move into your new condo. Moving once is enough.
Insist on a condo inspection
The first really hot day you spend in your new condo is way too late to find out that the air conditioning unit does not work. The one condition you should always include in an offer to purchase is for a condo inspection. Find out how much it will cost to fix any defects and have the seller fix them before you agree to buy the condo or deduct the estimated cost from your final offering price. If the seller won't help bear the costs and you want to go ahead with the purchase, make sure you can afford the necessary repairs on top of your mortgage.
The most important factors in effective negotiation are:
Information
Once you've found a condo, the first step in negotiation is to determine its fair market value. Condo.com or an appraisal affiliate can prepare a Comparable Market Analysis (CMA) to show you what similar condos have sold for. However, what a condo is listed for does not always mean that is what it will sell for or can be bought for. There can be a big discrepancy in the two figures. Gather information.
Condition
Does the condo that interests you shine above or fall below those recently sold? Make a realistic comparison of condition, then adjust your thinking up or down according to what you see.
Extra Amenities
Does the condo you've chosen have more or less amenities than comparable condos? Although amenities won't affect the value as much as location or condition, they can be a factor.
Preparation
The most important factor is your emotional frame of mind. Never let emotions override common sense. Excitement is normal, but keep it in check during negotiations or you'll lose the value of the information you've gathered.
In addition to your emotional frame of mind, your finances should be in order. An offer carries more weight if there are no dangling financial problems.
You can't be afraid to let the condo go. Convince yourself that if the price is not to your liking or is outside your budget, you'll walk away. Set a realistic limit and stick to it. Overpaying for a condo is an epidemic among buyers who let their emotions rule their better judgment. It is a mistake you will regret every 30 days for years to come.
Finally, organize your information and have it readily available.
Realism
Don't throw away all your information gathering and preparation by making a ridiculous offer on a well-priced condo, Nothing turns a seller off more than a low-ball offer on a condo that is realistically priced. Often, negotiations will stop, rarely to be revived again.
