Buying a condominium is different from buying a house and there are questions that need to be asked, documents that must be reviewed and information that should be obtained before you commit beyond redemption to a purchase.
Condos are a wonderful lifestyle choice, and in congested urban areas may be one of the few homeownership choices. But make sure you understand what you are buying and what you are buying into.
Seek ownership in a well-maintained building and pay special attention to the financial health of the condo association. Lax maintenance may be a sign of financial trouble, which could result in higher maintenance fees and problems trying to resell the property later.
First of all, ask the right questions. Your agent will probably not have all the answers and the listing agent may not either. Therefore the first question you ask is if the complex is professionally managed.
To enhance your chances of buying a good condo, here are key questions that need to be answered to your satisfaction when buying a condo:
• Is the condo association professionally managed?
Unless it is a small condo building of five units or less, professional management is a good sign. The cost usually pays for itself because an experienced condo manager knows where to get repair discounts that often "save" the equivalent of the professional manager's fee. A related question to ask is how long the professional manager has been managing the complex. The right answer is: the longer, the better. That indicates the condo owners are satisfied.
• How do the monthly fees compare with nearby similar condo complexes?
The answer is important not only to your wallet, but to the resale value of the condo. When the condo fees are very high compared to the competition—that holds down the market value of condos in that complex. Be sure to inquire what services are included, such as central heat and air conditioning.
• How good is the soundproofing?
Because poor soundproofing is the No. 1 complaint of condo owners (especially for buildings converted from apartments), when you focus on buying a specific unit, it pays to test the soundproofing. This can easily be done by asking the upstairs, downstairs and adjacent neighbors to turn on their TVs and stereos to normal levels and see if you can hear them in the unit. Also, check for noisy floors upstairs, especially in wood construction buildings if the upstairs neighbors don't have carpets with heavy padding.
• What is the percentage of renters?
Mortgage lenders know the risk of foreclosure default is very high in condo complexes with more than 20 to 30 percent renters. Many lenders either refuse to finance units in such complexes, or they charge above-normal interest rates. The reasons are that absentee landlords often have little interest in properly maintaining the condo complex and their renters aren't as considerate as owner-occupants. The result can be declining maintenance quality. Condo complexes with anti-renter rules are considered very desirable for owner-occupants and often bring premium resale prices.
• Has the condo unit been professionally inspected and did the seller provide a defect disclosure report?
Most states now have laws and court decisions requiring condo and house sellers to disclose known defects. Smart buyers carefully study these written disclosure forms before making purchase offers. In addition, savvy buyers include in their condo purchase offers a contingency approval clause for a professional inspection of the unit after the offer is accepted. The buyer should always accompany the inspector to discuss any undisclosed defects discovered.
• Ask current residents, "What do you like best and least living here?"
Or you might prefer to ask, "Would you buy a condo here again?" Most condo owner-occupants are friendly and willing to share their good and bad experiences. Be sure to talk with several residents just to be sure you aren't talking with a "bad apple," professional complainer. Just to verify your soundproofing test of the unit you are considering for purchase, casually ask, "How is the soundproofing here?"
• What is the financial condition of the condo association?
If you are considering purchase of a brand-new condo, to attract buyers the developer has probably set the monthly condo fees very low. Watch out for inadequate allocations for replacement reserves which are sure to increase in future years as the building ages and needs repairs. If you are considering buying an older condo, study the replacement reserves. Depending on the building's age and anticipated replacements, such as a new roof every 15 to 20 years, if reserves are inadequate a large special assessment might be levied on each owner when an unexpected cost arises.
• Have there been any special assessments in the last three years?
Are there major maintenance or improvement projects anticipated in the next 12 months? Are there sufficient reserves to cover those expenses? Homeowners have unexpected repairs and so do condo associations. But a well run association plans for these and sets condo fees so sufficient reserves exist to cover emergencies. Multiple assessments are a sign of poor planning. How unfair to purchase a unit from someone who had enjoyed artificially low condo fees for years, only to have to immediately cough up a huge assessment when the underground parking garage begins to collapse.
• Are there any current disputes among owners that the Association is trying to resolve?
If owners are fighting over one or more issues, you may want to think twice about buying into a hornet’s nest. Some issues that keep popping up:
• Hanging items on or from balconies.
This rule was originally put into condo documents to prevent stringing up laundry or hanging bird feeders which might cause hygiene problems, but countless battles have been fought over the last few years over its enforcement against flying the flag.
• Pets.
Condos that don’t allow them are often pressured to admit them; those that do permit them are pushed into conflict by one owner’s nasty poodle. Even where the right to own a pet is untouchable, behavior of individual pet owners can cause complex wide disagreements.
• Age restrictions.
Over-55 developments can be thrown into turmoil if an owner’s kid moves back home with ill-behaved teens. Also a remarriage or illness may dramatically change a family’s structure.
• Is the Condo Association involved in any lawsuits?
It is not unusual for condo owners to end up in litigation with the developer of the complex, with the manufacturer of building products used in the development or with an individual homeowner. Such lawsuits are not necessarily a deal killer, but something to discuss with your attorney.
• Are there any amendments to the condominium by-laws currently under discussion?
It would be a tough break to be handed the keys to your new condo only to discover a new amendment to the bylaws limiting each owner to one parking space. How scary to leave the Ferrari parked on the street. An extreme example, but some sudden bylaw changes could impact on your use and enjoyment of the property. Once you actually own your unit, you have a vote.
Condos are a wonderful lifestyle choice, and in congested urban areas may be one of the few homeownership choices. But make sure you understand what you are buying and what you are buying into.
Seek ownership in a well-maintained building and pay special attention to the financial health of the condo association. Lax maintenance may be a sign of financial trouble, which could result in higher maintenance fees and problems trying to resell the property later.
First of all, ask the right questions. Your agent will probably not have all the answers and the listing agent may not either. Therefore the first question you ask is if the complex is professionally managed.
To enhance your chances of buying a good condo, here are key questions that need to be answered to your satisfaction when buying a condo:
• Is the condo association professionally managed?
Unless it is a small condo building of five units or less, professional management is a good sign. The cost usually pays for itself because an experienced condo manager knows where to get repair discounts that often "save" the equivalent of the professional manager's fee. A related question to ask is how long the professional manager has been managing the complex. The right answer is: the longer, the better. That indicates the condo owners are satisfied.
• How do the monthly fees compare with nearby similar condo complexes?
The answer is important not only to your wallet, but to the resale value of the condo. When the condo fees are very high compared to the competition—that holds down the market value of condos in that complex. Be sure to inquire what services are included, such as central heat and air conditioning.
• How good is the soundproofing?
Because poor soundproofing is the No. 1 complaint of condo owners (especially for buildings converted from apartments), when you focus on buying a specific unit, it pays to test the soundproofing. This can easily be done by asking the upstairs, downstairs and adjacent neighbors to turn on their TVs and stereos to normal levels and see if you can hear them in the unit. Also, check for noisy floors upstairs, especially in wood construction buildings if the upstairs neighbors don't have carpets with heavy padding.
• What is the percentage of renters?
Mortgage lenders know the risk of foreclosure default is very high in condo complexes with more than 20 to 30 percent renters. Many lenders either refuse to finance units in such complexes, or they charge above-normal interest rates. The reasons are that absentee landlords often have little interest in properly maintaining the condo complex and their renters aren't as considerate as owner-occupants. The result can be declining maintenance quality. Condo complexes with anti-renter rules are considered very desirable for owner-occupants and often bring premium resale prices.
• Has the condo unit been professionally inspected and did the seller provide a defect disclosure report?
Most states now have laws and court decisions requiring condo and house sellers to disclose known defects. Smart buyers carefully study these written disclosure forms before making purchase offers. In addition, savvy buyers include in their condo purchase offers a contingency approval clause for a professional inspection of the unit after the offer is accepted. The buyer should always accompany the inspector to discuss any undisclosed defects discovered.
• Ask current residents, "What do you like best and least living here?"
Or you might prefer to ask, "Would you buy a condo here again?" Most condo owner-occupants are friendly and willing to share their good and bad experiences. Be sure to talk with several residents just to be sure you aren't talking with a "bad apple," professional complainer. Just to verify your soundproofing test of the unit you are considering for purchase, casually ask, "How is the soundproofing here?"
• What is the financial condition of the condo association?
If you are considering purchase of a brand-new condo, to attract buyers the developer has probably set the monthly condo fees very low. Watch out for inadequate allocations for replacement reserves which are sure to increase in future years as the building ages and needs repairs. If you are considering buying an older condo, study the replacement reserves. Depending on the building's age and anticipated replacements, such as a new roof every 15 to 20 years, if reserves are inadequate a large special assessment might be levied on each owner when an unexpected cost arises.
• Have there been any special assessments in the last three years?
Are there major maintenance or improvement projects anticipated in the next 12 months? Are there sufficient reserves to cover those expenses? Homeowners have unexpected repairs and so do condo associations. But a well run association plans for these and sets condo fees so sufficient reserves exist to cover emergencies. Multiple assessments are a sign of poor planning. How unfair to purchase a unit from someone who had enjoyed artificially low condo fees for years, only to have to immediately cough up a huge assessment when the underground parking garage begins to collapse.
• Are there any current disputes among owners that the Association is trying to resolve?
If owners are fighting over one or more issues, you may want to think twice about buying into a hornet’s nest. Some issues that keep popping up:
• Hanging items on or from balconies.
This rule was originally put into condo documents to prevent stringing up laundry or hanging bird feeders which might cause hygiene problems, but countless battles have been fought over the last few years over its enforcement against flying the flag.
• Pets.
Condos that don’t allow them are often pressured to admit them; those that do permit them are pushed into conflict by one owner’s nasty poodle. Even where the right to own a pet is untouchable, behavior of individual pet owners can cause complex wide disagreements.
• Age restrictions.
Over-55 developments can be thrown into turmoil if an owner’s kid moves back home with ill-behaved teens. Also a remarriage or illness may dramatically change a family’s structure.
• Is the Condo Association involved in any lawsuits?
It is not unusual for condo owners to end up in litigation with the developer of the complex, with the manufacturer of building products used in the development or with an individual homeowner. Such lawsuits are not necessarily a deal killer, but something to discuss with your attorney.
• Are there any amendments to the condominium by-laws currently under discussion?
It would be a tough break to be handed the keys to your new condo only to discover a new amendment to the bylaws limiting each owner to one parking space. How scary to leave the Ferrari parked on the street. An extreme example, but some sudden bylaw changes could impact on your use and enjoyment of the property. Once you actually own your unit, you have a vote.
.jpg)
No comments:
Post a Comment