5 Questions to Ask Before Buying a Condo

Written by Posted On Saturday, 07 March 2020 05:25

Condos are a great in-between option for people who want to own their own home, but either don’t have the money to buy a detached home, or don’t want to deal with maintaining a home. Compared to a single-family home, condos are more affordable. Many offer nice amenities, too, such as pools, gyms and business centers.

If a condo sounds like the right option for you, ask yourself these five questions before you go through with the purchase.

1. What is the Breakdown of the Monthly Association Fees?

Condo association fees are calculated based on several factors, such as the cost to maintain the property, the number of units, the funds set aside for repairs and litigation, and whether the community is self-managed or professionally managed.

Before buying a condo, get a breakdown of the monthly dues and make sure that you can afford this payment.

Look at the Repair Fund, too. Every association must set aside a certain portion of dues for major repairs. For communities that are less than 10 years old, the repair fund should have 10% of the cost of major items. Communities that are 10-20 years old should have 25%-30% set aside for major repairs. Communities that are 20 years old should have 50% of the cost of major items.

Keep in mind that if the Repair Fund isn’t well funded, you may be hit with a major repair bill in the future.

2. What is the Management Team Like?

Take the time to sit down and talk to the condo manager personally. Talk to your potential neighbors while you’re at it. A poor manager can make condo living a terrible experience.

Some communities are self-managed, which means that there are no property managers. The residents themselves make decisions. These communities often have lower HOA fees, but keep in mind that you’ll have to manage the community alongside your neighbors.

3. What are the Rules?

What are the community rules? Are you allowed to have pets? Do you have the option to rent out your unit if you want to? Can you plant a garden?

Go over the community rules with a fine-tooth comb, and avoid communities that have rules you can’t live with.

4. How Does the Budget Look?

Check out the association’s budget before you buy. The association probably won’t give a prospective buyer a copy of the budget, but the seller should be able to get a copy and provide it to you.

Take a look at the total outstanding debt owed to the association, and the percentage of owners who aren’t paying their monthly fees.

5. What is the Delinquency Rate?

Many prospective buyers don’t realize the importance of the community’s delinquency rate when buying a condo. You’ll have little chance of getting financing if you want to buy a condo in a building where most of your neighbors aren’t paying their dues.

Most lenders won’t approve mortgages for condos with delinquency rates above 15%. Even if you’re buying with cash, the delinquency rate should still be important.

If the association is starved of cash, it will have to make cutbacks. That may mean that the community pool will no longer be maintained.

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