Buying a Condominium Requires Doing Your Homework
Helping a client with the purchase of a townhouse recently has reminded me that a condominium purchase can actually be more involved than buying a single family home. This is partially due to the fact that you need to be concerned, not only about the unit you are buying, but also with the strength and stability of the entire condominium complex.
Before entering into the purchase of a condominium there are some important questions that need to be researched.
- Monthly condominium fees - Depending on the complex, these can be significant and they figure into your overall monthly expense of home ownership. You will need to find out what the fees are and exactly what they include. Fees typically go toward the maintenance of common areas, landscaping, snow removal and the master insurance.
- What is the percentage of renters vs. owner occupied units? Being in an environment of rental properties can have a direct effect on resale value. Additionally, depending on the type of financing you are seeking, your lender will want to know the owner-occupancy rate of the condominium complex.
- Bi-laws and covenants - These rules can govern how you can decorate your home, pet ownership and whether or not you can rent out your unit. It is not atypical in a condominium to have to control your noise levels or show a certain color, usually white, of window treatment from your unit.
- What does the master insurance cover? You will need to get a copy of the condominium's master insurance policy and examine it to see what your responsibility will be with regard to coverage. Most condo owners have to insure their own personal belongings or everything within your unit's walls. This includes carpeting, flooring, appliances and your own fixtures.
- Check recent resale values at the complex - Have sales of units been keeping up with the rest of the condo market? How have the "days on market" fared?
- What is the parking situation at the complex? When you have guests they will need a place to park. Most condominium complexes have some provision for guest parking. How many spaces are there for your guests and where are they located?
- Have unit owners been delinquent in paying their condo fees? If there is a large delinquency rate of owners paying their fees this is sign that the complex could be falling into financial trouble and this will not bode well for any future repairs, improvements or resale value.
- Are there any special assessments that are currently due? When a condominium project has fallen short on their budget sometimes the onus for special repairs (new roofs, decks, common areas) must fall on the owners. This will be in the form of a special assessment that needs to be paid either annually or monthly. You really do not want this type of surprise.
In addition to the above, you will need to check out the management company and see whether or not it is professionally run. This information should be provided by the listing broker or seller along with all of the condo documents as well as the financial statement and budget. All of this information should be carefully reviewed by your attorney.
Typically banks have a standard questionnaire that they require for all condominium purchases but if it is a cash deal you will need to come up with a list of your own and have the questions answered sufficiently by the owner or the management company prior to purchase.
For a more carefree lifestyle a condominium can offer some distinct advantages over single family living. Just be sure to do your homework to ensure a happy and safe investment in your new home.
Copyright 2010 "Buying a Condominium Requires Doing Your Homework"
Claudette Millette, Broker, Owner, The Buyers' Counsel - (508) 881-6230