Condos are a convenient, low maintenance option for many people. Condos often have as much space as a house but without the maintenance required of a single-family house. Many condos have access to pools and fitness centers, 24 hour security and are conveniently located near shopping and highways. People who travel a lot like condo living since you can leave your property for extended periods of time without having to worry as much about security or upkeep.
But if you’re buying a condo in a large complex with many units, it’s a good idea to research the condo association (also known as the homeowner’s association or HOA). The condo association is responsible for collecting fees that are used toward the building’s upkeep and maintenance. These fees cover such maintenance tasks such as mowing the lawn, shoveling snow and keeping walkways clear during the winter, or pool upkeep. Condo fees are also used for deferred maintenance costs like roofing, siding and parking lots.
Which tasks these fees cover depend on the association, so find out exactly what the fees cover and what they don’t. As previously mentioned, condo associations are supposed to keep a reserve fund for major repairs or upgrades. If these fees aren’t properly managed, you can run into problems once you buy the condo. This isn’t as common with smaller condo buildings, like a duplex or triple-decker, but deferred maintenance still needs to be budgeted for these units as well, so be aware of how the more expensive repairs will be addressed.
6 Things to Research before buying a Condo:
Tour the Property
One of the first things you can check is the property itself: do the grounds look well maintained? Are there obvious problems such as poor lighting or broken windows? If possible, speak to a condo owner in the building to find out what they think of the association and the building maintenance in general. If there are issues with how the grounds look, then most likely the association is either underfunded or poorly managed.
Does the Building Have a Property Manager or is it Self-Managed
Find out if there is a property manager or if the condo is self-managed. Having a professional property manager may seem more expensive, but often there are fewer problems with a professional property management company than with a building that is self-managed. In the long run they can save money for the building since they have experience negotiating bids for such services as gardening or general maintenance.
This is one of the most important areas to research. Ask the association if they made budget last year. Find out if there are there any special assessments coming up. Special assessments are an additional expense for significant repairs or upgrades such as putting in a new roof. They are usually broken down and the condo fees increases monthly for a certain amount of time until the assessment is paid for. Make it a point to review existing financial information for the building, including reserve fund levels. Be wary of fees that are very low; if the reserves are too low, there may not be enough to cover future repairs, which can result in an unexpected large bill for you down the road.
Find out if there are any owners who are delinquent on their fees, and how the association deals with them. A building’s delinquency rate refers to the percentage of residents who are late paying their homeowner’s dues. Most banks will not approve mortgages for buildings with high delinquency rates, which mean that even someone with good credit and income could be denied.
Owner Occupancy Rate
Find out how many renters there are (if any) in the building compared to owners. As an example, for the condo to be approved for FHA loans, at least 50 percent of the units must be owner-occupied. Having a high percentage of renters can also make it more difficult to sell when the time comes. Renters may be less likely to follow the association rules, and their unit may not be as well maintained as owner occupied units. Another thing to keep in mind is if a person or entity owns more than 10 percent of the units in the complex, it can make financing difficult.
Insurance Policy/Meeting Minutes/Rules & Policies
Make sure you get a copy of the condo association’s insurance policy. Find out exactly what is covered. Also try to make sure the insurance coverage to rebuild is accurate, and not minimized or outdated.
Get a copy of the condo meeting minutes for the past year or so. This will give you insight into how the association is run, what are common complaints, if there are any pending lawsuits and how problems are generally handled.
It’s also a good idea to find out what the rules and policies are for the building. For instance, do they allow pets? How many parking spaces you will get? Are you allowed to use a grill on the porch, are you allowed to put up outdoor decorations, are there quiet hours, etc. It’s best to know these policies up front to make sure the condo will be the perfect fit for your lifestyle.