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RSS Feed10 Questions to Ask A Condo Board Before You Buy |
Feb. 27, 2007
Categorized in: Buying Real Estate
10 Key Factors About Condos
1. What percentage of units is owner-occupied? What percentage is tenant-occupied? Generally, the higher the percentage of owner-occupied units, the more marketable the units will be at resale.
2. What covenants, bylaws, and restrictions govern the property? What grandfather clauses are in place? You may find, for instance, 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. Have an attorney review property docs, including the master deed, for you. We will also ask for the minutes from the meetings of the last 6 months if possible. You will have an idea of purposed changes that have not yet been recorded. You will need a copy of the common insurance policy for your insurance carrier, this can usually be found in the condo docs. In addition, some associations require 30 days for board approval where they run credit and background checks on potential owners before a paid assessment letter will be released for closing.
3. How much does the association keep in reserve? How is that money being invested? This is especially important for New Construction buyers. It is typical for new developments to estimate monthly assessments at a lower fee, which can be enticing for home shoppers. However, this can lead to an increase in dues after the association has been turned over from the developer and the true operational costs are examined. Most developer’s purchasing agreements require additional deposits of monthly assessments to help build a reserve. Note, this is not a credit to the buyer as months paid.
4. Are association assessments keeping pace with the annual rate of inflation? Smart boards raise assessments a certain percentage each year to build reserves to fund future repairs. To determine if the assessment is reasonable, compare the rate to others in the area.
5. What does and doesn’t the assessment cover—common area maintenance, recreational facilities, trash collection, snow removal? You will also want to inquire into move in charges, credit check fees, and deposits necessary before moving in. Each association is different and therefore, charge their own fees.
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.
7. How much turnover occurs in the building? What are the restrictions for move in arrangements?
8. Is the project in litigation? If the builders or homeowners are involved in a lawsuit, reserves can be depleted quickly.
9. Is the developer reputable? This is where you will need to do some homework. Find out what other projects the developer has built and visit one if you can. Ask residents about their perceptions. We can request an engineer’s report for developments that have been reconverted from other uses to determine what shape the building is in. If the roof, windows, and bricks aren’t in good repair, they become your problem once you buy.
10. Are multiple associations involved in the property? In very large developments, umbrella associations, as well as the smaller association into which you’re buying, may require separate assessments. Also, inquire as to who manages the building if separate from the association. Professionally managed buildings may make better living conditions.
Understanding Assessments
All associations are made up of a President, Vice-President, and Treasurer. The association is responsible for creating the condo/townhome declarations for which all owners adopt.
Examples include but not limited to, pets, moving days/times/fees, security, garbage, insurance, water, cable hook up, storage, common areas, parking, landscaping, repairs, improvements, and snow removal.
There are costs associated with all services and benefits. These costs are split between each unit and unit owner. How much you pay is determined by the actual percentage of ownership in the community you own.
Special assessments by definition is a levy or tax customarily imposed against only those specific parcels of real estate that will benefit from the proposed public improvement like a street or sewer.
In its use with condo ownership, it is referring to an extra one time or monthly charge to each owner for a specific repair/project for a designated length of time. It is due to inadequate reserves, which would be depleted or greatly hindered with the expense. This is generally voted on before being levied, however, some by-laws permit the board to act without expressed majority.
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