Extra Considerations When Buying a Condo or Townhome

When you are considering buying a home in the Denver-Boulder area, you need to look beyond the physical structure, the location, or the land itself to the more abstract legal characteristics of the property you’re buying. When you’re buying a condo or townhouse, or any even a single family home or piece of land that is governed by a homeowners association, you need to be at least one degree more cautious. 

When you buy this type of property, you’re not just purchasing a piece of real estate. You’re buying into a corporate entity that has its own governing structure, the ability to establish new rules and regulations that can define how you can use your property, and the ability to mismanage the finances of the corporation in ways that could bankrupt you.

Lending Requirements

Make sure that the complex meets the criteria for major lenders. If you are getting an FHA loan, your lender will verify that the complex is FHA approved. However, if you are paying cash or getting a conventional loan, you may only discover that the complex is not FHA approved when you are trying to sell it and find out that an FHA buyer can’t buy your condo because the complex doesn’t meet their  lending requirements. If the complex is not eligible for FHA or conventional  loans with low down payment limits, you may have purchased a condo with a limited resale market.

HOA Rules and Regulations

In addition to recorded covenants, most townhouse or condominium associations have unrecorded rules and regulations that you will have to live with. You need to review these and make sure you are comfortable with them. It  is also a good idea to review the minutes of recent association meetings to familiarize yourself with the issues that are of concern to current owners in the complex.