With the recent housing boom in California, many renters looking to buy are looking at buying a condo rather than a house. Buying a condo vs. a house does have its pros and cons but for many a house if just not within their budget. Also, buying a condo isn’t the same as buying a house, bringing with it different considerations and concerns. For those looking to buy a condo here are a few things to keep in mind.
Make sure you get all the documents, and have sufficient time to look them over.
Buyers are supposed to get all financial documents relating to the association during their inspection period, but often they arrive, incomplete, just a day or two before closing. That’s not enough time to review documents that may be many pages long. So, make your agent gets them to you early in the escrow period to give you adequate time to review them.
Take a close look at the exterior
Complexes in terrible disrepair with non-functioning pools, old or peeling paint, rotting wood, broken light fixtures, cordoned-off elevators, damaged stairs, deferred balcony repairs and unsecured perimeters would raise a red flag with most people but poorly maintained exteriors often point to bigger management problems.
Some real estate salespeople might minimize these issues and say it’s the association’s responsibility, but once you buy there are no assurances the association will take care of these problems.
Know What the Association Fees Are
In most condo communities, there is a monthly, quarterly, bi-annual, or annual fee that is required by each resident. The association fees are used to cover common expenses such as insurance and maintenance.
It’s important to know when buying a condo that the community has a large amount of reserve funds in the event a major repair is required, such as a roof replacement. Ask the community how the association fees are divided and where they are distributed too.
Association fees can also impact whether a buyer can afford the condo or not. When approving a buyer, a lender is going to add the association fee into the monthly debts of the buyer.
Equally as important is knowing what the association fees include. As mentioned above, the fees generally include insurance and maintenance. Know exactly what the association fees include and what, if any exclusions apply.
Review Association Rules
Seeing as most condos are in close proximity to one another, the communities association will have rules and regulations. It’s important to understand that unlike a single family home, you cannot make your own rules and do whatever you want. The association’s rules will include the policy on pets, allowing renters, and who’s responsible for what among other important details. Read the rules.
Check the Financial Statement
About two-thirds of the association’s budget should be operating expenses such as water, lights, elevator maintenance and landscaping; the rest should be set aside in a reserve fund for long-term maintenance and repairs. See if expenses exceed revenues due to foreclosures, unpaid dues or other reasons. If they do, ask the association what their plans are to make up the shortfall, and whether you should expect an assessment or higher dues.
Condo owners have to be proactive and involved. Look at the books and records on a regular basis – but if there is conscious mismanagement, even that might not be enough to protect your assets.