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For Your
Clients: 7 Questions to Ask Before Buying a
Condo
RISMEDIA, May 21, 2010--You've found your dream
condo, and you're ready to relax among the mango
trees and swaying date palms. Hold everything.
To keep from getting stuck with a lemon, you've
got to do some homework. Here are the seven most
important questions you need to ask before
buying a condo.
1. "What's the Beef?"
Take a look at the minutes of the condo
association board meetings to see what the
owners have been griping about. If everyone was
complaining about the faulty plumbing or the
gardener's absence, you know that the complex is
having management difficulties. Even if there
aren't any complaints, reading the minutes will
reveal the sorts of projects that are under way
at the complex -- projects the seller may have
neglected to mention.
2. "Who's Been Naughty and Who's Been
Nice?"
Find out the delinquency rates of
present owners. If people aren't paying their
association dues on time, that is either a sign
of discontent or an indication that the
association might be underfunded.
3. "How Much Is In the Repair Fund?"
Ask if the community has done a
reserve-fund review in the past five years.
Lester Giese, the author of The 99 Best
Residential & Recreational Communities in
America, recommends the following formula: If
the complex is one to 10 years old, the reserve
fund should have 10% of the cost of replaceable
items (roofs, roads, tennis courts, etc.).
Between 10 and 20 years old, the repair fund
should be at 25% to 30%. At 20 years, that
amount should be 50% or above. Residents who
brag that they don't pay much in maintenance may
be in a complex that either is not being kept up
well or is living beyond its means.
4. "Can You Cover Me?"
If you look at nothing else, get a copy
of the certificate of insurance, which is a
summary of the association's policy. First see
if the replacement costs covered by the policy
are an accurate estimate of the cost of
rebuilding. Then make sure that the policy has a
building-ordinance clause, which means that the
insurance will cover the cost of bringing the
building up to code if there is any rebuilding
to be done. On older buildings, there may have
been many code upgrades since the time of
construction. Finally, make sure that you
understand exactly what the association policy
covers and what you are responsible for. The
smart condo owner will insure his or her
personal belongings, along with any other items
within the unit that are not covered by the
association's policy. If you have trouble
understanding the insurance lingo, take the
insurance certificate to an agent whom you trust
and who understands the state laws.
5. "Does the Association Present Any
Legal Problems?"
Buying a single-family home without a
lawyer is no big deal for many people. But with
a condo, there's so much more involved. Contact
a local real estate lawyer and have him or her
go over the bylaws of the association. Do they
make sense? Are they consistent with the state
laws? Giese, the author, once found that the
association bylaws of a large garden-style condo
complex had been lifted from the books of a
high-rise condo, leaving confused tenants with
rules about shared hallway space and the correct
use of garbage chutes. Benny Kass, a Washington
real estate attorney, recommends that you also
have your lawyer screen the association at the
local courthouse, to see if any owners have
filed suit against it.
6. "Is the Complex Renter-Friendly?"
If the renter population is over 10%,
there should be clear rental policies, either
listed in the bylaws or tacked on as an
amendment. Does the management company find
renters for you? If so, do they get enough good
renters? Ask other tenants about their
experience. In addition, ask to see the
association's rental lease, and have a real
estate lawyer look it over. Keep one thing in
mind, though: An association can change its
bylaws to prohibit or restrict renting at any
time. The more owners who rent, the less chance
that will happen.
7. "Am I My Community's Keeper?"
Watch out for a condo whose owners
manage the place themselves. Although many are
operated efficiently, self-management can lead
to more hassles for owners -- especially those
who live thousands of miles away. If the complex
is professionally managed, check out the
management company as thoroughly as you check
out the association. Ask other owners. Ask
people in nearby buildings. And be sure to
interview the day-to-day manager directly. If
you hook up with a bad manager, you can be sure
of this: Your dream condo will keep you up at
night. |
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