Buying a condo can be different – and possibly more complicated – than buying a single-family home.
The purchase process needs to be very thorough.
Additional due diligence is required on behalf of buyers.
No matter how attractive the physical property is, there may be issues that can turn your dream property into a nightmare.
Doing some homework in advance is a very good idea.
Following the steps below will help you make an informed decision and eliminate any unpleasant surprises.
- Review the Declarations and Bylaws – These are available, usually online. They define very important key issues:
- Expectations for behavior – laying out the rules and telling you what you can and cannot
- How the condo association runs – the basics of how decisions are made and by whom
- What owners are responsible for paying
- They also define items like what are the “common areas” which all owners have access to – and for which are expected to help pay upkeep
- Look over the Financial records for the condo association
- This will let you know how well or poorly an association is managing its money
- These should include budgeted and actual expenses, income statement, and balance sheet
- If the association is NOT managing its funds correctly, that could lead to assessments on all its members – including you, if you buy one of their units
- Ask to see the Association’s Reserve Study
- All associations are required to do one every 5 years
- This study outlines the condition of the complex as a whole
- It will detail what things need repair and when that work will be done
- Get a copy of the Association’s Meeting Minutes
- These will let you know the current status of complaints and financial issues the board is discussing at meetings
- It will also let you know if the board is working efficiently OR if there are members who are not working toward the common good
- Transfer Fees / Capital Contributions
- Some associations charge transfer fees and require capital contributions, (usually one time charges)
- This type of charge is associated with the transfer of title on a property that is part of a condo or homeowners association
- It is normally paid at settlement to the association and is usually deposited into the capital reserves to fund future maintenance items
- it’s important to know what coverage is provided by the association to ensure there are no gaps in your coverage
- Condominium owners’ associations have unique insurance needs
- Each unit owner individually owns a specific portion of the building in which they live as well as having a shared interest in the common areas and certain other portions of the complex
- As with any other type of home, condos face the possibility of damage from dangers like fire, wind, hail, theft and vandalism
- Owners also face numerous liability risks that are associated with specific common areas such as swimming pools, spas, saunas, playground equipment, parking lots and others
While all this might seem like a lot of work, following these steps could not just save you money, it can also protect your investment. If an association is dysfunctional or not working together, the entire condo could have problems that could negatively affect the value of your unit.
It’s always better to avoid a bad situation now that to have to deal with it later.