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Old 03-06-2015, 09:18 PM
 
Location: Sarasota, FL
2,637 posts, read 1,547,110 times
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I posted this originally in the Ft. Lauderdale subforum, but got no responses, so I thought I'd try it here:

We're thinking of buying a condo in FL. We have heard horror stories about people who get ripped off buying condos that later get hit with large assessments. I read one article talking about how it was a regular scam in some condo developments to hit retirees with big assessments, to force a default and then resell the property.

What is the best way to prevent falling into such a bad deal? We're aware that its crucial to read the Condo association documents and look for planned assessments, and to check at the age and condition of the building to determine the likelihood of an assessment. In particular, does buying into a higher end development reduce the likelihood of this happening, or does spending more money on your condo make no difference?
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Old 03-07-2015, 01:24 AM
 
172 posts, read 179,655 times
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Condo law is a minefield. While "hire an attorney" is the cheap, disposable non-answer to give to any legal question asked on the internet, in this case, its usually the best idea. A $300-$500 consult can head off any potential headaches.

Understand that 'liability estimation' is an imperfect science and there's just no way to ever get totally risk free in a property that has any jointly owned components. Also, bear in mind that a condo board that has been easy going can very quickly be hijacked by busybodies that are empowered with all manner of neglected bylaws that can come back to bite you.

Short of it? Condos are 'pending assessment' risk, always.
Even if you appraise their solvency and find them to be in pretty good standing, it doesn't take much for things to get nasty... or, you live there for 30 years with never a single special assessment ever levied.
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Old 03-07-2015, 03:44 AM
 
2,056 posts, read 2,469,782 times
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"What is the best way to prevent falling into such a bad deal"?

The only way I know is to avoid buying a condo. We've owned five, and they all were trouble from start to finish (none were in Florida). You have to deal w/ a board of directors, where there's always a small clique of owners who control everything, AND you have to deal w/ a property management company. You "own" a condo in name only. In reality, you're just an apartment dweller, BUT you have all these management problems to deal with, may face mandatory assessments, have to pay property taxes, insurance, maintenance and repair to your unit, and may still get the neighbors from hell because whoever owns that next door unit may not even live in your state, and can rent it out to anyone they choose. What a deal! And let's not forget that it may be troublesome to sell later, and you'll probably lose money.

Just rent.
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Old 03-07-2015, 04:53 AM
 
Location: Central Mexico and Central Florida
7,108 posts, read 3,465,006 times
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I agree that condos are simply a bad investment, either rent an apartment or buy a house.
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Old 03-07-2015, 06:27 AM
 
Location: Lakewood Ranch, FL
5,329 posts, read 8,184,659 times
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I live in a condo in the Sarasota area and we own another which we use as a rental property. I also have assisted buyers and sellers with condos as an agent. I often see comments like those above but I have never had a bad experience and neither have my customers. Is condo living for everyone? Of course not...nothing is.

In Florida, when buying a condo resale, you ask the seller to provide all of the condo docs, the most recent year-end financials, and "Q&A" sheet that answers important questions about the association and how it is run. Among the condo docs is the rules. Most people who dislike condos never bothered to read the rules despite having signed a document that they had read them and agreed to abide by them. Read them, assume they will be enforced (even if someone tells you otherwise), and be sure you can live with ALL of them. You have 3 days from the receipt of this info to review everything and can back out with your deposit if anything is unacceptable. The other thing you will want to review during this 3 day period is the reserves. Look at the financials to see what they have and how much they have. Different condo associations are responsible for different things (info is contained in the docs) but, if the association is responsible for them, there should be reserves for roofs, exterior painting, resurfacing pavement, and deferred maintenance costs that run more than $10K. Each year, they should be setting aside an amount equal to the estimated cost of the work divided by the remaining years of useful life. Of course, boards typically rely on management companies for that info but a buyer can use their judgement, talk to the property manager, talk to the board president, etc. to see what they have to say. If the reserves are adequate, the need for an assessment should be minimal. Personally, I'd rather pay a higher monthly or quarterly condo fee than get hit with an unexpected assessment but some condo associations choose to go that way. Just be aware. Also, look at the fee and, as you consider different places, evaluate them in terms of what you get for the money. Some pay for water, sewer, basic cable, pool, fitness, etc., while others cover very little.
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Old 03-07-2015, 08:25 AM
 
Location: Fort Payne Alabama
1,211 posts, read 1,586,945 times
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Quote:
Originally Posted by CapnTrips View Post
I posted this originally in the Ft. Lauderdale subforum, but got no responses, so I thought I'd try it here:

We're thinking of buying a condo in FL. We have heard horror stories about people who get ripped off buying condos that later get hit with large assessments. I read one article talking about how it was a regular scam in some condo developments to hit retirees with big assessments, to force a default and then resell the property.
In Florida it is extremely difficult for a board to engineer a special assessment as a large percent of the owners must approve it first. Bbronston gave very good advise above, like him we also own a condo in Florida. On a HOA to "force a default" for their advantage is an "urban legend", there is no advantage to the HOA for this action. If the property is financed, the HOA actually gains nothing as the bank holds all the cards. If by some chance there is/has been a special assessment it is probably for a good reason and a large percentage of the owners agreed. You must remember that the board is just selected from the home owners to serve at no pay or other benefit. Generally as in our case, board members are retired executives who enjoy keeping busy, we are voted in, any owner can run.
A few tips (actually the potential of a special assessment would be far down on my list on concerns)
A, Look at current units for sale in the complex you are interested in versus the total number of units. Compare that to other similar complexes in the area. This gives you an indication of how happy the owners are.
B, Look at the reserve budget, are they and have they been fully funded? When was the last reserve study done, Florida requires one every three years.
C, Look what the HOA fees include, some pay for everything, some nearly nothing. A dollar to dollar comparison tells you nothing.
D, Review the spending for the past year, find out how much was spent on legal fees. If the amount seems high (more than several thousand), find out why and what is was about.
E, Talk to some owners, are they generally happy?
F, READ your condo docs, ask questions if you don't understand something.
G, Finally walk the property, has it been taken care of? When was the last time it was painted? Are there any obvious maintenance oversights?
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Old 03-07-2015, 09:35 AM
 
Location: Florida -
8,767 posts, read 10,851,233 times
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We've lived in three different (upscale) condos over the past 13-years and, unlike some who feel compelled to warn against the 'horrors' of condo living, we've never had a problem --- and will likely stay in condo's for the duration.

As with any housing investment, one simply needs to exercise a little caution and common sense. (One probably has a greater chance of encountering an 'assessment size' expense in a SFH, since there are fewer folks 'minding the store.'

Check your online Property Tax Assessor's office for a record of sales turnover and prices in a particular condo. Check the Condo budget (particularly the 'Reserves') for major items such as paint, roof and driveways.

Is this on the beach in Ft. Lauderdale? --- Balconies are a big assessment item in beachfront condos; typically needing replacement about every 15-years (cantilever-type balconies).

Ask adjacent neighbors about the noise levels and HOA Board satisfaction. Also, what is the Condo rental policy? -- This can be a major issue! We stay away from any condo with less than a 6-month rental minimum. Otherwise, during tourist and snowbird season, you can find yourself living in a 'hotel', where nobody treate it like a 'home' or takes any sense of personal responsibility for taking care of anything.
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Old 03-07-2015, 11:20 AM
 
4,539 posts, read 4,837,189 times
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As a Condo Board Member I will tell you one issue for brand new buyers in a condo complex is financials are always very dated.

For instance we only put out financials once a year. Our year end was just 12-31-2014. Pretty much in a good year we get our income tax done on time close to the deadline of April 15. Then a few weeks later we mail out Financials. Sometimes in June depending on delays.

So someone looking to buy in my complex today is looking at 12-31-2013 Financials. We have one annual meeting a year and after that annual meetings we issue minutes. We have no newsletter or website. We are a smaller condo. We do send out notices via regular mail for stuff that come up.

My condo is on the up and up but as a new buyer how would you know that. Also our original offering plan from 35 years ago has never been altered or changed.

So a buyer today gets a 35 year old offering plan, 12-31-2013 Financials and the meeting minutes from the November 2014 Annual Meeting.
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Old 03-07-2015, 11:23 AM
 
1,831 posts, read 2,599,552 times
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I'm glad to catch this thread as this has been a question of mine as well. Much of this I've heard before but my question is how can you find out some of this when you start out looking? I've seen HOA and Condo fees listed but is there a way to find out the other financial information before getting fully invested in a particular condo? While there is the three day period, it seems a lot of information could be very important prior to even getting to that stage.
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Old 03-07-2015, 12:44 PM
 
4,539 posts, read 4,837,189 times
Reputation: 3481
Quote:
Originally Posted by jghorton View Post
We've lived in three different (upscale) condos over the past 13-years and, unlike some who feel compelled to warn against the 'horrors' of condo living, we've never had a problem --- and will likely stay in condo's for the duration.

As with any housing investment, one simply needs to exercise a little caution and common sense. (One probably has a greater chance of encountering an 'assessment size' expense in a SFH, since there are fewer folks 'minding the store.'

Check your online Property Tax Assessor's office for a record of sales turnover and prices in a particular condo. Check the Condo budget (particularly the 'Reserves') for major items such as paint, roof and driveways.

Is this on the beach in Ft. Lauderdale? --- Balconies are a big assessment item in beachfront condos; typically needing replacement about every 15-years (cantilever-type balconies).

Ask adjacent neighbors about the noise levels and HOA Board satisfaction. Also, what is the Condo rental policy? -- This can be a major issue! We stay away from any condo with less than a 6-month rental minimum. Otherwise, during tourist and snowbird season, you can find yourself living in a 'hotel', where nobody treate it like a 'home' or takes any sense of personal responsibility for taking care of anything.
or as in my buildings case the balconies and windows and doors and decks are all the owners responsibility. Some new owners did not read carefully and called us after buying to see if we could fix something. We also have owners responsible own HVAC and Water Heater.

Some condo buyers assume balconies are covered but in the offering plan any area for the Exclusive use of the owner of that unit is their responsibility. Most condos cover some of that.

Lido Beach Condos in Long Beach NY after Sandy hit it shows dangers of living in a high rise on the beach and what can happen when things go wrong. The raised maint around 500 a month per unit after sandy plus a one time 40K assessment!!!! Beach front is great, but you need a good board, good management agent and good insurance policy in place and trying your best to flood proof before the next Sandy

Long Beach NY oceanfront condo and a Florida condo the same thing could happen.
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