Publication Date: Friday, April 27, 2007
Getting your foot in the door
Townhouses, condos offer entrée for first-time buyers
by Susan Golovin
About two years ago Kevin Rouse and Shanon Pestrong, who were then renting an apartment in Menlo Park, decided to look for their own home. Rouse says that the lady downstairs who banged a broom on the ceiling every time their toddler, well, acted like a toddler, underscored the necessity for the move.
"We considered a single-family home," Rouse said, "But it was out of our price range." In fact, Rouse, a fourth-grade teacher at Walter Hays School says that if he had not been offered a teaching job in the relatively well-remunerated Palo Alto Unified School District that he and Pestrong, who teaches at Brooks College in Sunnyvale, would not be able to afford a condo either.
Condominiums (individually owned units in a building) and townhouses (individually owned homes that often share a wall with one other, and in which you own the ground underneath) are traditionally less expensive than single-family homes.
Why zero in on Mountain View? "Although condos and townhouses are a small part of the overall housing market, Mountain View has a lot more than most cities on the Peninsula," explained Arvada Darnell, assistant manager of Coldwell Banker in Palo Alto (and the Realtor who worked with the couple).
"In the last year there were 427 one- and two-bedroom condos and townhouses available in all price ranges in Mountain View," says Darnell. "Of those, 154 were under $500,000." Her data shows that the lowest price was $279,000. Mountain View also offers the flexibility of buildings that have places with two master bedrooms.
Condos and townhouses charge monthly homeowners' fees, which typically cover exterior maintenance such as painting and landscaping, and often, water and garbage. In addition, homeowners' associations hold regular meetings to uphold regulations and deal with any issues.
Darnell advises all her potential condo and townhouse buyers to read the homeowners' association minutes to get an idea of what those issues are, especially concerning the financial health of the residences. If there is a problem, it could result in a hefty assessment. Some people may choose to use such problems to bargain for lower fees.
Jacquie Berry works for Community Association Datasource in San Jose. For a $375 fee she will take all the documents in the disclosure package, which she describes as "that pile that's held together with a rubber band," analyze them and organize them into an eight-page binder that reveals all the administrative and financial information.
Berry advises buyers to pay special attention to the reserves that the association has, to insure that all the required maintenance can be done.
"Boards have a fiduciary responsibility, but they don't always do their job," she said.
"We looked for six to seven months," Rouse said, adding that they wanted to get as large, and modern, a place as their budget would allow. When they found their two-bedroom, two-bath second story with balcony, 1,160-square-foot unit in Willow Park in Mountain View they knew that it was the one.
Rouse and Pestrong paid $450,000 for their condo. In addition they have a $350 monthly homeowners' fee. All condo or townhouse buyers must factor in monthly fees to qualify for the mortgage.
"I always tell clients to beware if the homeowners' fees are too low," Darnell said. "It can mean that there is not enough money being put into upkeep. ... Anything that has movement -- pool sweeps, security gates, elevators -- will raise dues because of maintenance."
Currently, many homeowners' associations are considering dropping earthquake insurance. They are willing to take this risk to avoid the negative impact on fees, and thus on resale opportunity.
"There are some wonderful loan opportunities for qualified buyers," Darnell said. Janet Valez, senior vice president at Bank of America in Palo Alto, said that for Santa Clara County the maximum income limit is $135,940 for a first-time buyers' program called Acorn Loans.
"Many clients are also eligible for a 3 percent (loan) from the State of California that can cover the majority of the closing cost," Valez said. "For example, on a $500,000 purchase price they may be eligible to receive $15,000, which does not have to be repaid until they sell or refinance. The program is not based on a client's credit score."
Rouse and Pestrong did not take advantage of special loans for teachers. "We could have put down a smaller down payment, but it would have meant a higher mortgage," Rouse said. Instead, they decided to get help from family.
Rouse says that he and his wife do enjoy the sense of community, and the shared amenities, particularly the pool. They also appreciate having a private exterior entrance and a corner unit.
"With a 3-year-old and a baby we'd really like to have our own washer/dryer rather than use the complex's laundry room," he said. He broached this at a homeowners' association meeting and was told to fill out an "alteration to your unit" form, which will then be considered for approval.
"In lower price points you usually can't put in a washer because if it overflowed it could cause damage," Darnell said. "Most have coin-operated communal machines."
Henry and Chiara Portner say that in their home search they "looked for everything, but wanted a yard," largely because they have two miniature poodles. They also had to find a place that allows pets.
They put in a lot of bids in their six-month search, but were constantly over-bid.
"If there are 10 or more disclosure packets given out, the place will go for $25,000 to $50,000 over the asking price," Chiara said. "Some went for $100,000 over."
Finally, they got a lead on a pre-listed, un-staged townhouse that they were able to get for what they considered a good price: $620,000, with a monthly fee of $480. Their 1,475-square-foot, two-level home shares one wall with their neighbors in the 24-unit complex.
They have a washer/dryer as well as a community pool.
Their association does not allow bright colors for window treatments. The only rule that bothers them, however, is the ban on air conditioners.
Chiara, a lawyer, and Henry, an executive chef, read all the disclosure documents. They were aware that all the flat roofs would need repair and there would be an assessment.
After two and one-half years, the Portners are putting the townhouse on the market. "The next step is a free-standing house with the white picket fence," Henry said. They feel that their timing is good. The single-family home market has low inventory and high demand and they expect to make a good profit.
Darnell says that if people can afford to do so they should keep their townhouse or condo as an investment when they move. "You've kicked the tires," she said.
As for Rouse and Pestrong, they now have no problems with noise complaints. "The floor under the carpet is concrete," Rouse said.