One of the most common questions the Real Estate Professionals at The Trembley Group Real Estate get from first-time homebuyers is, “Should I buy a condominium or a single family home?” There is no simple answer. There are many good reasons to choose a condominium or a house and the real question is, “Which one is right for me?”
Jeremy Jenks, Vice President of Sales with The Trembley Group Real Estate in Myrtle Beach recently closed a condo for clients Tom and Pam on the water in Myrtle Beach. While not first-time buyers, their experience, and thought processes are useful. Tom and Pam moved from a single family house in Abingdon, Maryland. Over the years they had also owned and lived in two condos in Maryland. They said there were pros and cons to both.
A few years ago, they owned a condo on the water in Belcamp. They were uncomfortable with the high dues, so they bought the house in Abingdon. Tom says he had no idea how much he would hate all the yard work and maintenance. It seemed that as soon as he was done mowing one side of the lawn, the grass had already grown longer on the other. It left no time for Tom’s passion for fishing or the passion he shares with Pam, golfing.
So, back to the original question, “What’s the right decision, a condo or a house?” Tom says, “I think most people should buy a house, even though I prefer a condo for now — but it really depends on your lifestyle and goals.” To help determine which is best, here are some of the benefits and drawbacks of each, along with some of The Trembley Group’s experiences.
The Argument For A Condominium
Here are a few of the reasons people prefer condos over single-family houses.
Condos Cost Less
Tom and Pam paid a little more than $194,900 for their oceanfront condo, and it came with new carpet, tile, and paint. They added a washer, refrigerator and did some patio work for roughly another $2,000. There is no way they could have bought a comparable house on the water for that price. An oceanfront house might have cost hundreds of thousands more.
Recent pricing data from the local Association of Realtors shows a median sales price of $238,361 for single-family homes in the Myrtle Beach area versus $158,788 for condos. That includes luxury and oceanfront condos and houses in the area. The differential is substantially greater for oceanfront property. Also, part of the difference can be attributed to a size differential – condos are generally smaller – but for Tom and Pam, that’s not necessarily a bad thing.
Condos Generally Have Lower Monthly Expenses
For Tom and Pam, the $593 monthly dues for their Myrtle Beach condominium make it almost as expensive as a house. But they shopped wisely and are finding lower living costs in their condo. Their association dues include water, sewer, and garbage, as well as exterior maintenance and building insurance. The insurance they still have to buy covers only what’s inside their unit (including contents) and it is significantly less than a typical homeowner’s policy.
In their Maryland single-family house, water, sewer, and garbage collection cost $122 per month. The cost of their homeowner’s policy was about $58 per month as compared with $20 monthly for their condominium policy, a savings of $38. Clearly, their total housing costs are low, despite paying dues, and that’s considering the lack of expenses for exterior maintenance or yard care. Tom and Pam estimate their overall cost of living to be lower here than it was in their Maryland house.
Most first-time homebuyers are not going to pay cash for their home and may find the biggest savings with a condo may be in the borrowing costs. Since homebuyers pay significantly less for a condo than a house, the mortgage payment will be much lower.
Condos Require Less Maintenance
Tom and Pam’s three bedroom condominium generally takes minutes to vacuum and clean. They spend their time golfing, fishing, reading, or walking downtown rather than cleaning and maintaining a house. It isn’t just the size that makes it easier, though. Condo owners are never responsible for painting, landscaping, or maintaining the exterior. Management does that. There is no lawn to mow, no mailbox to replace and no shingles to repair. Tom and Pam only take care of the inside. Home maintenance is simply easier in a condo.
Amenities Are Included
A house buyer may not be able to afford a house with a pool and hot tub, and who wants to clean and care for them anyhow? With many condos, these and other amenities (exercise room, playground for the kids, tennis court) are included without additional cost or work.
Condominiums May Offer A Better Location
Tom and Pam walked downtown for happy hour yesterday. Also within walking distance are several parks, a couple of grocery stores, their bank, 20 great restaurants, a hardware store, a shoe store, a clothing store and much more. Most importantly, the 60 miles of Grand Strand beaches are just an elevator ride and a few steps away. Tom and Pam could never have afforded a house so close to so much.
Many home buyers find they can’t afford a house in their favorite neighborhood but a condominium fits the bill.
Good Reasons Not To Buy A Condo
Here are some reasons many people hesitate about buying a condo when considering the condo vs. house question.
There Are More Rules and Restrictions
Some condominiums come with what some think are nitpicky rules. Some won’t allow an owner to back into their parking spot or leave a pool towel out to dry on a patio chair. Pam says, “Our rules here seem more reasonable like what is permissible to place on a porch or patio. Tom even planted a potted tomato this summer.”
It’s important to know the rules before buying a condo to avoid surprises. For example, some condominiums don’t allow pickup trucks or motorcycles and others have restrictive pet policies. A new home buyer doesn’t want to move into their unit and discover they have to immediately sell their vehicle and put their dog on a diet so he conforms to the maximum weight allowance.
There Is Less Storage Space
With a small condo, stuff has to be more efficiently organized or it just needs to be sold or given away. And if a condo owner thinks they’ll just add storage, they’d better read the rules first. Tom and Pam’s HOA doesn’t allow for outdoor storage except for the 18 square feet of storage off the balcony.
There Isn’t A Yard
Some folks can’t imagine this as anything but a benefit, but some homeowners love that big, green field of sweaty weekend work and the resulting vegetables and flowers. That doesn’t come with a condo. Tom thinks watering his potted tomato plant takes the perfect amount of time.
There Is Less Privacy
Condominium owners live much closer to their neighbors. Some condominium owners may find the neighbors snooping every time the garbage is taken out or the sound of high heels clicking on the tile floor in the unit above to be annoying. A partial solution is to buy an end unit in a one-story complex. Only one fairly soundproof wall is shared with a neighbor, and a fenced patio or balcony may have privacy screening.
An end unit may have a higher price but for some, it may be worth a couple thousand dollars more for the added privacy. The privacy will be enjoyed for years to come, and the extra cost will probably be recouped when it comes time to sell.
Condo Owners Have To Pay Association Fees
The Trembley Group has seen condos with HOA dues as high as $1,200 per month. Fortunately, that’s not the norm. Even when dues are low, though, it’s important to examine the HOA budget and other financial documents. A big deficit or a lack of reserves could suggest a dues increase is just around the corner.
It’s also important not to justify higher association dues because of amenities unless there are plans to actually use them.
Try to calculate the value of the amenities based on lifestyle. A hot tub and pool may be worth $25 per month because that much was spent going to pools and the gym before buying the condominium. But with the beach and ocean just a few steps away, some residents may never use the facilities, so the value to them is zero.
There May Be Special Assessments
Sometimes the collected association dues are not sufficient for the necessary maintenance and other costs. When that happens, an HOA may have to impose a special assessment. That can be an unpleasant surprise. For example, there could be a special assessment to cover unexpected pool repairs. A roof repair may lead to a $600 special assessment for each owner.
Once the HOA makes the decision, there generally isn’t anything anyone can do but pay – usually with a couple of months lead time. That’s why examining the condo documents before buying is so important. Ideally, there should be sufficient reserves to deal with unexpected problems.
Otherwise, a new homeowner needs to be prepared for unpleasant surprises.
Mortgage Rates May Be Higher
A condominium mortgage may have an additional charge of 0.75% of the loan amount. It’s usually rolled into the loan, effectively increasing the interest rate. However, there are several important things to consider here.
First, the extra charge is only added for mortgages with a loan-to-value of 75% or more. A borrower can also avoid private mortgage insurance with a down payment of 25%. A less expensive condo with a 25% down payment may also be less expensive month by month because PMI and the extra mortgage fee are avoided. Remember that the condominium mortgage will be significantly less than a comparable house mortgage, so the monthly payment will likely be lower even with the 0.75% condo loan premium. In the whole scheme of things, it’s not really that big a deal.
Finally, it’s possible to avoid the extra charge, even with a low down payment, by getting a Veterans Affairs or Federal Housing Administration mortgage. However, not all condominium developments meet the specific guidelines.
The Argument for a Single-Family House
For some people, a house is simply part of the American dream. There are some good reasons some people choose houses over condos.
Houses Have More Space
According to the latest census statistics, the median size of new houses is 2,467 square feet, while for new condos, it’s 1,408 square feet. That is typical for Myrtle Beach. Bigger means more space for your stuff and the people living there. A large family crammed into a condo would not be a good idea.
There’s a Yard
There is rarely a personal yard with a condo. That’s one reason that some people prefer houses. While a yard does mean a lot of work, there is room to barbeque, garden, play, and there’s space for a dog to run. It also helps with privacy.
There’s More Privacy
There’s almost always more privacy with a house versus a condo. No walls are shared with neighbors, and the yard adds even a little more distance, too. It’s even possible to create more privacy with fencing and landscaping, too.
House Owners Have More Control
A house might come with neighborhood association rules, but in general, with a single-family home, the homeowner has more control. In most cases, subject to building codes, an addition can be built, a fence can be added, and no one will restrict the kind of vehicle owned.
In a condominium, association rules affect every decision regarding the home. If a porch roof is leaking, there may be 11 roof repairs in line ahead of it, so it may stay that way for years. Had it been a single-family house, the roof might have been fixed right away. In the case of a condo, the decision wasn’t the homeowner’s to make. Other potential freedoms that come with a house include being able to run a small business from home or renting out rooms, an option some use to help pay a mortgage. Many at The Trembley Group Real Estate believe the greater personal control over home space and lifestyle is the biggest reason for single-family homeownership.
Good Reasons Not to Buy a House
Finally, there are some good reasons to avoid buying a house, too.
Houses Cost More Than Condominiums
National Association of Realtors data shows that houses cost more than condominiums in just about every market. That’s partially due to size differences, but today, even if a homebuyer wants to go smaller, there are not as many options with houses. Even if Tom and Pam had wanted a 1,400 square-foot house, it would have cost significantly more than the price paid for their condo if they could have found one.
Houses Have Higher Initial Expenses
Higher house prices mean higher one-time expenses like mortgage points and closing costs. It also costs more to set up the household: buying a lawn mower, a weed whacker, shovels, rakes, a branch cutter, a ladder, and a slew of other tools that wouldn’t be needed in a condominium.
Houses Have Higher Regular Expenses
With a bigger house rather than a smaller condo, in addition to a higher initial cost, just about every ongoing expenses will be higher.
Mortgage payment (a bigger loan = bigger payments)
Insurance (higher value = higher insurance premiums)
Taxes (higher value = bigger property tax bill)
Maintenance (more things to maintain = higher costs)
Heat (more space = higher cost to heat)
Electricity (more room = more lights and devices = bigger bill)
Water (more things to water = bigger water bills)
Houses Are Much More Work
Some people just love mowing the lawn, painting the garage and cleaning that black gunk out of the gutters. Pam and Tom didn’t. And many first-time homebuyers may not have the confidence or experience to take on the upkeep of a single-family home. And if there is one thing Tom and Pam’s experiences make clear, houses are more work than condominiums. They would rather be soaking in the hot tub, soaking up the sun on the beach, fishing, or cutting another stroke off the golf game.
For first-time home buyers, the decision between a condominium and a single-family house is a choice of lifestyle. Both have advantages and disadvantages and the right decision is the one that most closely fit a buyer’s lifestyle at a particular point in their life. For a young professional who wants to be close to the action, a short walk to restaurants, shops, and the beach is likely to be a higher priority than having more bedrooms and a big yard. But when it becomes time to start a family, a single-family house with a yard might be a better fit.
In any case, be sure to ask all the lingering questions before signing on the dotted line. The Trembley Group Real Estate Real Estate Professionals have the patience, insight, and experience to help first-time homebuyers sort out all the variables and answer all the questions that need to be answered before looking for a home.
At The Trembley Group, we pride ourselves on being the experts at more than just selling real estate. We are local residents, some of us have been here for a lifetime. The rest of us will be here until the end of time. We love living, working, and playing in the diverse backyard of Coastal Carolina, and look forward to helping you live and love your dreams soon too. Please reach out to us by phone or email for personalized service and one-on-one advice.