To Condo or Not to Condo

Condos may look like an inexpensive first home, but they have a few drawbacks to consider.

Want a deal? A condo may not always be the answer. On the surface, purchasing a condo seems like a great option for buyers in search of affordability. The median sales price for a condo in February 2024 was $355,100, nearly $50,000 less than the median sales price of $402,500 for a single-family home, according to the National Association of Realtors.

“Many first-time homebuyers are transitioning from apartments, making condo ownership feel like a natural next step,” says Derrick Nuttall, vice president of Citi Mortgage’s Community Lending Team. “While condos can be great options, they require thorough planning and research to fully understand the associated costs and the rights and responsibilities of both the buyer and HOA.” 

Why You May Not Want to Condo

For many first-time buyers, a condo can seem like an affordable and convenient option, but there are a few considerations to be aware of, says Wendy Forsythe, chief marketing officer of eXp Realty, such as:

• Homeowners Association (HOA) Fees: Monthly HOA fees can add a significant cost on top of the mortgage. These fees cover maintenance, amenities and common areas but can increase over time and are not within your control as the condo owner.
• Slower Appreciation: Condos typically appreciate at a slower rate compared to single-family homes, which can impact long-term wealth building.
• Special Assessments: If a condo building requires unexpected repairs or improvements, the association may issue special assessments—one-time fees that all owners must pay, sometimes amounting to thousands of dollars. You can’t control the timing or the amount of the special assessment, which can create unexpected financial challenges.
• Less Control: Condo living means shared decision-making with the association, which can restrict changes to the property, exterior modifications and even how you use the unit.
• Resale Challenges: Depending on market conditions, condos can take longer to sell, and lenders may have stricter requirements for condo financing, limiting the pool of potential buyers.

In addition, Nuttall points out, many condos require a higher down payment than a single-family home.

“Mortgage programs for condos often need extra paperwork from both the borrower and the condo association,” he says. “Research is essential before buying a condo, as the HOA's financial health can significantly impact ownership. Struggling HOAs may raise fees without approval to cover obligations. In some cases, deferred maintenance has led to six-figure special assessments for owners. While rare, this can happen in other developments, making due diligence crucial.”

Why a Condo May Suit You

Despite the challenges, condos remain a popular choice for many first-time buyers. Some of the attributes that make a condo purchase appealing, Forsythe says, include:

• Affordability: In many markets, condos offer a more budget-friendly entry point compared to single-family homes, making homeownership accessible sooner.
• Low Maintenance: The HOA typically handles exterior maintenance, landscaping and amenities, which is ideal for busy professionals or those who don’t want the upkeep of a house.
• Urban and Walkable Locations: Condos are often located in city centers or walkable neighborhoods, providing easy access to work, entertainment and public transportation.
• Amenities: Many condos offer desirable features like pools, fitness centers, security and shared social spaces, which can add value to the lifestyle of the owner.
• Good for Short-Term Plans: If a buyer plans to stay in a location for only a few years, a condo may be a practical choice, especially in competitive housing markets where single-family homes are out of reach. 

“Condos are excellent options for well-prepared buyers,” Nuttall says. “While some buyers may prefer to wait and save for a single-family home that may not be feasible for others. Location and affordability ultimately determine whether a condo or a house is the best fit. Every buyer's situation is unique—there’s no one-size-fits-all approach.”

Prepurchase Due Diligence for Condos

Still, before making an offer on a condo, Forsythe recommends that buyers review the following issues:

• Financial Health of the Condo Association: Review the association’s financial statements, reserve funds and history of assessments. A well-managed association reduces the risk of unexpected costs.
• Condo Insurance and Coverage Gaps: Understand what the HOA’s master insurance policy covers and what additional coverage you may need for your unit.
• Maintenance and Building Condition: Inspect the property’s condition, including roofing, elevators and common areas to avoid buying into a poorly maintained building.
• Rental and Investment Restrictions: If the goal is to eventually rent out the unit, check HOA rules regarding leasing. Some buildings limit or prohibit rentals, which can impact future flexibility.
• Resale Potential: Consider how easy it will be to sell the condo in the future. Research appreciation trends and demand for condos in the area.
• Lender Approval: Some condos have difficulty qualifying for conventional or FHA loans. Buyers should ensure the condo meets lending guidelines before making an offer.

Condo Alternatives

If you’re convinced to skip the condo step, there are strategies to help you get started on the homeownership ladder.

“If possible, delaying a purchase to build a larger down payment may provide access to more home options with better long-term financial benefits, such as a single-family home,” Forsythe suggests. “Townhomes can offer a compromise—often at a lower price than detached houses but with more space and fewer shared amenities than a condo.”

Townhouses also typically have lower HOA fees than condos.

Other options Forsythe suggests include house hacking : buying a duplex or small multifamily home and renting out part of it to offset the mortgage costs, and expanding search areas to emerging neighborhoods or markets that may offer better value. In addition, she suggests looking for down payment assistance programs that can make homeownership more attainable.

Whether or not to buy a condo depends on the buyer’s financial situation, lifestyle and long-term goals, Forsythe says.

“If affordability and low maintenance are top priorities, and the buyer is comfortable with HOA fees and restrictions, a condo could be a great first step into homeownership,” she says. “However, if building long-term equity, resale flexibility and greater control over the property are important, a single-family home may be the better choice.”

Sidebar: Florida Condo Owners Face New Costs that Could Come to Your Town

After the shocking collapse of the Champlain Towers South condo in Surfside, Florida in 2021, which killed nearly 100 people, the as yet incomplete investigation focused on the corrosion of the concrete in the parking garage and its steel reinforcement. The tragedy shined a light on the lack of maintenance and repairs in some condo buildings, particularly older buildings and those exposed to harsh climate impacts.

The Florida legislature passed new structural safety regulations that went into effect December 31, 2024, including the requirement that all condo buildings that are three stories or taller be inspected when they are 25 or 30 years old, depending on their proximity to the coast. All condo associations in Florida must complete a structural integrity inspection every decade and set aside reserve funds for potential repairs.

New reserve fund rules mean many condo owners face special assessments to pay for inspections, repairs and to bulk up savings for potential future problems. In cases where deferred maintenance is a problem, those assessments can rise to $100,000 per condo or even more. Regular condo association dues rise to increase reserves and pay for projects, too.

Other state and local governments are also implementing new rules for condo associations meant to ensure that owners are adequately protected and prepared for future maintenance.

New rules from Fannie Mae and Freddie Mac require a review of condo association repairs before approving a new mortgage for buyers. Buildings with deferred maintenance or evidence of construction defects may be blacklisted from financing. Other lenders also require a review of a condo association’s reserve funds before approving a loan.

On top of these expenses, insurance rates in Florida rose 102% between 2021 and 2024, according to the Insurance Information Institute. Some insurance companies refuse to provide coverage for condos that show evidence of deferred maintenance or that lack sufficient funds for repairs.

As a result, condo ownership may become a more expensive proposition than buyers anticipate. 

Publisher’s Note: This content is made possible by our Today’s Homeowner Campaign Sponsors: Whirlpool Corporation. Whirlpool Corporation takes sustainability seriously, in both their products and their operations. Learn more about building and buying homes that are more affordable and less resource intensive.