Monday, June 11, 2012

Consider the Condominium: Tips for Success

Consider the Condominium: Tips for Success

Whether you are a first-time buyer looking for a low-cost way into the housing market, purchasing your next home, or a veteran home-owner purchasing a vacation home, a condominium is definitely worth your consideration. Condominiums can provide you with a viable way to share the costs of maintenance and upkeep of a home, afford you more security, provide you with lifestyle amenities, and offer other conveniences that come with living in a defined community.

It is, however, important to understand the unique issues that come into play when purchasing a condominium. Here are some tips that will make you the best buyer you can be.

Learn About The Building And Structure - Just like purchasing a single-family dwelling, you should know some details. Find out when your particular condominium was built, and by whom. Learn about the history of the structure, when it was renovated or updated, number of previous owners of your unit, if it was rented out, and anything you can learn about it via public record or word-of-mouth. Find out about the roof, wiring, appliances, foundation, heating and cooling equipment, plumbing and other systems that will affect you on a day-to-day and seasonal basis. Understanding the history, planning, how the structure fits into the complex and other physical details is a first step in knowing what you are buying. It is also wise to look into issues around land and landscaping, including drainage and other elements that might affect your investment, like wetlands, large trees, and proximity to sensitive areas like cliffs or fire prone areas. If your condominium is more likely to have issues, you would want to know about these possibilities in advance.

Learn About The Condo Association Or Governance Structure, And Who Manages The Building Day-To-Day - Your happiness and satisfaction might depend on a group of people or a management company that does not work within your standards of excellence. If the organization and management can be easily manipulated or changed, maintenance or other important issues might be mishandled. Get a feeling of the overall satisfaction with this structure and understand your level of involvement in participating with it. Reviewing the Board of Directors meeting minutes for the past year will help expose any "issues" needing resolution. These minutes should be available to review, and will provide black-and-white evidence about the nature of the group and how decisions are made.

Read The Fine Print - Ask to see any paperwork that you would be signing prior to purchasing a condominium. These documents give you insight into rules, obligations and running of the building or complex. Don't hesitate to bring it to a real estate lawyer, or at least to go over it with your real estate agent, if you have thoughts or concerns that should be made clearer to you. It isn't just "mumbo jumbo" - these are legal documents that should be designed to protect you and your new neighbors. These documents might also spell out who is responsible in certain situations, or have big holes where things were overlooked. Before you buy is the time to ask questions. It is common for these documents to take days to review, so you need time. Don't wait for a day or so before your closing to read them - ask for them as soon as you go into escrow.

Know What Else To Ask - Also review the condominium's financial statement, including annual budget, (for the past few years) and ask about a reserve fund study and understand the reserve fund account. Ask for a list of special assessments levied over the past decade, as this tells a lot about how realistic the operating budgets really are. Does this condominium association do adequate work to ensure that everyone's investment is safe and secure, avoiding assessments that are the result of poor planning? Look at how much is in the reserve fund: experts recommend avoiding a purchasing a condominium if the reserve fund is funded less than 40%

If you are unclear about this, get a second opinion from someone you trust. Ask to review the certificate of insurance, the summary of the association's policy. You are checking to see if the replacement costs covered by the policy are an accurate estimate of the cost of rebuilding. Additionally, you will want to be sure that the policy has a building-ordinance clause, ensuring that the insurance will cover the cost of bringing the building up to code in the event that any rebuilding needs to be accomplished. When insurance or the reserve fund is inadequate, you are responsible for assessments on the repairs. Buying a great condominium in a fiscally irresponsible complex is a bigger risk, and in the event of a large capital expense, like a new roof or the failure of complex mechanical systems, you could be facing large assessments.

Learn The Rules - When you buy a condo you agree to live by the rules that govern the building and community. This includes how the land and outdoor spaces are used and could even limit what you store in public site. Rules often govern whether units might be rented or how many rentals might be allowed at any given time. Understanding the rules around use of amenities, parking, working on a car, noise, business use of the unit, storage areas, restrictions on renting the unit or on guests - all should be clear from the beginning. before you buy, rent or move in. And if your lifestyle or intended use of the unit is going to be affected by these rules and regulations, be aware of that.

Understand Obligations - Condos come with obligations; they might be Home-Owners Association dues, additional fees for maintenance or insurance, parking fees, waste disposal fees, pest control fees, or a commitment to do or not to do something in your unit. Understand these obligations before you buy or rent, as they are not negotiable. In tight economic times, what happens if you or your neighbors get behind in these fees? Fees can go up to cover necessary expenses, and you might have to cover a negligent neighbor. Your obligations when conducting a renovation or remodel are particularly important to know - so that you can save time and frustration later. Remember, if you purchase a condominium, you also have to consider outside obligations like property tax.

Sneak A Peek At The Surroundings - Keen observation of the state of the parking facilities, hallways, common areas, any neighbors you might see, and the surrounding neighborhoods might help you to understand how you would feel living in close quarters. Try to determine the demographics of the development you are considering. Is it diverse, or does it serve a special community? How would you and your family "fit" not just in your unit, but in the community that a condominium complex naturally creates? Understand the effect that the size of the building and complex will have on your lifestyle. Is it a "party" place, or family oriented community? Are most of the units owner-occupied or rentals? All the rules of house-hunting apply, but more than ever, learning about the personality of the place will help you to determine your over-all satisfaction with your purchase.

Be A Detective - You are entering into a potentially long-term relationship with a building and a group of people - so it is not weird to want to know all that you can going in. Your real estate agent and a real estate lawyer can help you to learn more about the background of the condominium you are considering and whether this particular unit would be right for you. Public records are available, often online, to help you in your task, too. In addition to learning about your investment, you will gain insight into problems that might have occurred in the past and how they were handled. You want to hear the bad along with the good.

Don't Be Fooled By Low Home Owner Association Dues - When Home Owner Association dues are low, the deal looks attractive - but if the reserve fund is not being adequately funded, you might end up with special assessments to cover necessary repairs. In fact, if you have low dues, planning your own reserve fund to cover potential assessments is not a bad idea.

Look At Your Needs And How The Condominium Will Meet Those Needs - If you are disabled or have special needs, look into how these needs will be met, and if your condominium complex has issues that could come into play. There are books and watchdog groups that address these issues, but only YOU can understand your particular situation. Even if you are not disabled, understanding special needs is another way of gathering information about the personality of the condominium complex, and will aid your understanding of the parameters if you need to do any modifications to your unit in the future, should a need arise.

All The Best,

Herb Johnson

859-372-8019 Direct Line Email Website

Buyers and Sellers wanted. Referrals Appreciated!

4895 Houston Road
Florence, Kentucky 41042


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  3. Thanks so very much for taking your time to create this very useful and informative site. I have learned a lot from your site. Thanks guys
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