Before
you buy, contact the condo board with the following questions. In the process,
you’ll learn how responsive — and organized — its members are. You’ll also be
alerted to potential problems with the property.
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. And have an attorney review property docs, including the
master deed, for you.
3. How much does the association keep in
reserve? Plus,
find out how that money is being invested.
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? Does
the assessment include common-area maintenance, recreational facilities, trash
collection, and snow removal?
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? This will tell you if residents are
generally happy with the building. According to research by the NATIONAL
ASSOCIATION OF REALTORS®, owners of condos in two-to-four unit buildings stay
for a median of five years, and owners of condos in a building with five or
more units stay for a median of four years.
8. Is the condo building in litigation? This is never a good sign. If the
builders or home owners are involved in a lawsuit, reserves can be depleted
quickly.
9. Is the developer reputable? Find out what other projects the
developer has built and visit one if you can. Ask residents about their
perceptions. 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.