10/07/2015
THINKING OF BUYING A CONDO?
9 VERY IMPORTANT QUESTIONS TO ASK
1. What are the biggest complaints?
What gripes are people airing at the condo board meetings? Get your hands on the minutes from the last few meetings, or talk to current owners. If the association isn’t quick about fixes, you want to know about it before committing to live there.
2. What’s the management team like?
You’ll want to interview the condo manager (i.e. the one who’s there full-time) personally. Also, talk to your neighbors about management. A lousy manager can make condo living a grueling experience.
Some condos manage themselves. That is, there are no property managers, and the residents meet to make decisions together. The good side to this is that it often means monthly fees are much lower than professionally managed communities. Although self-management works in some cases, think carefully before moving into a community like this. You have to live next door to all of these people…do you really want to manage a community with them too?
3. Is there storage space available?
Some condos offer residents personal storage space. Your condo will likely not have an attic or garage (unless you’re in a townhouse), so ask if you’ll be provided any extra space to store bikes, winter skis, and luggage.
4. What does the insurance cover?
Make sure you get a copy of the condo association’s insurance policy. Find out exactly what is covered, including the cost to bring the building up to code (if it’s an older building). Also make sure the estimates to rebuild are accurate, and not minimized or outdated.
If the policy is confusing, it might be worthwhile to bring a copy to your own insurance agent so you can go over it together.
It’s also important to check if their policy will cover your personal belongings if the roof leaks or the building catches fire. If it doesn’t, you’ll want to consider taking out a policy on your own (which will be yet another monthly expense).
5. Will I need to move in the next five years?
Condos usually appreciate slower than single-family homes. And with the real estate market in the dumps already, it could take a while for prices to recover enough to make a profit if you decide to sell. While it’s impossible to predict the future, make sure that you really want to live in this community before you decide to buy.
6. Do I fully understand the monthly association fees?
Condo association fees are calculated based on how many units there are, what it costs to maintain the property (both short and long-term), whether or not the community is professionally or self-managed, and funds set aside for litigation and major repairs.
Get your hands on a breakdown of the monthly dues you’ll be responsible for. Make sure you can truly afford this extra payment, and that you understand what you’re getting for this payment. And remember, condo association fees are not tax-deductible like your mortgage is.
You also need to look closely at the Repair Fund. Every condo association must put a certain portion of dues aside for major repairs. If the complex is less than 10 years old, the repair fund should have 10% of the cost to repair major items (i.e. roofs, tennis courts, etc.). If your community is 10-20 years old, the Fund should have 25%-30% or more on hand for major repairs. And if the community is more than 20 years old, 50% needs to be funded.
Many communities promise their residents “ultra low dues.” Be wary. Although this may seem appealing, chances are it means the community isn’t funding their Repair Fund like they should; if the roofs end up needing a replacement, you and all the residents could be hit hard with a major bill.
Find out the delinquency rates on monthly dues as well. When other owners fail to pay their monthly dues, this often leaves everyone else holding the bag. Good communities will have a delinquency rate of 15% or less.
7. What are the rules?
Does this community allow pets? Can you rent out your unit if you need to? Will you have a chance to plant a bed of flowers?
Go over the community rules line by line. Make sure the condo doesn’t have rules that you simply can’t live with.
8. Is there any litigation?
Condo communities can often be rife with drama and, yes, litigation. Owners sue other owners, as well as the management team or developer. Make sure there are no past or pending litigation in your community, since it’s often a sign of a poorly run community, or one filled with litigious neighbors.
9. Is this MY porch?
Many condos offer residents porches or balconies with their units. Make sure you look at the Unit Deed, and the Master Deed, very closely. The porch may be attached to your unit, but do you truly own it, meaning it’s your responsibility to repair it as it ages or breaks? Or, do you own it in the sense that it’s yours, but the community actually maintains it?
