Home Economics: Condo vs. single-family home: What's right for you?

Among condominium buildings high above the city are10 Rittenhouse Square (front) and Two Liberty Place in the background. Center City condos have held their value.
Among condominium buildings high above the city are10 Rittenhouse Square (front) and Two Liberty Place in the background. Center City condos have held their value. (DAVID M WARREN / Staff Photographer)
Posted: January 06, 2012

You've decided to dip your toe into the sea of properties available in the Philadelphia real estate market. Now, the question is: single-family home or condo?

Though location and price are prime considerations for both, real estate agents cite lifestyle as a major factor.

Why? Because when you buy a single-family house, you purchase the land on which it sits, and are responsible for maintaining it.

"When you buy a condominium, you are also buying the services," said developer/real estate broker Allan Domb, who specializes in the Center City high-rise market - "the doorman, the facilities offered, maintenance, and professional management."

"In addition, condos in Center City offer buyers a chance to live in locations" where single-family houses are few or are spoken for, he said.

Location - especially around Rittenhouse and Washington Squares - has helped Center City condos hold their value, Domb said.

Data collected since the real estate downturn began here in August 2007 show Center City and adjacent neighborhoods have not sustained the price hits other areas have experienced.

So, if you don't like mowing the lawn or driving to the gym, or if you travel out of town frequently, a high-rise condo might be your choice.

"It provides you the freedom of locking the door and leaving without worrying" that something will go wrong and remain unattended until you return, Domb said.

With a condo, you do give up some freedom. Though every owner is guaranteed the "right to quiet enjoyment of their space" that can't be infringed upon, he said, you are sharing.

No matter how thick a unit's walls are, for most people there's no substitute for the privacy promised by a single-family house.

Despite condos' increased sales, and sale prices, market observers say they are unlikely to replace single-family homes as the investment of choice in real estate. Traditionally, houses, because of their appeal to families, have tended to appreciate at a faster rate than condos.

Unlike most single-family-home developments, condos come with rules, established and enforced by owners associations and their boards.

The best condo boards "maximize owners' equity and make living in the building easier, maintaining the common elements and putting away money for expenses," Domb said. One of his buildings, the Barclay, has a reserve fund of $1 million, financed by 15 percent to 18 percent of the annual budget.

Condo boards do have a say on changes made to the units.

"Changing a kitchen or bath and not touching elements common to the building is not usually a problem, but for a gut job, you need an architect or engineer to draw up the plans and make sure they comply with the rules," Domb said.

Before you buy, Mark Wade of Prudential Fox & Roach in Center City, who specializes in low- and mid-rise condos, recommends careful scrutiny of the condo association.

"The association can influence value," Wade said. For instance, if it doesn't monitor the owner-occupancy ratio - that is, if there are more than the acceptable number of renters vs. owner-occupiers - it may make it difficult for a buyer to get financing.

Condos not approved for Fannie Mae, Freddie Mac, or Federal Housing Administration-backed financing are known as "nonwarrantable" and offer few options for buyers or those refinancing.

"This scenario ultimately lowers demand for a building, and reduces resale values as well," Wade said. "A review of the condo budget, money on hand, and knowing what is included in the condo fees should be considered when buying a unit."

Pennsylvania law requires a condo association to provide rules and regulations, financial data, and other relevant information within 10 days of a prospective buyer's request. The buyer has five days after receiving the details to cancel the contract.

Mortgage interest rates for condos tend to be higher than those for single-family houses, unless you are willing to put at least 25 percent down.

Center City mortgage broker/Realtor Fred Glick said that for a mortgage guaranteed by Fannie Mae and Freddie Mac, "if the loan-to-value [ratio] is more than 75 percent and the term of the loan is over 15 years, there is 0.75 percent added to the price."

"That translates to about 0.375 percent in higher rate," Glick said.

Financing purchases in a high-rise building that is less than 70 percent sold is challenging, and many lenders won't touch them, Domb said.

"Usually, a developer has one or two lenders who will provide mortgages," he said. In some cases, the lender submits a project for "spot approval" to Fannie Mae and Freddie Mac, both of which have tightened regulations dramatically on existing buildings as well as new ones.

Domb added, "A lot of seasoned buyers won't look at a new building unless the units are 50 percent to 60 percent sold, concerned that a fire sale will change the makeup of the occupants - that is, speculators and rental units."

When you look at a building, "ask questions and keep your eyes open," he said.

These days, condo sales continue apace, although the chief buyers, especially in Center City, are young professionals and empty-nesters, rather than families, who still gravitate to houses.

"I got a call recently from a guy I sold a condo to in the early 1980s, when he was single, who moved to the suburbs when he got married and had children, and now he and his wife were empty-nesters and looking to move back," Domb said.

Was he surprised the man remembered him?

"I was surprised he was still talking to me."


Home Economics:

Join Alan J. Heavens

at noon Monday for

a chat about real estate, home repair, and anything in between.

Go to www.philly.com.


Contact real estate writer Alan J. Heavens at 215-854-2472, aheavens@phillynews.com,

or @alheavens at Twitter.

comments powered by Disqus
|
|
|
|
|