Questions To Ask When Buying A Condo

September 17, 2012 By Bill Gassett

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What are the condo association rules?

There is no question that buying a condo is a lot different than the purchase of 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 buying 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 customers fail to understand about buying a condo is that they will usually be buying into a community where some rules and regulations must be followed.

It is not like owning a home where the majority of the time you can 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 held 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 homeowners association where all the homeowners 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 essential 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 primary 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 sure there are no amendments to the condo by-laws upcoming which may deter you from wanting to purchase.

How much are the condo fees?

Another critical 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 the need for such things, this could factor into your buying decision.

Is the complex professionally managed?

Some condominiums are under professional management and others that are run by a home owner’s association (HOA). You should find out which is the case in 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 management companies are an excellent information source for anything you could want to know about the neighborhood.

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

How much money is in the reserve fund?

One of the more essential questions to ask when buying a condo is how much money is contained in the reserve fund.

Finding out what’s in reserve is important because it establishes the financial health of the association. You want to know if the association has budgeted enough money if an unforeseen expense arises.

As a general rule, a repair/reserve fund should contain about 10% of the annual revenue budget if the neighborhood 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 significant 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 adequately, so you are not stuck with a significant 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 of other questions you will want to ask as well when considering buying into a particular condo community.

One of them is what the delinquency rate of the owners paying condo fees is? You obviously don’t want to be caught in a neighborhood where a significant number of owners are not paying their condo fees. Another financial question to research 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 buyers due to the reduced down payment requirements which are only 3.5% down.

This is a fundamental 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 buyers prefer to take!

Are there any special assessments coming up?

A special assessment is typically a one-time fee that will cover a significant expenditure needed in the neighborhood. For example, maybe all the roofs need to be replaced on all of the buildings. This obviously would be an enormous 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 usually $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 a question you want to ask before purchasing a condo not when you have already purchased and found yourself with a massive unexpected bill.

Are there any lawsuits against the condo complex?

Another critical question 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 homeowners have a lawsuit going against the developer for not completing something in the neighborhood or shoddy construction which has caused some 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 system is a critical question to ask when buying a condo for a couple of reasons. A high number of renters within the complex can have a few adverse effects. Condo’s that are not used as the primary residence of the homeowner 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.

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 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 number 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?

The parking situation from one condo complex to another can vary widely. 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 of 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 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 particular areas. This is an important question 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?

You are going to want to know exactly what you are responsible for regarding maintenance expenses. For example one of the gray areas in many condo developments is who is responsible for replacing the windows? This is obviously a significant cost when the time comes. Is this something the condo association is responsible for or is it yours?

Another example of a gray 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 ensure who 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 shortly?

There are s0me excellent reasons to own a condo such as affordability, the need to downsize, or possibly not to want to have the maintenance headaches that are associated with owning a home. You do, however, want to keep in consideration that condos 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. Condo 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 past trends, what you realize in appreciation may be a smaller figure than a home. This makes it even more critical to understand if you 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 homework, 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 will 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:

Tips for dealing with a homeowners association by How Stuff Works.
What is the purpose of a homeowners association? An explanation of what a home owners association does for those living in a condo.
What’s the difference in buying a condo vs. a home by Royal Lepage.
Age restricted condominiums – what you should know via Wikipedia.

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

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 [email protected] or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 31+ Years.

Are you 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.