Five questions to ask before you purchase a condo
Home owner associations (HOA) have many advantages. However, a poorly managed HOA can have many disadvantages.
I know four home owners that became liable for the previous owners HOA assessments because the seller didn't pay their HOA due/fees. I would suggest in addition to Scott's list you verify the assessments due by the seller are paid.
Please read the five questions you should ask before purchasing in any HOA. Written by Scott Hayes
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Condominiums can be a nice alternative for buyers who want the benefits of ownership, without the upkeep of a single family home. But before we decide to dip our toes in the condo pool as it were, we must remember a few things to consider.
1. What is the status of the homeowners association? Although you aren't married to your fellow condiminium owners, bear in mind, the relationship is more close knit than in a subdivision of homeowners. Although one owns their real estate, there are common areas- such as heating systems, elevators and exterior items which are commonly owned. Try to get a look at the minutes from the last HOA meeting. Are the owners complaining about the pool that is still out of service? Has the roof repair lingered longer than it should? Is the current property management peforming?
2. How are the finances? This is a big, and often overlooked part of the condo purchase. How are the reserve funds? Has there been a special assessment lately? Is a special assessment anticipated in the near future? An assessment can be assessed by a vote if there is a need to raise funds. This can be due to a need to do repairs, pay outstanding bills, etc. This is important, because assessments can run high for things such as repairing a bad roof, or painting the entire condominium complex. What if a homeowner, or group of owners, wish to sell in the future. There may be a difference of opinion in terms of repairs needed between sellers, and owners who are perfectly content with the condition of the property. When associations have vast reserves, these issues tend not to be as contentious.
3. What is the renter situation? Renters are good people too, we're talking finances here . As we know, financing has become challenged in the last several years, and seemingly gets more challenging every month. FHA financing still offers low down payments for buyers. But when it comes to condos, FHA typically requires that over 50% of the complex be owner occupied. And 10% of a given property can be investor purchased.
4. Does the association have any legal issues? How do the bylaws of the association read? Some would advise using a real estate attorney in a condo purchase. In my opinion that is an individual decision. But I do suggest a thorough reading of the bylaws of any condo you are considering purchasing. And I would certainly suggest asking if the condominium association is facing any lawsuits. As I wrote, you aren't married to your future neighbors, but you are in business with them.
5. Is the insurance adequate? Get a copy of the condominium insurance policy. What does it cover, and what are you as an owner responsible for? It's pretty hard to escape weather in this country. Tornadoes, earthquakes, hurricanes, flooding,hail, you get the picture. What does the policy read when it comes to natural disasters/weather. A good idea is to get a copy of the policy to an insurer you use or trust.
Buying a condominium can be a very rewarding purchase. Just remember to address these questions before getting too deep in the process.
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