YOU'VE FOUND YOUR DREAM CONDO, and you're ready to
relax among the mango trees and swaying date palms. Hold
everything. To keep from getting stuck with a lemon, you've
got to do some homework. Here are the seven most important
questions you need to ask before buying a condo.
1. "What's the beef?"
Take a look at the minutes of the condo association board
meetings to see what the owners have been griping about. If
everyone was complaining about the faulty plumbing or the
gardener's absence, you know that the complex is having
management difficulties. Even if there aren't any
complaints, reading the minutes will reveal the sorts of
projects that are under way at the complex -- projects the
seller may have neglected to mention.
2. "Who's Been naughty and who's been nice?"
Find out the delinquency rates of present owners. If people
aren't paying their association dues on time, that is either
a sign of discontent or an indication that the association
might be underfunded.
3. "How much is in the repair fund?"
Ask if the community has done a reserve-fund review in the
past five years. Lester Giese, the author of The 99 Best
Residential & Recreational Communities in America,
recommends the following formula: If the complex is one to
10 years old, the reserve fund should have 10% of the cost
of replaceable items (roofs, roads, tennis courts, etc.).
Between 10 and 20 years old, the repair fund should be at
25% to 30%. At 20 years, that amount should be 50% or above.
Residents who brag that they don't pay much in maintenance
may be in a complex that either is not being kept up well or
is living beyond its means.
4. "Can you cover me?"
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 covered by the
policy are an accurate estimate of the cost of rebuilding.
Then make sure that the policy has a building-ordinance
clause, which means that the insurance will cover the cost
of bringing the building up to code if there is any
rebuilding to be done. On older buildings, there may have
been many code upgrades since the time of construction.
Finally, make sure that you understand exactly what the
association policy covers and what you are responsible for.
The smart condo owner will insure his or her personal
belongings, along with any other items within the unit that
are not covered by the association's policy. If you have
trouble understanding the insurance lingo, take the
insurance certificate to an agent whom you trust and who
understands the state laws.
5. "Does the association present any legal
problems?"
Buying a single-family home without a lawyer is no big deal
for many people. But with a condo, there's so much more
involved. Contact a local real estate lawyer and have him or
her go over the bylaws of the association. Do they make
sense? Are they consistent with the state laws? Giese, the
author, once found that the association bylaws of a large
garden-style condo complex had been lifted from the books of
a high-rise condo, leaving confused tenants with rules about
shared hallway space and the correct use of garbage chutes.
Benny Kass, a Washington real estate attorney, recommends
that you also have your lawyer screen the association at the
local courthouse, to see if any owners have filed suit
against it.
6. "Is the complex renter-friendly?"
If the renter population is over 10%, there should be clear
rental policies, either listed in the bylaws or tacked on as
an amendment. Does the management company find renters for
you? If so, do they get enough good renters? Ask other
tenants about their experience. In addition, ask to see the
association's rental lease, and have a real estate lawyer
look it over. Keep one thing in mind, though: An association
can change its bylaws to prohibit or restrict renting at any
time. The more owners who rent, the less chance that will
happen.
7. "Am I my community's keeper?"
Watch out for a condo whose owners manage the place
themselves. Although many are operated efficiently,
self-management can lead to more hassles for owners --
especially those who 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
other owners. Ask people in nearby buildings. And be sure to
interview the day-to-day manager directly. If you hook up
with a bad manager, you can be sure of this: Your dream
condo will keep you up at night.
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