Understanding the Real Estate Process from A – Z – A Buyer’s Guide to Real Estate – Part 3
This is the third post of a series in an FAQ format that I hope will help would be buyers better understand the real estate process that they are about to go through. There is a follow-on series to the posts for real estate sellers.
FAQ – My Realtor said that a new home may not be just a house, what else can it be?
During your interview with the Realtor that you chose, he/she probably asked if you have considered a condo or something other than just a house in a sub or out in the country. What else is there? Well, Michigan is unique in having something called a “site condo”. In fact, most (but not all) of the homes that were built in any kind of development since the early-1980’s were built as Site Condos. You can read a good legal description of the laws that established this type of development by clicking here. The long and short of it is that there are platted subdivisions and there are site condo developments and the average person would have no idea which is which by just looking at them.
So what is the difference? In a platted subdivision each homeowner owns the land that the home sits of and the house and nothing else. The subdivision may have a Home Owners Association (HOA) but most of them are voluntary, unless it was specifically required in the deed. The roads in the sub are maintained by the local governmental body –usually a township, Village or City. There are deed restricted communities that are platted subs, but which have very specific rules or restrictions spelled out in the deed to the property. You should be informed about that when you are looking and certainly have an opportunity to review those restrictions.
Usually, if you get out in the country the plots are bigger and are governed only by Township and other government rules or zoning restrictions. Platted subs and platted land out in the country are governed under the Michigan Land Division Act, formerly the Michigan Subdivision Control Act of 1967. A rule of thumb is that the further you get out into the country the looser the rules and regulations seem to get. So, if you want government and homeowners’ associations off your back, head to the boonies.
In a site condo development each owner owns his plot and his house AND, just like in a condo complex, is also a co-owner of some “common areas” with all of the rest of the homeowners. These houses were built under the rules of The Condominium Act of 1978, which requires that each owner MUST belong to the Home Owners Association (HOA) and share in the costs of maintaining the common areas, including insurance for them. And, in well over 90% of these site condo developments, the common areas include the roads. So the HOA is responsible for maintenance and snow removal for your subdivision roads, if it is a site condo complex. You, as the home owner, are responsible for the upkeep of your land and the house. So, remember that if the roads get rough or aren’t plowed in the winter, it’s because you and the other home owners didn’t collect the money to maintain them – you can’t blame government for that.
And there are rules! Every buyer in a site condo complex receives (or should receive) a copy of the Master Deed and HOA By-Laws. Within those documents are all of the terms and condition that you are bound by when you buy into that condominium complex. Your Realtor will make sure that you have the right to review those documents and have the ability to get out of the deal if you find them to be too onerous. Sometimes it might be wise to review them before you even make an offer. You should also be leery of developments with extremely low HOA fees. That just means that they are not collecting enough money to really do the job and things like roads may deteriorate until such time that they may have to impose a big special assessment against each homeowner to pay for new roads. The HOA has the right to do that.
Of course your new home could be an actual condo. Condos come in several different styles and some are what’s called detached condos where they don’t have shared walls with other home owners. They all have lots of common areas – basically everything outside of the house, including the roads are considered to be common areas. That could include things like swimming pools, club houses. garages or carports which may be assigned to specific condo units, and park areas or play grounds.
The rule of thumb for true condos is that everything outside of your unit is the responsibility of the condo association for maintenance and upkeep. That include things like the roof, porches and decks
So, what else might a new home be? Well, it could be a Co-operative (Co-op). Co-ops are actually companies that own everything in the complex – land and the building on the land – and lease them out to stockholders in the company. You don’t actually “buy” the unit that you may occupy; rather you have an ownership interest (sort of like stock) in the company that owns everything and because of that ownership position, you are allowed to occupy part of the space (the units) that the company (the Co-op) owns. It’s sort of like a condo; but, in this case you are also part owner of the condo complex. Click here for a good article in the Washington Post about the differences between condos and co-ops. It turns out that the infamous Watergate complex was and is a co-op; but, don’t let that deter you.
Of course there is also a whole spectrum of manufactured homes. Mobile homes that one finds in a mobile home park are manufactured homes, but not all manufactured homes are mobile homes. There is a category of manufactured homes called modular homes which, like mobile homes, are manufactured indoors; however, these homes are manufactured in modules which are transported to
Mobile homes, even if the wheels have been removed are not considered to be real estate. In many states, if the mobile home is permanently mounted on a foundation it may be considered to be real estate from that point on. Modular homes are built in the factory to local building code standards, while mobile homes are usually built to less stringent standards. Of course, with a mobile home you are likely to be in a mobile home park and to have to pay rent each month for your parking spot. That rent covers the cost of maintaining a common septic system or sewage treatment plant and the shared water delivery system for the park. It may cover other shared cost of the park. Check with the management of the mobile home park for details on that, since I’m a Realtor and don’t deal with mobile homes.
Each of these different type of homes has their own advantages and disadvantages, depending upon how you look at things. Buying into any of them still works out better than continuing to rent an apartment or living in the basement with mom and dad. Be sure to ask your Realtor to keep you informed as you look as to whether what you are looking at is a regular house on a platted piece of property or one of these other types of homes.