High condo fees can be a thorn in the side of a home buyer who finds a place she loves only to realize that monthly fees are upwards of $1,000. Understanding how these exorbitant costs are factored into the list price can be critical when home shopping.
While most condo units in the city have modest fees when compared to the total costs of home ownership, some offer perks and amenities of every flavor — plus excessively high monthly fees to pay for them. Can fees be so high that the list price needs to be adjusted down, or so low that they actually push a unit’s price up?
Local real estate agent Lindsay Reishman told UrbanTurf that condo fees very often impact how a property is priced. He noted that higher fees may result in a lower list price to bring in a larger prospective pool that might not otherwise qualify for a mortgage given the added costs.
Similarly, low condo fees (under $200 a month) could increase the list price of a property, not just by making it more attractive to buyers, but because that pool of potential buyers will qualify for a larger mortgage if the fees are low.
Reishman’s rule of thumb for buyers trying to crunch the numbers is that for every $100,000 borrowed, expect to pay around $600 a month in mortgage payments. Using that logic, if condo fees are $600 a month, you should accordingly reduce what you anticipate being able to afford by $100,000.
In some cases, the calculus can be more tricky.
Many units on the market in Southwest DC look like great deals listed in the $200s, however a closer look reveals monthly fees north of $600. But many of these units are not actually condos but co-ops, which often include property taxes, utilities, cable, and other costs in the monthly fees. So it’s not necessarily that the co-op fees are so staggering, but rather they just consolidate more expenses into one bill than your average condo.
It is important to recognize that every transaction is case specific. Some units with higher fees turn out to be as good or a better deal than similarly-priced units with lower fees when you consider all the services those fees pay for. Some units with lower fees may be attached to a unit with an inflated price. The key is being careful with crunching the numbers, realistic about your priorities, and savvy about the area in which you’re looking to buy.
This article originally published at http://dc.urbanturf.com/articles/blog/rule_of_thumb_to_calculate_the_condo_fees_you_can_afford/2330
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