People all over the country buy condominium units in every state, everyday. They purchase large condos, small condos, upscale and luxurious Boston condos. Very few of the buyers know how condominiums and townhomes or any planned development community is structured and the consequences of not having all of the pertinent information could come back to haunt those owners, and there is little they can do once they take ownership of the condo unit. Here are some important questions you should ask before buying any condo, at any price, anywhere.
What Makes a Condo Different?
Condos are multi-unit facilities, where you have full ownership of a particular condo unit and have a shared ownership of the common areas of the entire condo complex. The owner of a condo unit has access and ownership of that particular unit only, or other if he/she owns other condo units. The owner will have the title deed the the unit(s) he/she owns. All of the residents of the condo complex own the real estate property. The owner of the unit can live in it, sell it, and rent it out if the condo association allows the renting of the units in the particular complex. The common areas like the elevators, lounges, gymnasiums, parking spaces, yards, pools, garages and other common areas are owned by all the residents of the property. You are charged a set fee to pay for the management of the complex, each month, to be combined with other owners fees, for the purpose of maintaining the common areas, pay water, trash pick up, maintenance, etc. In short, you own the interior of the unit you buy, and cannot make any structural changes or remodel anything that would change the original design or the original building and anything you do must be approved by management. The Home Owners Association supervises the condo management. The Condominium Document, commonly known as the Master Deed, or CC&Rs, outlines the residency unit boundaries and the common property and also mentions any restrictions on the use of these areas. This document is initiated during the permitting stage of the development and amounts to the rules that all condo owners must abide to. The residents elect a number of members to form a management group for the purpose of managing the day to day business of the condo complex. The chief task of this group is to collect the maintenance fees from the residents, decide how the money will be spent, maintain the entire complex, do repairs, pay all bills like water, trash, taxes, etc.
Ask to See, Read, Understand the Cc&Rs
The condominium document, or deed, or CC&Rs, is the guiding rules for the condo complex and anyone thinking about buying a home in any condo complex should ask to see a copy of the CC&Rs, and even have an attorney review it before buying a condo unit. Many complexes for example will not let an owner rent out his or her condo, and demand that it be owner occupied. There could be other restrictions also.
How Much Money is Collected and Spent Each Month, and on What?
A potential buyer can ask to see the Board of Directors notes or minutes from their monthly meetings to see how much money is coming in, and going out, and why. Are there owners who are not paying their monthly fees? Why? It could be that people are withholding paying their fees due to a situation that the Board is not taking care of properly. Example: There might be a complex wide plumbing problem that has been ongoing and not taken care of, or another situation that is causing people in the complex to be unhappy. This type of thing will drive down property values over time. Even if there aren’t complaints, reading the minutes will reveal the kinds of projects that are under way at the complex, including those that the seller may not have mentioned. Look at the list of the employees in the complex, ask questions. Talk to some of the residents and ask about how they like living there and are there any ongoing problems.
Ask to See, Read, Understand the Cc&Rs
If you look at nothing else, get a copy of the certificate of insurance, which is a summary of the association’s policy. First, see if the replacement costs that the policy covers are an accurate estimate of rebuilding costs. Finally, make sure that you understand exactly what the association policy covers and what you are responsible for. Smart condo owners will insure their personal belongings, along with any other items in the unit that the association’s policy does not cover. If you have trouble understanding the insurance lingo, take the insurance certificate to an agent whom you trust and who understands the state laws.
Does the Homeowners Association Have any Legal Problems?
Buying a single-family home without a lawyer is no big deal for many people. But with a condo, much more is involved. Have a local real-estate lawyer go over the association’s by-laws. Do they make sense? Are they consistent with the state laws? Also, have your lawyer screen the association to see if any of the owners have filed suit against the complex and for what.
Is the Condo Complex Renter Friendly?
If the renter population is more than 10%, there should be clear rental policies, either listed in the bylaws or tacked on as an amendment. Ask other owners about their experience with renting out a unit. In addition, ask to see the association’s rental lease, and have a real-estate lawyer look it over. Remember, though, that an association can change its bylaws to prohibit or restrict renting at any time. The more owners who rent out, the less of a chance that will happen, but it does happen and happens all the time.
Be Aware of any Condo Complex where the Owners Manage the Day To Day Operations
Watch out for any condo complex whose owners manage the place themselves. Although many may be operated efficiently, self-management can lead to more hassles for owners, especially those who may live thousands of miles away. If the complex is professionally managed, check out the management company as thoroughly as you check out the association. Ask some of the other owners and people in nearby buildings and complexes about any known problems that might exist or how they feel about maintenance, yard upkeep, thefts, loud parties, etc. And be sure to interview the day-to-day manager or directors directly. Don’t always go by what the condo seller says, or the Realtor you are working with. Go back to the complex at different hours of the day and night to see what is going on. Check the pool and spa areas, gymnasium, office area and some of the other common areas. Sometimes we have to do research on our own to get the real facts.