THINKING OF BUYING A CONDO? GET THE FACTS FIRST!
10 Must Ask Questions for the Condo Board
Before you buy, make contact with the condo board and get answers to the following questions. This will give you a better idea of how organized and receptive the board members are.
1. What is the percentage of owner-occupied units vs. tenant-occupied? In general, a unit has more resale value and marketability when the percentage of owner-occupied units is higher.
2. What governs the property in terms of bylaws, covenants, and restrictions? What clauses have been Grandfathered in that may not apply to you but that will affect you? For example, that those who buy a property after a certain date can't rent out their units, but buyers who bought earlier can. Ask for a copy of the bylaws to determine if you can live within them. (Change) It's a very good idea to have an attorney review the Condo docs for you, including the master deed.
3. What amount of money does the association keep in reserve and how are those funds being invested?
4. Does the association raise assessments a certain percentage annually to keep up with the rate of inflation? This is important to ensure that the reserves necessary to fund future repairs are available. Compare the rate to others in the area to determine if the assessment is realistic. Also find out whether there is a cap on the percentage that the association can increase the fee per year. If the community is brand new and does not have a cap, if the developers have underestimated expenses, then your monthly association fees could be raised dramatically and you would have no recourse.
5. What expenses does the assessment cover and not cover? For example: common area maintenance, recreational facilities, re-paving of the streets, cable, trash collection?
6. What special assessments have been mandated in the past five years? How much was each owner responsible for? Some special assessments are unavoidable. But repeated, expensive assessments could be a red flag about the condition of the building or the board's fiscal policy. How many and what type of special assessments were mandated in the last 5-7 years? What was the responsibility of each owner in paying for the assessments? It is normal to have assessments but when they are recurring and expensive this could be a sign about the building's condition or the board's procedures.
7. What is the rate of turnover in the building or community?
8. Is the project involved in any pending legal issues/lawsuits? If the builders or homeowners are tied up in litigation, reserves can be expended rapidly.
9. What is the developer's reputation? Visit other projects that the developer has completed and ask residents their opinions. If the community or building is has been converted from a different type of use, ask for an engineer's report to determine the condition of the building. Anything that isn't in good repair will become your problem when you are an owner. Observe the condition of the roof, windows, exterior walls, etc.
10. How many associations are involved in the property? In very large developments there may be multiple assessments because umbrella associations exist including the smaller one to which you belong.