Things to consider/ask when buying a condo

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sunnyday
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Things to consider/ask when buying a condo

Post by sunnyday » Sat May 17, 2014 8:11 pm

My friend is looking into condos and I'm going to shop around with her. What things should she consider? What details about the HOA should she find out?

investor1
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Re: Things to consider/ask when buying a condo

Post by investor1 » Sat May 17, 2014 8:22 pm

Mostly, what the fees are, what they cover, and what the policy is for raising the fees.

HOAs tend to be more concerned with the outside of the house, so ask about the types of repairs and maintenance they cover for the outside of the home such as roof replacement, painting, pressure washing, etc. Parking policies are another big one. You might want to ask if there are penalties charged for anything and what the process around that is.

Things she should consider (if possible) are the neighbors. Their level of noise and friendliness can have a noticable impact on her quality of life. Not just the people, but pets as well.

I use to live in a condo that shared two walls with two different neighbors. Everything was great for the first few years I lived there. Then many great neighbors slowly moved out over time. Eventually, both neighbors that I shared walls with moved out and new ones moved in. One of them had a dog that liked to start barking around the time I got home from work and wouldn't stop for hours. The other shared a bedroom wall with me. They like to have the bedroom TV (loud enough that I could hear) while they fell asleep (and after).

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widestance
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Re: Things to consider/ask when buying a condo

Post by widestance » Sat May 17, 2014 8:31 pm

Scope out the units adjacent to the one that is for sale and look for evidence of smokers (assuming your friend doesn't enjoy the smell of cigarette smoke).
Also, look for evidence of irresponsible pet owners who let their dogs crap in your planters and don't pick up after them.

Those are my two biggest pet peeves. I don't get to enjoy my patio very often due to smoking neighbors. The dog crap around the property is just an annoyance to me.

Get a copy of the HOA's rules to review before buying. If possible, get a copy of the associations annual financial statement. You don't want to find out the complex has 3 years of useful life of the roof and the reserve fund is underfunded to make the repair. Special assessments can be back breakers.
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ddoubleu
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Re: Things to consider/ask when buying a condo

Post by ddoubleu » Sat May 17, 2014 8:36 pm

This is based on me owning a condo:

- Make sure to use a home inspector that has no relation with the real estate agent. Find a reputable inspector on Angie's List.
- Find out who the management company is and see if you can get a copy of the by-laws, Rules & Regulations, and maybe the Association's budget to give you an idea how the community is run.
- What is the owner/renter occupancy ratio? It's typically 80% owners/20% renters which is okay. More renters than will bring more issues all around.
- Is there a condo fee AND an HOA fee? I have both.
- How much are those fees?
- Do the fees include utilities such as water, electricity, and gas?
- How easy is it to hear your neighbor?
- Does the unit upstairs have kids who will be prone to jumping and running around?
- What are rules for hardwood flooring? My condo association requires upper level units to have 80% of the flooring to be carpeted, but most owners get around this with rugs.
- What interior modifications can you or can't you make?
- What is the Association responsible for when it comes to maintenance? Where I'm at we can't replace windows or balconies (I'd love to, but whatever).

sunnyday
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Re: Things to consider/ask when buying a condo

Post by sunnyday » Sun May 18, 2014 3:47 am

Thanks for all of the tips. Some great questions to ask and things to consider.

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Re: Things to consider/ask when buying a condo

Post by Call_Me_Op » Sun May 18, 2014 7:00 am

Find out under what conditions the HOA or representatives thereof can enter the condo. He/she may not like the idea of someone entering the condo without his/her permission.
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davebarnes
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Hire a lawyer

Post by davebarnes » Sun May 18, 2014 12:24 pm

Have a lawyer review the condo docs.
It cost me $500.
Worth every penny.
Decided NOT to buy.
A nerd living in Denver

Louis Winthorpe III
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Re: Things to consider/ask when buying a condo

Post by Louis Winthorpe III » Sun May 18, 2014 12:40 pm

Definitely review the financials and bylaws. Pay attention to how much teeth the bylaws give the association for collecting against members who are delinquent in their dues. If they aren't strong, you could end up with a fraction of the HOA members paying the expenses for the entire association. This was a big problem for many HOAs during the financial crisis. The HOA should be able to force the delinquent member to pay legal expenses incurred by the HOA in collecting the unpaid dues, and the HOA should be able to garnish wages, get a lien on assets, etc., with a court order.

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midareff
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Re: Things to consider/ask when buying a condo

Post by midareff » Sun May 18, 2014 12:47 pm

sunnyday wrote:Thanks for all of the tips. Some great questions to ask and things to consider.
How much is the monthly maintenance and what does it cover in detail.

Does the maintenance include reserves and are those reserves fully funded?

What is the pet policy...... nothing ruins a condo faster than barking dogs with pet owners who don't clean up after their pet. These folks are usually renters.

Ratio of owner occupied to rental....... there is probably good reasons why owners don't live thrre any more.

When did the building have its last structural inspection if an older building or near salt water. How old is the roof. If it on the water when was the last seawall inspectiom.

I would make it a point to walk the building floor by floor to see how maintenance and housekeeping is performing.

How many on the BOD and are any related by blood or marriage?

That comes from a 10 year condo owner, 3 years on the board, and looking for a condo in another city.

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Cottons
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Re: Things to consider/ask when buying a condo

Post by Cottons » Sun May 18, 2014 1:01 pm

+1 for bylaws, pet situation, and +2 on noise level of neighbors, assessments (including special assessments pending or being considered) You may be charged for obtaining the financials and regulations of the association but it is worth it. The more information you have the better. Possibly have a lawyer review these docs.

Restrictions on repairs/modifications you can make within your unit.
Common area usage.
Is there additional storage?
What does the HOA fee cover? Utilities, landscaping, trash/sewer?
Not a serious one, but some condos don't allow satellite dishes anywhere on the property.

stan1
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Re: Things to consider/ask when buying a condo

Post by stan1 » Sun May 18, 2014 2:01 pm

Also keep in mind resale. In many markets there are hundreds of very similar condos for sale at any given time. What will make this unit stand out from the others when it comes time to sell?

Pluses:
Location (transit, shopping, jobs)
Two bedrooms & two baths
Layout that doesn't feel like an apartment (such as an open kitchen)
Light/big windows/end unit/corner unit
Ceiling height (low ceilings throughout the unit can make it feel dark/apartment-like)
No neighbors above (townhouse style or top floor
Parking (2 cars in a garage)
Security

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dumbbunny
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Re: Things to consider/ask when buying a condo

Post by dumbbunny » Sun May 18, 2014 2:29 pm

Cottons wrote:assessments (including special assessments pending or being considered)
If the HOA publishes a newsletter, ask to see past issues.
If the HOA has a website, look for archived posts.
Talk to residents of the association.
“It’s the curse of old men to realize that in the end we control nothing." "Homeland" episode, "Gerontion"

gerrym51
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Re: Things to consider/ask when buying a condo

Post by gerrym51 » Sun May 18, 2014 2:45 pm

i have lived in a 56 unit condo development for 27 years. I find that most of the restrictions in the handbook are there to use if somebody complains about something.
You can't say it's not in the contract. many times minor infractions of the rules don't get enforced as long as you don't do something crazy.

Like no hanging something. if it's small and no one complains it's not an issue.

my condo on pets is max 2 and must be under 30 pounds.

ralph124cf
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Re: Things to consider/ask when buying a condo

Post by ralph124cf » Sun May 18, 2014 3:08 pm

Ask to see the reserve study. If none has been done, find out why. Generally any owner can get a copy of the reserve study. If your seller won't provide one for you, find out why.

Financials of the condo are provided to each owner. Ask the owner for a recent copy. If he won't provide one find out why.

Check the reserves against the reserve study. Identify any shortfalls. A substantial shortfall means that the association has not been charging a high enough association fee, and will have to raise the fee in the near future.

Ralph

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HardKnocker
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Re: Things to consider/ask when buying a condo

Post by HardKnocker » Sun May 18, 2014 3:32 pm

sunnyday wrote:My friend is looking into condos and I'm going to shop around with her. What things should she consider? What details about the HOA should she find out?
Uhm...don't buy a condo.
“Gold gets dug out of the ground, then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.”--Warren Buffett

Grt2bOutdoors
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Re: Things to consider/ask when buying a condo

Post by Grt2bOutdoors » Sun May 18, 2014 5:31 pm

How much are the association fees? What services do they cover? What are the reserves? How many months of association fees are in reserve at any one time (what is the floor?) What do protections if any, do the by-laws provide in terms of deadbeat's who don't pay their association fees? Don't buy a condo in a building with less than 20-25 units, this from a fellow who is an involuntary condo landlord in a building with less than 20 units. If one apartment stops paying fees, not great, not so bad, but if 5 units stop - just think about the aggravation that comes with that and imagine if 5 out of 20 units puts their condos up for sale at the same exact time!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
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Re: Things to consider/ask when buying a condo

Post by Grt2bOutdoors » Sun May 18, 2014 5:31 pm

HardKnocker wrote:
sunnyday wrote:My friend is looking into condos and I'm going to shop around with her. What things should she consider? What details about the HOA should she find out?
Uhm...don't buy a condo.
+1 Uhm, yes that too!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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grabiner
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Re: Things to consider/ask when buying a condo

Post by grabiner » Sun May 18, 2014 8:46 pm

Check whether the condo is FHA qualified. If the condo doesn't meet FHA requirements (for example, too many rentals), it will be harder for you to get a mortgage, and even if you pay cash, you will have a harder time selling the condo if buyers cannot get a mortgage.

Check recent sales in the complex; if there are a lot of recent foreclosures or short sales, there may be more poorly-maintained units. (However, the foreclosures and short sales will also reduce the comparable sales, so you will be able to buy a condo in a complex with recent foreclosures for a lower price.)

+1 on checking the financial statements; look for special assessments to be sure that they are for non-routine issues. If your condo complex just had a special assessment to replace 30-year-old roofs, that isn't a major issue (particularly since it means that there will be a long time before the next roof replacement). If it needed a special assessement for snow removal, this suggests a budgeting issue.

If you will be taking out a mortgage, get pre-qualified for the mortgage from one lender; this will confirm to the seller that you will be able to buy the condo. For the pre-qualification, list the price and condo fees for the most expensive condo you might buy (assuming that you could qualify for such a loan); it doesn't cost anything to be approved for a $200K loan on a $250K condo even if you are more likely to take out a $160K loan on a $200K condo. (This turned out to be relevant for me; I bought my current condo six months ago, had a pre-qualification for about 1.5 times the price of most condos in the area, and wound up buying a condo close to the price limit.)
Wiki David Grabiner

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Cottons
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Re: Things to consider/ask when buying a condo

Post by Cottons » Sun May 18, 2014 8:47 pm

HardKnocker wrote:
sunnyday wrote:My friend is looking into condos and I'm going to shop around with her. What things should she consider? What details about the HOA should she find out?
Uhm...don't buy a condo.
In some places (read: large cities) buying a house is out of the question simply due to cost. When the lady and I were looking a 2 bed 2 bath house would run $200k over a condo with the same sq. ft and similar features.

rj49
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Re: Things to consider/ask when buying a condo

Post by rj49 » Mon May 19, 2014 12:02 am

I second the part about taking the time to check out neighbors, both immediate and others in the building, especially anyone living above you. After buying a condo in Seattle, seduced by the location, I discovered my upstairs neighbor was a kid whose parents bought the place to get rid of him and let him live his dream life of avoiding employment and education by listening to music, watching movies all night on a surround sound theater system, smoking beneath windows and on the front stoop (the only time he ever left his condo, from what I could tell), doing an impromptu amateur remodeling job most of last summer, and walking around loudly at 5 am before he'd go to bed, waking me up in the middle of the night.

I also found out that the HOA and management company were basically toothless, and didn't enforce what rules were in place, so a couple of people in the building had refused to pay HOA dues for years before any legal action was taken. After complaints about my neighbor, letters were sent to the kid's parents, but he of course interpreted that as harassment and adults trying to control him, so he responded by blaring rap music at top volume whenever he heard me around or on the phone. I eventually decided that he wasn't likely to get a job and spend any time out of his apartment any time soon, and he was making my life miserable, so I ended up selling my place after a year of living there, fortunately in an up market. Since then I've been happy in an apartment, with great neighbors, and the peace of mind knowing that if things change I can simply move, and I made sure to move into a complex with a large percentage of older retirees, so there's a definite peer pressure and expectation of quiet. But if I ever try a condo again, I'll make the effort to speak to neighbors on all side and ask others about noise, management/maintenance issues, and other things, instead of letting the excitement of real estate ownership or other things blind me to proper research.

LeeMKE
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Re: Things to consider/ask when buying a condo

Post by LeeMKE » Mon May 19, 2014 12:42 am

Like others have said:

HOA documents: CCRs, Bylaws, rules and regulations, latest reserve study, and 2 years minutes from HOA board.

If the seller can't/won't get these for you, RUN away.

Read them with suspicion. Are the minutes sanitized or sparse so you can't really tell what is going on?

Are reserves sufficient according to the reserve study? (most reserve studies conclude with the current reserve account balance and a budget for future dues.)
What is the ratio of renters to owner occupants? (less than 15% renters is a good rule of thumb)
What is the ratio of collected to uncollected HOA dues? (If uncollected dues are more than 10%, everyone else will have a dues increase to cover the shortfall.)
What special assessments have been approved over the last 5 years and for what purpose? (If purpose is for routine maintenance, reserves are insufficient and there will be more special assessments)

Some condominiums are well run, many are not.
The mightiest Oak is just a nut who stayed the course.

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Re: Hire a lawyer

Post by investor1 » Mon May 19, 2014 11:17 am

davebarnes wrote:Have a lawyer review the condo docs.
It cost me $500.
Worth every penny.
Decided NOT to buy.
What did the lawyer tell you that prevented you from buying?

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Cottons
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Re: Things to consider/ask when buying a condo

Post by Cottons » Mon May 19, 2014 1:11 pm

One place we considered had a portion of the bylaws that pertained to abandoned/foreclosed units. It basically said that should this happen, the remaining residents had to 1. pay property taxes for the unit 2. pay HOA dues for the unit and 3. make any "reasonable and necessary" repairs to bring the unit into a habitable (read: merchantable) state. :moneybag :moneybag

Ran far from that place.

johnubc
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Re: Things to consider/ask when buying a condo

Post by johnubc » Mon May 19, 2014 2:00 pm

ralph124cf wrote:Ask to see the reserve study. If none has been done, find out why. Generally any owner can get a copy of the reserve study. If your seller won't provide one for you, find out why.

Financials of the condo are provided to each owner. Ask the owner for a recent copy. If he won't provide one find out why.

Check the reserves against the reserve study. Identify any shortfalls. A substantial shortfall means that the association has not been charging a high enough association fee, and will have to raise the fee in the near future.

Ralph
+1 - the reserve study and reserve funds for a Condo (or really any HOA) - no sense in buying into a condo to find out that they building needs a new roof and there are no funds to pay for it.

ralph124cf
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Re: Things to consider/ask when buying a condo

Post by ralph124cf » Mon May 19, 2014 3:16 pm

Cottons wrote:One place we considered had a portion of the bylaws that pertained to abandoned/foreclosed units. It basically said that should this happen, the remaining residents had to 1. pay property taxes for the unit 2. pay HOA dues for the unit and 3. make any "reasonable and necessary" repairs to bring the unit into a habitable (read: merchantable) state. :moneybag :moneybag

Ran far from that place.
If on owner stops paying assessments, the HOA can and should foreclose on the unit and rent it out without paying either property taxes or mortgage payments until either the bank forecloses on the mortgage or the state takes the place and sells it for the taxes. Owners seldom abandon a place that is paid for, or even with substantial equity, so there would be no reason for a HOA to try to sell. When the bank forecloses, then the bank is liable for the assessments and taxes, but not more than six months of back assessments in my state.

Ralph

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Re: Things to consider/ask when buying a condo

Post by Traveler » Tue May 20, 2014 9:53 pm

Get the bylaws and find out how and how often the HOA fees can be raised (is there an annual percentage max for example). Get a history of the fees so see how they've increased over time (i.e. annually or less frequently).
Look at the financials and determine if there are sufficient reserves.
Find out if any additional assessments have been made, when, how frequently, how much and for what.
Find out if there is a rental limit (my complex can only have about 20% as rentals) - this is nice for owner occupied units because it's more stable, but not as nice if you suddenly have to move and can't rent it out.
Confirm the association has the required insurance policy(ies) in place.
Check out the neighbors, how the landscaping looks, if there's a pool or gym-do they look to be maintained.
Get an inspection! Then you can estimate when you'll need to replace the major appliances, systems, etc.

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Re: Things to consider/ask when buying a condo

Post by jlawrence01 » Wed May 21, 2014 8:31 am

grabiner wrote:+1 on checking the financial statements; look for special assessments to be sure that they are for non-routine issues. If your condo complex just had a special assessment to replace 30-year-old roofs, that isn't a major issue (particularly since it means that there will be a long time before the next roof replacement). If it needed a special assessement for snow removal, this suggests a budgeting issue.

I have to disagree. If the condo association has to make a special assessment to cover the replacement of roofs, it is an indication that they are NOT reserving the proper amounts for the replacement and maintenance of capital items. It is pretty easy to assess that you will need to replace the roofs every 15-20 years.

I can tell you that it is a lot easier for board members to "kick the can" down the road and keep the HOA fees very low for years. However, when a condo owner finds out that they have to shell out a special assessment of $2000-5000 to replace the roofs, the credibility of the board is shot.

The ONLY special assessment in 15 years in our HOA has been to fund the legal fees to challenge our property tax assessments. Each owner was assessed $400 and received about $1200 in property tax relief in the FIRST year. (And two owners were STILL screaming bloody murder.)

=====================================================================

I would NEVER buy another condo in a small development (under 50 units). It is very difficult to find anyone willing to sit on the board. If you do, many lack the ability to read and understand the nuances of condo law. My DW has served on the board since we wrestled control from the developer and honestly, it has NOT been worth all the aggravation. It is an unpleasant, AND unpaid job.

======================================================================

One more thing to remember. Most states have very specific laws for condo associations which outline what can and cannot be done. These supercede anything that is in the condo charters and the CCRs. It is good to read these to get some ideas as to what you are getting into.

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