What are the unique pitfalls in buying a condo?
Q: When buying a condo, what should I look for to ensure a quick resale when I’m ready to move on?
A: Condos are popular because they can provide affordable housing in otherwise unaffordable locations, a home with fewer maintenance demands and convenient access to public transit, employment, entertainment and shopping.
You’ll want to purchase a property in a high-demand location that appeals to buyers of all ages and is priced far below the single-family options in the area.
But avoid buildings with tons of amenities and luxuries that drive up homeowners association fees. The high fee is a turn-off to people who don’t plan to use all of these features.
Also, be careful about buying in areas that are dense with condo developments. Ideally, you want to be located closer to single-family residences or, at least, more upscale condos.
Look for buildings that are close to transportation, shopping and employment. These conveniences add value.
You’ll also want to be near major highways and public transit lines and close to the central business district or major tourist attractions.
Q: Does the financial health of the condo association matter?
A: Absolutely. In a condo development, individual unit owners are jointly responsible for common maintenance, operations and repairs.
Owners pay monthly homeowners association fees for these expenses. An association that doesn’t collect enough might be deferring maintenance and failing to build reserves for future needs. The result can be a special assessment, an unexpected bill sometimes in the tens of thousands of dollars. Insufficient monthly dues can also mean a large future increase in HOA fees.
Buyers should carefully review the complex’s recent board minutes, replacement reserve study and financial statements for potential issues.
The right monthly HOA fee pays for monthly operating costs and creates a reserve fund that can cover 70 percent to 100 percent of anticipated major maintenance costs, like a new roof. Be wary of complexes where less than 30 percent of the anticipated costs are funded.
Condo buyers should also note the building’s overall condition, as aging systems, worn-out amenities and deferred maintenance could all be signs of a future special assessment.