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What to know when buying an existing condo

When budgeting for a condo, it’s important to consider the costs outside of your mortgage.

Don't forget to consider the costs outside of your mortgage.

Many people like condo ownership because of the ease of living in a managed space; think less yard work, no snow shovelling, and no exterior maintenance. Condos are often a great first housing purchase, and their price tag means it’s easier to take that first step on the property ladder in competitive markets like Toronto and Vancouver. You can also use a condo to build equity for when you have the resources to buy something larger.

Just like a house purchase, if you’re buying a condo at any stage as your principal residence, a minimum 5% down payment is required. If you’re buying the condo as a rental or investment property, a 30% down payment is required. When budgeting for a condo, it’s important to consider the costs outside of your mortgage as well, including property tax and condo fees.

Should I buy an existing condo? 

Buying an already built condo comes with a lot less uncertainty around close dates, and is similar to buying a house in many ways vs. buying a new or pre-construction condo. Since the building is completed, you should have more clarity around the space and the condition of things, but there are still many important things to ask before buying an existing condo.

CMHC has a great guide to buying a condo that’s worth going over before purchasing. 

Key questions to ask about buying a pre-existing condo:

  • What’s a building reserve and how do I know if it’s enough? 
  • Are there any big repairs to spaces like the parking garage or exterior that will need to be done in the short or medium term?
  • Is the interior in good condition? How about the appliances and HVAC? 
  • Are any of the mechanical elements of the condo rented? If so, what are the monthly fees?
  • Are there any legal actions against the corporation that manages the condo?
  • Is there still a builder’s warranty?
  • What are the conditions (if any) on the unit? (E.g. are pets allowed?) Are there any other conditions that might impact you now or in the future?
  • Are there any rules within the condo that will be challenging for you to adhere to? What are the policies for pets, visitors, noise, short-term rentals, Airbnbs, etc.?
  • Is there sufficient soundproofing?

Having a certified house inspector assess the interior and exterior will help you to decide if the building you’re considering is a good investment. This will also help you budget for anything that might be nearing end-of-life, like appliances or HVAC.

What’s included in condo fees? 

What’s covered in your condo fees varies greatly from building to building. Some include utilities like gas, electricity and water, while others don’t. Understanding the building’s amenities will help with your budgeting. Property taxes are also not often included as part of condo fees, so ensuring they’re part of your mortgage payment or budget each year is essential.

It’s also important to understand that condo fees can fluctuate. This should be part of your due diligence with a certified house inspector before you buy, and will hopefully help you ward off any surprise increases in the short and medium term.

What is the condo reserve fund? 

The reserve fund is the money that the condo corporation has in trust to do major repairs to the building. This can include the exterior, common areas, ammenity areas like pools or gyms, or overall structural fixes. This fund is created through condo fees, and after a major repair takes some time to replenish. A lot of repairs to a building results in a low reserve fund.

Buildings with low reserve funds require increases in condo fees to make major repairs that come up, which will impact your monthly fees. Your real estate agent can help you access the most recent reserve fund study, which shows the buildings financials and repair records. Checking the reserve fund of a building, along with a building inspection will help you head off many unpleasant condo fee increases.  

What else should I consider before buying a condo?

In this shifting market that’s moving more towards favouring buyers, the condo market may be a space where you can secure a great deal. Keep in mind that because of the frequent fluctuations, making an offer from comparable sales in months prior may not be an accurate representation of the price you can pay today. Work with a real estate agent that understands the shifting landscapes of condos in your area and ensure your mortgage broker is giving you the lowest rate possible to help reduce your monthly payments.

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