Questions To Ask When Buying A Condo

Top questions to ask before buying a condominium.

The questions to ask when buying a condo found below are something every buyer should consider when purchasing this type of housing. I would be willing to bet that many of these questions are nothing that many buyers would have ever thought to ask. After reading I am sure you will agree they are super important!

What are the condo association rules?

Condo association rules There is no question that buying a condo is a lot different than buying a home. There are a tremendous amount of details that every buyer faces when purchasing a home from getting a home inspection, to procuring a mortgage, to purchasing home insurance, to deciding whether Real Estate title insurance is a good idea. Buying a condo typically involves all of these things plus a whole lot more. There are questions that every buyer should ask before buying a condominium.

One of the biggest things buyers fail to understand about buying a condo is that they will usually be buying into a community where there are rules and regulations that must be followed. It is not like owning a home where the majority of the time you are able to make improvements such as adding shrubbery, planting a garden, or putting up a fence if you like.

Unlike a home, with a condo you own from the walls in. The outside of a condominium is owned by a democracy where you must abide by the rules. The point here is that you are not the king of your castle when owning a condo. Many condo communities either have an outside condo association with a management company involved or a direct home owners association where all the home owners decide what can and can’t be done.

Investigating the condo rules and regulations are an important consideration especially if you are used to the freedom of not having to answer to anyone else. I can tell you first hand there are some condo neighborhoods where the people that make up the rules do so just to make your life miserable. Just picture that crotchety old person that has nothing better to do than complain about every little thing they see. Their self importance is on display at every turn. This is not to say that every condominium community is like this but it sure pays to find out before making a purchase!

If planting a garden is important to you, ask before buying. Think you might want to add a patio? Be sure to ask if this is even possible. One the things that I have heard from some of my past buyer’s is how surprised they are about the stringency of the rules at the condo community in which they live.

Besides finding out what can be done aesthetically to your townhouse, one of the major considerations for many folks is the condominiums pet policy. Some condo developments do not allow pets at all. Some have restrictions on the number and size of the pet you can have. The last you want to find out is that Fluffy is not allowed to come with you!

Lastly, you will also want to make certain there are no amendments to the condo by-laws up coming which may deter you from wanting to purchase.

How much are the condo fees?

Questions to ask before buying a condo Another key question to ask when buying a condominium is how much are the condo fees and what exactly do they cover. Condominium association fees are typically based on how many homes there are, what it costs to run the community, whether there is a professional management company, and if there are funds set aside for major repairs or an unforeseen lawsuit.

The condo fees from community to community can also cover vastly different things. Some of these things may or may not be important to you.  Possible considerations of what could be included in the condominium fees are the following:

  • Exterior maintenance of the building
  • Grounds maintenance including landscaping, lawn mowing, and snow plowing
  • Master insurance
  • Water and sewer services
  • Road maintenance
  • Trash pick up

In some condo neighborhoods you may find that there are frills that you end up paying for in the condo fee that you may not need or want such as a pool, tennis courts, or recreation center that may also include a gym. If you do not have need for such things this could factor into your buying decision.

Is the complex professionally managed?

Professional condo management company There are some condominiums that are under professional management and others that are run by a home owner’s association (HOA). You should find out which is the case at the neighborhood you are considering.

If it under professional management you will want to get the contact information for them and give them a call. Often times they are a great information source for anything you could possible want to know about the complex.

If the neighborhood is not professionally managed you will want to speak to the head of the home owners association. This person will should also be well versed as to the goings on of the complex.

How much money is in the reserve fund?

Money in condo reserve fund One of the more important questions to ask when buying a condo is how much money is contained in the reserve fund. This becomes important because it establishes the financial health of the association. You want to know if the association has budgeted enough money in the event that an unforeseen expense arises.

As a general rule a repair/reserve fund should contain about 10% of the annual revenue budget if the complex is under ten years old.  If the neighborhood is older than ten years, the budget should be closer to 25% or more on hand for major expenses. Just like anything else the older the buildings are the more maintenance they will require.

While some condo neighborhoods may seem to have super low condo fees, you need to find out if they are funding their reserves properly so you are not stuck with a major expense at some point down the road.

Finding out how much money is in the reserve fund will help partially determine the financial health of the neighborhood. There are also a couple other questions you will want to ask as well when considering buying into a particular condo neighborhood.

One of them is what is the delinquency rate of the owners paying condo fees? You obviously don’t want to be caught in a neighborhood where a large number of owners are not paying their condo fees. Another key financial question is whether or not the condo complex is on the FHA approved list for financing eligibility.

FHA which stands for The Federal Housing Administration which is a government entity that backs loans. The FHA program is one of the most popular out there for home buyer’s due to the reduced down payment requirements which are only 3.5% down. This is a key question to ask when buying a condo because it is of great benefit for a complex to be FHA approved. In today’s real estate environment this is the financing route many buyer’s prefer to take!

Are there any special assessments coming up?

Condominium special assessments A special assessment is typically a one time fee that will cover a large expenditure needed in the neighborhood. For example maybe all the roofs need to be replaced on all of the buildings. This obviously would be a very large expense.

Sometimes rather than taking it out of the reserve fund a special assessment will be made where it becomes a short term expenditure. If your condo fee was normally $350 per month it may jump to $400 for a certain amount of time. Of course if you are considering buying into the neighborhood you will want to have this information for budgeting purposes. This is definitely a question you want to ask before buying a condo not when you have already purchased and find yourself with a large unexpected bill.

Are there any lawsuits against the condo complex?

Lawsuit against condo complex Yet another important questions to ask before buying a condo is whether there are any legal concerns! You should make sure there are no pending lawsuits which could in some way impact you financially somewhere down the road. There could be any number of reasons why there may be a lawsuit.

Maybe the home owners have a lawsuit going against the developer for not completing something in the complex or shoddy construction which has caused some kind of issue. Most of the time this is not a major consideration but at least worth investigating.

What is the condominium rental policy?

Finding out the rental policy is a very important question to ask when buying a condo for a couple of reasons. A high number of renters within the complex can have a few negative effects. Condo’s that are not used as the primary residence of the home owner often are more likely to default on a loan than an owner occupied residence.

Many lenders are therefore more reluctant to loan on a condominium that has a high percentage of renters. Renters also do not always have the same pride of ownership. As a result, the property may not be kept as well as if the owner were present. There is also the possibility they may not follow the rules as closely as the owner would.

Condominium rental agreement Fannie Mae and Freddie Mac, the two mortgage giants, may not finance in a complex where there are too many non owner occupied units. The typical owner occupancy rate that lenders look for is at least two thirds. Over the years Fannie and Freddie Mac have learned that when the real estate market turns sour there are far more units foreclosed on in complexes where there is high investor ownership.

When foreclosures are taking place, condo fees often times are not paid so associations have to defer maintenance. Innocent owner occupants can then find themselves held hostage in units which are getting run down, losing value, and stigmatized in the eyes of Realtors and home buyers.

The ability to get a mortgage on a property is not only important when you are a buyer, but also later, when you are trying to sell your home. The last thing you want is to own a non mortgageable property in the future.

On the other side of the coin what if you find you need to move but the condo has lost value since you purchased it. You may want to rent it instead of selling if you are going to take a big financial hit. You may find out you can’t rent if there is a rule on the amount of units that can be rented at any one time. Again this is a question to find out before you sign a purchase agreement NOT after!

What is the parking situation?

Condominium parking The parking situation from one condo complex to another can vary greatly. This is an important consideration especially if you have lived in a home before and are used to having guests over quite a bit. There are some condo complexes where you may be granted one or two “deeded” parking spaces in which you become the legal owner for such space.

This means you are the only one who is entitled to park in that designated spot and another owner could not legally park there. They are typically located right in front of or in close proximity to your unit. There are other condo communities where you do not have a deeded parking spot and it is “first come first serve”.

Many condo complexes also have areas where there is dedicated guest parking. People who come and visit are directed to park in these specific areas. This is an important questions to ask before you have signed your offer to purchase contract not when the moving truck is putting your furniture inside the unit.

Who fixes what?

Who is responsible for repairs at a condo You are going to want to know exactly what you are responsible for in terms of maintenance expenses. For example one of the grey areas in many condo developments is who is responsible for replacing the windows? This is obviously a big expense when the time comes. Is this something the condo association is responsible for or is it yours?

Another example of a grey area is balconies and porches. In some condo’s you are given the option of having a balcony or porch. Make you look at the master deed as well as the unit deed to make sure who actually owns the porch. The porch may be attached to your unit but do you truly own it? In other words are you the one who will pay for repair and maintenance or is that the condo associations responsibility?

Will I need to move in the near future?

Real Estate for sale sign selling condo There are s0me excellent reasons to own a condo such as affordability, the need to downsize, or possibly not wanting to have the maintenance headaches that are associated with owning a home. You do however, want to keep in consideration that condo’s typically do not appreciate at the same rate that homes do.

I know in my area of Massachusetts the appreciation rate of condominiums has certainly not kept pace with single family homes. Condominium values have also dropped a lot more in the last Real Estate correction than single family homes as a whole.

While it can be hard to predict what will happen in the future, if things follow previous trends, what you realize in appreciation may be a smaller figure than a home. This makes it even more important to figure out if you really want to live in a particular condominium development.

As you can see there are lots of questions to ask before buying a condominium. It makes sense to do your home work so you are not only happy the day you buy but years into the future!

If you are thinking of buying or selling a condo anywhere in the Metrowest Massachusetts area, I would welcome the opportunity to interview with you.

Other Real Estate articles worth a look: Top Metrowest MA Realtor via Maximum Real Estate Exposure.

Additional condominium resources:

Use these additional resources to make a sound decision when purchasing a condo!

 

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About the author: The above Real Estate information on questions to ask when buying a condo was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out ofmany Metrowest towns for the last 27+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

I service Real Estate sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton and Uxbridge MA.

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Comments

  1. Jack Hashem says

    Great article! Another situation to be aware of is buying in a complex where many units are unsold or many investors walking away. Many complexes with 100-200 units and only 10 or so living there and paying fees. Makes it impossible to operate the place with no fee income so the insurance gets cancelled,no management,no money to do anything,etc. and your left with the mess and great depreciation in value.

  2. Ben Turner says

    Bill these are many of the questions I thought to ask when I bought my condo a few years ago. Great job with the article. I especially like your advice about finding out what can be done as far as renting.

  3. John Benson says

    Bill these are some really excellent questions for anyone who is thinking about buying a condo. Nice job with your article!

  4. says

    Thanks John there are a lot of questions that buyer’s should be asking when buying a condo and don’t. Hopefully the article does a good job of letting everyone know there is a lot more to think about than when you are buying a home.

  5. says

    Excellent article. Perhaps not everywhere, but here along the seacoast where flood insurance is hard to get, make sure you can get insurance for your unit and if in a flood zone that the master insurance policy has flood insurance. Lenders will check, but if you are paying cash, be sure to check that out.

    • says

      Thanks Janis. As I am sure you already know many buyers do not know what the right questions they should ask when buying a condo. As Realtors, we need to be their guides and be well versed on this type of information.

  6. Chris Stygles says

    I live in a condominium here in Mexico City. Your article is right on target. I will share it in Facebook with my friends. Thank you.

  7. jay lim says

    The article is good but the impression of owning a condo is so negative.
    What about the posotive side such as the importance of convenient and comfort,
    Considering the time you can save on traffic — location, save on gasoline, stress
    On commuting, prestige, etc.

    • says

      Jay – thanks for your constructive criticism. I did not realize the article gave the impression of owning a condo being a negative. You are 100% correct those are good reasons why any buyer may want to consider one.

    • says

      Virginia thanks for the compliment! There are lots of times over the years I have found that many buyers do not know what questions they should be asking when buying a condo. I tried to give a good source for folks to look at.

  8. says

    There are definite positives to buying a condo for many homeowners. I think the point Bill is trying to make is…. know what you are getting into before buying one. They are more complex than buying a single family home and it is good to have a real estate agent that knows what they are doing when it comes to purchasing a condominium in Massachusetts.

  9. T J says

    Can any one answer my question? I live in a condo and want to sell but I have found out I can not sell because the board is holding us hostage for others not paying their condo dues. The Association has a deficit of 20 % where there should not be no more than 15 %. Can any one help point me in the right direction to sue for holding me hostage from selling our condo. 360-815-7131

  10. says

    Very extensive list here and people need to know that buying a condo is a little bit different the buying a residential house. All those rules and covenants. Excellent job Bill

    • says

      Thanks Rich I appreciate the compliments. There are so many buyers who don’t do the proper research and ask the right questions before buying a condo and end up unhappy. Hopefully this article will give them some questions to think about.

  11. says

    Bill,
    Excellent article! Most of my business in Naples Florida is upscale condominium sales. I live and work in Pelican Bay which is a 30 year old planned community. The condo prices go from just under 250,000 to as much as ten million. A number of issues also come up as to rental policy. Many buildings limit rentals to one time a year with a 90 day minimum. Since we are in snowbird heaven, this is important for potential buyers wanting rental income. Some buildings can limit the amount of time family members may occupy the unit without the owners being present. Owners with large families are pretty upset when they cannot let their kids and grand kids use the condominium for spring breaks and holidays.

    Lastly, it is not uncommon to have a special assessment that could run 20,000,50,00 or more. In Florida, if the assessment has not been voted on it before the contract is written, it would be the buyers responsibility. However, to protect my buyers for surprises like this, I ask for copies of the minutes of the condominium association for the prior year. If the condominium association has any kind of issues, whether it be foreclosures, assessments, it is being discussed in the minutes and sends a red flag to prospective buyers. Condominium living is great but not for everyone.

    • says

      Thanks Marcia for the compliments. I know it is a different world down in your neck of the woods with all the foreclosures and short sales that have taken place. In fact I bought a condo myself two years ago in Florida. You are right about doing the proper research prior to buying a condo. Surprises are usually not fun in Real Estate. Asking good questions before buying a condo really does help in the decision making process especially in regards to issues like you raised.

  12. says

    Bill
    These are great tips for Condo Buyers. In our market in Orange Beach and Gulf Shores Alabama and Perdido Key Florida, Condo purchases make up the bulk of our transactions. The issues you bring up in your post as well as some of the comments are very spot on. Very good article!
    CB

    • says

      Thanks Chuck. I had fun writing this article as there are many buyer that have made a mistake when buying a condo because they did not know what questions they should ask before buying!

  13. Will Kirby says

    Condos are certainly different than a house. I know this from experience too. It helps to have an agent that knows how to buy one and the differences. Looks like you got it covered, Bill

    • says

      Will thanks for your comments. You are right there is a lot more to think about when buying a condo. Hopefully these condo questions will help a few folks out who are considering purchasing one.

  14. says

    This is great stuff Bill! Very well thought out and the content; just wow! I could not be more impressed. Mind if I saddle up my horse next to yours! It was great to connect with you on Google+ as well.

    • says

      Phyllis if you are buying a condo through a Realtor they should be able to provide it for you. If not and are buying directly through an owner you will want to ask them to provide the condo docs for you to review.

  15. Toni Apryasz says

    Mr. Gassett, This was SOOOO helpful to my husband and I. We are looking at Naples for a condo and those questions will be on the list when we find a few to look into. We did find some condos that are designated as “single family” and that is one question we will need to ask for sure. We had heard that for those condos you are to care for the outside building maintenance (painting, roof and such). We are not sure if that is true, but, if so, we would not consider them as that is the last thing we would want to do when we retire. We plan to keep our home in PA, and will have to take care of it, so no desire to take care of another home on the outside. Is that what this designation means, or is it for tax purposes only? Thanks again, so glad I stumbled on this article!! Toni

  16. Deb says

    Hi, we are in the process of purchasing a short sale condo in MA. The agent verbally stated that the refrigerator was staying in the unit. When we did our home inspection, the refrigerator that was originally in the nut was removed and replaced with a disgustingly, non cleanable one. It was also missing the handles. Does the refrigerator have to stay in the condo if the realtor verbally said it was?
    The refrigerator was not listed in the purchase agreement.

    Thank you!

  17. Louise Weyer says

    Two issues: I don’t think there should be any “grey” areas regarding who owns what and is responsible to fix whatever, in official documents such as condominium by laws and/or master deed. They should be Black and White!! There are 26 units in the 55+ condominium building we live in.

    We are currently renting from my daughter who inherited it from her father. We want to use my husband’s VA loan benefit. The VA will not approve the Association by laws due to wording regarding no definition of how the HOA assigns and extinguishes an HOA fee lien. Secondly the Association wants to be in 1st position in recouping any debt to them. It is my understanding that all “lenders” will be in 1st position for any liens against the loan.

    The association is in the process of getting the condo building FHA approved…I am confused..if both the VA and FHA are government backed…wouldn’t the FHA require the same type of wording in the Association by laws? It seems to me that if the Assn does not change the by laws, there will be no access to secondary lenders….only an “in house (bank)” loan or pay cash! An ‘In House” loan could require up to 20% down in addition to a higher interest rate. The president of the association said the FHA by law wording requirements are different from the VA wording…could you explain the difference, if any? My husband and I are of retirement age and want to use his VA loan benefit..he served our country in the Army National Guard for 24 yrs. We have a broker and have been working on this since MAY. We meet all the qualification for loan approval…it is the condo by laws holding this up. I really need answers quickly. Lincoln, Nebraska

    • says

      Louise you are running into a common problem that many condo developments face. One of the issues with purchasing a condo is you can get involved into a place where the people running the show are not the brightest bulbs in the world. You are right in the fact that any kind of restriction will affect marketability and ultimately the value. In regards to your question about the docs with FHA and the VA treating this differently you would need to speak with a qualified attorney in your area that handles such matters.

  18. Cathy says

    We have been looking at condos in naples fla and were surprised to find that fees were charged by unit, not by square ft. The $500,000, 1000 square ft condo facing the street paid the same maintenance fees as the $2,000,000 , 2400 sq ft condo facing the ocean. Seems like the poor condos subsidize the wealthy.

    How common is this? It is unheard of in canada.

    • says

      Kathy – here in the states I would say that most of the time the condo fee will be based on the square footage but certainly not always as you have found out. I agree with you that the example you gave does not make a lot of sense!

  19. TORR L. HUBRED says

    I bought a condo in a complex where all units are on ground level. There are seventy units in the complex with thirty being river front property and forty being on much higher ground over looking the river. I have been told according to our master deed and by laws if the units flood that are located on the river we will all be responsible for the cost to repair the damage to these units, can this be possible?

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