WHAT IS THE FINANCIAL CONDITION OF THE CONDO ASSOCIATION? 

 

Many times - to attract buyers the developer sets the monthly condo fees low. Watch out for inadequate allocations for replacement reserves which are sure to increase in future years as the building ages and needs repairs.

Study the replacement reserves - or any upcoming replacement reserve studies that may be in the works.  (Ask people on the board what they may know....  Some board members give you the straight scoop - and some might be pushing other agendas...) 

Depending on the building’s age and anticipated replacements, such as a new roof every 15 to 20 years, if reserves are inadequate a large special assessment might be levied on each owner when an unexpected cost arises.

Typically - at least 25 percent of the annual gross income for the homeowner’s association should be in the reserve account.

Smart condo buyers  (or your Real Estate attorney) ask if there are any major replacements anticipated in the next 12 months and if there will be a special assessment.  Review the meeting minutes for the last six months to determine what issues are being discussed.

HOW DO THE MONTHLY FEES COMPARE WITH COMPARABLE NEARBY CONDO COMPLEXES?

The answer is important not only to your wallet, but to the resaleability of the condo. When the condo fees are very high compared to the competition, that holds down the market value of condos in that complex. Your agent should let you know what services are included in the monthly fee.

 

IS THE CONDO ASSOCIATION PROFESSIONALLY MANAGED?

Unless it is a small condo building of five units or less, professional management is a good sign. The cost usually pays for itself because an experienced condo manager knows where to get repair discounts that often “save” the equivalent of the professional manager’s fee.

Ask them how long they have been managing the complex. (The longer, the better. That indicates the condo owners are satisfied.) 

To find out how good they are, talk to homeowners exiting the complex.  Even the doorman may have some good "intelligence" for you about things you may want to know about..  (My background is military and corporate intelligence collection - so I have a lot of fun with this..)

 
HOW GOOD IS THE SOUNDPROOFING?
 

Poor soundproofing is the number one complaint of condo owners (especially for buildings converted from apartments) - and can impact resale if it has a reputation for "thin walls."  

You might be able to ask the upstairs, downstairs, and adjacent neighbors to turn on their TVs and stereos to normal levels and see if you can hear them in the unit.   

There have been many condo conversions in the Chicago area - especially downtown.  Noise and energy efficiency seem to be the biggest problems with these conversions.  Some buildings have rock solid construction - and others may not.

 
WHAT IS THE PERCENTAGE OF RENTERS?

Mortgage lenders know the risk of foreclosure default in condo complexes with more than 20 percent to 30 percent renters is very high. Many lenders either refuse to finance units in such complexes, or they charge above-normal interest rates.

Absentee landlords often have little interest in properly maintaining the condo complex and their renters aren’t as considerate as owner-occupants.   Condo complexes with anti-renter rules are considered very desirable for owner-occupants and can sometimes bring higher resale prices.   Of course - if you are the one that would like to rent your unit out in the future - perhaps not!

To find out the percentage of owner occupied units, have your agent contact the property manager. 

ASK CURRENT RESIDENTS, “WHAT DO YOU LIKE BEST AND LEAST LIVING HERE?”

Or - “Would you buy a condo here again?”   Most condo owner-occupants are friendly and willing to share their good and bad experiences.

Be sure to talk with several residents just to be sure you aren’t talking with a professional complainer.

Other questions to ask -- “How is the soundproofing here?”  "Anything you think I should be aware of that concerns you?"   "What do you like best about living here?"  "What do you like least?"    

 

 FIND OUT IF THERE ARE PLANS FOR ANY NEW BUILDINGS TO BE CONSTRUCTED NEARBY

 Your "beautiful view" of the downtown Chicago skyline might not be there next year if a 50 story building goes up across from your unit!   Also - more condos = more resale competition.  

 

  FIND OUT IF THERE ARE ANY LAWSUITS VS. THE ASSOCIATION, THE DEVELOPER, OR THE MANAGEMENT.

 Besides impacting the association's finances - something like this may hold up your loan commitment - especially if the lender didn't know about it beforehand! Have your agent and Real Estate attorney look into this well up-front.