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My brother is looking to move out of his house into a condo. Neither of us have ever been involved in a condo transaction before. I'm hoping you can make us aware of some of the watch-outs specific to making a condo purchase ... like getting the financials for the complex. Any rules of thumb in assessing financial condition? What questions do we need to ask the broker and/or seller? Any specific contingencies we should put in the purchase offer? Thanks, in advance.
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I have heard it's very important that the complex have restrictions as to whether or not condos are allowed to be rented.
If a condo complex has too many units occupied by non owners, it ruins resale value.
You want to see the financial for the HOA. I would also ask about what recent repairs and maintenance were done.
I would ask for copies of the HOA minutes for the past few months. It is not uncommon for HOA's to be in lawsuits or voting on whether or not to sue a builder, etc. Some sellers don't disclose "potential" lawsuits to buyers and then a few months after moving in buyers are hit with the special assessment for the lawsuit (happened in Portland area).
I would find out how often they do special assessments and what the amounts have been.
Find out their rental to ownership policy, as well as other CC&R's. Some restrict # of pets etc. I would also have your agent pull their sales data. Condo complexes with a lot of turnover is not a good sign. When people are happy they stay. Look at turnover compared to other comparable complexes.
Thank you for sharing your insights. These are great points. Having never been involved in a condo purchase, I figured there would be condo-specific purchase considerations. Thanks, again.
If new, there will likely not be a HOA. Local law may require a % of units sold before an HOA can be established. In this case roads are still under performance bond...important here amount...expiration date...assumption agreement for dedication of roads...is there a maintenance bond? Who is managing the complex? All again to avoid hidden assessments......Town suing developer, etc
OCNYISHOME ... thanks for that perspective. We are considering a couple of new developments in the search. When we ask these types of questions, should we assume we are getting a straight answer or are there documents we should reasonable expect to get copies of or see? Is there a website I can check to see if the city is suing the developer?
I have heard there is some sort of law that is going to be coming down soon at a Federal level, something to the effect that will require a whole lot of documentation and condition vouching by the lenders that may dry up or really raise up the interest rate for condos. You may want to google for it.
Very important if buying a new condo, GET EVERYTHING IN WRITING!! On site agents have a way of promising things that aren't necessarily included. Take notes on what they tell you when you do your walk through and then check their literature to see if they are all mentioned - things like a grilling area, a gym, parking...any ammenities or "standard" features that are supposed to be included in the price. Also, ask specifically how many units the developer plans to keep as investment (rentals).
I just bought a new condo myself and these are some of the issues I encountered. I bought in phase 2 of a community in which the first phase was a converted building and ours is brand new. We just found out that the roof in phase one was not brand new and now needs to be replaced to a tune of $1M. Hopefully the warranty will cover some of these things but I would have never thought to ask if the other building's roof was new or not - just something to keep in mind if you are interested in a converted building.
Most townships will not allow construction w/o a performance bond and then subsequently a Maintenance bond. Much of the info should be produced by your realtor or by the listing agent. If HOA is established, they should have info and likely a membership app./process. When you find something you like, talk to the neighbors. Your realtor can talk to the town............
If new, there will likely not be a HOA. Local law may require a % of units sold before an HOA can be established. In this case roads are still under performance bond...important here amount...expiration date...assumption agreement for dedication of roads...is there a maintenance bond? Who is managing the complex? All again to avoid hidden assessments......Town suing developer, etc
OC - you make some good points. However, by it's very nature and definition, I believe a Condominium development does have a Homeowner Association. A town home development, wherein the land is individually owned, may not. I do not think local law would dictate the % of units would need to be sold before the HOA would be established. Local municipal laws that I'm aware of do not address such operation of a condo entity. The Offering Plan would address this though.
Quote:
Originally Posted by millennialmom
OCNYISHOME ... thanks for that perspective. We are considering a couple of new developments in the search. When we ask these types of questions, should we assume we are getting a straight answer or are there documents we should reasonable expect to get copies of or see? Is there a website I can check to see if the city is suing the developer?
The Condominium Offering Plan is the document you want to read - every word of it. This is the Plan that, at least in New York, is approved by the State Attorney General's office which permits the condo sponsor to offer the units for sale. The By-Laws of the Unit Owners' Association will also be spelled out here as well as the Rules and Regulations, details about the establishment and operation of the Board of Managers, etc.
Millennialmom - In which state are you looking?
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