We commonly think that when buying a property, the listing price is the most important criteria when making the decision. Although it is true that it is important, this statement is far from reality.
When buying a car, it shouldn't be right to only consider how are you going to pay the sellers asking price, you also need to think about the car's insurance, monthly fuel cost, sales taxes, maintenance... The same happens when purchasing a home. Buyers need to be aware that there are other charges in addition to the "listing price" linked to the transaction. The property investment includes property taxes, home insurance, mortgage costs, mortgage insurance, utilities, maintenance fees, just to mention a few.
The maintenance fees or HOA's might be the ones that have increased the most over time. It seems like yesterday when the HOA's of the Continuum Condo South and North had a policy of $1 per property's sqft. A few years later one of the lowest-priced South of Fifth condo, the Yacht Club at Portofino, is at $1/sqft while the Continuum is now at $1.30/sqft
Let's see for instance the lowest-priced available unit at the Continuum Condo South, unit #802. This beautiful turnkey 2-bedroom unit is listed at $1.8M, has ocean, government cut, and Fisher Island views. Although the price has been reduced 3 times for a total of 12.5% down the original listing price, the unit has been steady on the market for over 2 years! One explanation pops our mind when we see the exorbitant management monthly fees of $2,201.
When requesting a loan, banks don't only look at the lending price to approve or not the mortgage, but they also check the interest, taxes, insurance, and common charges. HOA's fees are normally included in the common charges. Lenders don't look favorably upon high maintenance fees, but this doesn't mean they are completely turned off by the idea, or at least not for ultra-luxury condominiums.
Everything comes back to market activity. If the condo has quick liquidity, which means units are selling/ renting at a fast pace, there are higher chances that banks give thumbs up to the mortgage. There are some other scenarios where borrowers come to the bank and ask for a loan on a preconstruction where there are no market activity records. This might make things more difficult for lenders to approve credits.
In conclusion, maintenance fees can be a definite deal-breaker if they are not anticipated. If you are planning to buy a unit and ask for a loan, you should definitely consider the following advises:
1. Discover which banks have lent on that condo before. They might have the records and relevant contact information which will facilitate the process.
2. Be informed of the common charges since the beginning.
If you are interested in purchasing a unit, contact Condoideas Realty Group. We will guide you into the HOA's fees of any property that interests you.