Questions to Ask Before Buying Condos

There are some important questions to ask before buying condos. Doing so is sometimes hard, especially for first-time home buyers, but our condo specialist Realtors® can help.

These questions include:

• What is the monthly assessment and what does it cover? To budget, you need to know the monthly fee and exactly what you are getting for it.

• What are the rules and regulations? Condominium rules can prohibit pets, your ability to rent out the unit, and renovate. Carefully review the rules and regulations, and have your attorney do the same. This includes the master deed, declaration of trust/by-laws, covenants, unit deed and floor plans to ensure compliance with state laws and other guidelines.

• How much money is in the capital reserve account and how much is funded annually? The capital reserve fund is for major repairs such as roofs and heating and air conditioning. Generally, the fund should contain at least 10 percent of the annual revenue budget—more for older developments. If it is poorly funded, a special assessment is more likely.  Ask to see the last two years’ budgets, current reserve account funding level and any capital reserve study.
• Are special assessments pending or being considered? Special assessments are one-time fees for capital improvements payable by every unit owner. You need to know if you are buying a special assessment with your unit, because they can be costly.  Reviewing the last two years of condo meeting minutes is a good way to see what the issues are.
• Does the condo association manage itself or have a professional management company? There are pros and cons to each avenue.

Other questions to ask before buying a condo include:

• Is the condo involved in any pending legal actions? In most states, you can search court databases to see if there have been any lawsuits. Legal disputes can lead to fee increases if the condo association is fined.
• How many units are owner-occupied? A large percentage of rented condos can create unwanted noise and neighbor issues, as well as re-sale and financing issues because Fannie Mae and FHA condominium regulations  limit owner-occupancy rates.
• What is the condominium fee delinquency rate? A rate exceeding 15 percent could signal financial trouble, according to Fannie Mae and FHA.

• Do condo owners have exclusive rights to use common areas such as porches, decks, storage spaces and parking spaces? Knowing what areas are your responsibility is important, especially regarding maintenance and repairs.

One more question to ask before buying a condo is: “What does the Master Insurance Policy cover?” Usually, only common areas are covered so buyers should buy condo insurance to protect their belongings and the interior of the condo.