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Dear Pat, It's About These Condo Documents!

Reblogger
Real Estate Agent with Better Homes and Gardens RE Shore and Country Properties RES.0781237

Activerain associate, Pat Kennedy, has written a very comprehensive post about what condo buyers should be aware of in documents that are provided to them. Here in CT we call it the resale package or just ‘condo doc’.

Buyers MUST read the by-laws cover to cover and also scutinize the budget, reserve fund, and plan for any improvement and how it will be paid. Also, buyers must be aware of any pending litigation, especially if it involves construction and safety.

Have a pet? Most condo association allow pets. However, there MIGHT be a limit on the number as well as the size.

READ and approve the by-laws prior to signing your contract; OR if time is an issue, make sure there is a contingency in the contract to do so.

Original content by Patricia Kennedy AB95346

Q:  Dear Pat, I just got the resale package for the condo unit that I am buying, and there is so much stuff in here!  What's important?  What should I especially look out for?

A:  The idea is that before you are legally obligated to buy your new place, the condo management and board must provide the buyer with information about the project and how it is run.  The most important things to watch out for are first, is the building involved in any litigation, and second, a close look at the budget is crucial.  Finally, you will be expected to mind the house rules, so it's good to know what they are before you move in.

In the Washington area, there are a lot of lawyers.  I once lived in a large building in Adams Morgan that was God's gift to one of the area's law firms, and I moved out as soon as I could.  If it is a building that is lawsuit prone, think twice.

Then look at the numbers to see how much money the association has coming in, how much they are spending, and what big dollar projects might be on the horizon.  An important figure is the reserve fund, money that gets set up each month (or not) to cover anticiapated maintenance and repairs.  In a well-run building, they will have funds allocated to various categories, so there will be money for a new roof, renovated hallways, mechanical issues and other things that typically and predictably need attention.  If there is no reserve fund, when the need arises, they will have to pass the had with a large, lump sum special assessment from each owner.  So if they are planning a roof replacement or other major expenditures, make sure you understand how they plan to pay for it. 

And when it comes to money and lawsuits, are the owners generally up to date on their fees, or are there a significant number in arrears?  If there are a lot of deadbeats in the building, you risk having to cover your share of what they are not paying.  This can be the bad side to buying a short sale or foreclosure, especially where there are many in the building.

Finally, it's a good idea to go over the rules and regulations for the association.  Some are minimally invasive.  Others are not.  If they have a strict no-pets policy, even if you don't have one, it will make reselling the place tricky in the future.  If you have a home business, check the items regarding employees and clients coming to your unit. 

Once you finalize the deal and move in, the condo association will be the boss of you, at least at some level.  And keep in mind that the association and the board do have legal authority to govern the building.  If it's well run, condo living can be great.  If it's poorly run, um, not so great.

Comments (6)

Steve Baklaich
RE/MAX Results St Cloud Mn real estate - Saint Cloud, MN
Treating Buyers & Sellers to Full Service Always.

A Great Repost Barbara. I have always taken this process seriously, but never before considered lawsuits. I learned something here. Thanks

Jan 02, 2011 08:25 AM
1~Judi Barrett
Integrity Real Estate Services 116 SE AVE N, Idabel, OK 74745 - Idabel, OK
BS Ed, Integrity Real Estate Services -IDABEL OK

An excellent post.  We do not have any condos in McCurtain County or Choctaw County.  So I don't have to answer that question from any clients.

Jan 02, 2011 08:41 AM
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

Consider LAWSUITS and FAIR HOUSING complaints * these should be considered since their costs will be paid by the condo owners!

Jan 02, 2011 08:42 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Barbara, from a Lender's point of view lack of reserves and pending litigation are things that could present a major issue in obtaining financing.

Jan 02, 2011 01:53 PM
Barbara Altieri
Better Homes and Gardens RE Shore and Country Properties - Shelton, CT
REALTOR-Fairfield County CT Homes/Condos For Sale

Thank you for your comments.  I forgot to disable comments on this reblog.  I'd love to hear from you here, but please also post back to Pat.  ;-)

Steve --  lawsuits are becoming increasingly worrisome depending on the type in my experience. Some lenders will automatically deny financing if there is pending litigation no matter what the reason is for the litigation.  It's very important for a listing agent to be aware of any litigation but just as important for the buyer's agent to check into this as the buyer's lender may not fund the loan.  Better to know sooner rather than later.

Hi Judi - We have many, many condo complexes here in CT so we must be on our toes about these things.

Wallace -- Good point....and you know who those costs are passed down to!

George --  Thanks for your expert input. You are so right as the major issue is that the lender will not approve the mortgage.  That sets up an undesireable situation for a condo owner who wants to sell when the HOA is involved in litigation.

Jan 02, 2011 02:20 PM
Pam Dent
Gayle Harvey Real Estate, Inc. - Charlottesville, VA
REALTOR® - Charlottesville Virginia Homes / Horse

Barbara - Thanks for reblogging.  I missed this the firs time and it is full of important information.

Jan 15, 2011 12:29 PM