Three things no one tells prospective
condo buyers
Better Condo Life
03 November 2016
Buying a new home is always exciting. Condominiums are often
ideal for people who have smaller (or no) families, don’t want to have
to directly worry about maintenance, or desire the prime geographic
location of a condominium. While condos are a great investment
for many people, they also include challenges and potential downsides
that most people aren’t told or don’t know about. Here are three
things no one tells prospective condo buyers. Before you buy a
condominium, make sure you’ve got all the facts.
1. Your condo
has the power to bill you large sums of money
Every condo corporation has the ability to levy a Special Assessment on
its owners. They can do this with
no warning and demand payment within a short period. For some
Associations, the amount can be relatively low—maybe capped at two or
three times your monthly condo fees. Other buildings can go as
high as five figures! Before you buy a condo, make sure you know
how much money you could be tagged for.
What this means to you:
Make sure you understand that you could get a big fat bill from the
condo association at any time. Find out how much that bill could
by by reading the bylaws or asking your realtor to tell you what the
number is.
What you can do about it:
You’ll want to make sure you factor this into your savings and your
buying power. Being assessed is part of condo living, you just
need to make sure you budget for it. This is on paper one of the
easiest things no one tells prospective condo buyers to deal with—you
just need to be financially disciplined and ensure you’re saving
enough.
2. Your condo
may be in poor condition and need extensive maintenance—and it won’t
even be disclosed!
Deferred maintenance is when a building needs something replaced – like
a new roof – but instead of replacing the roof, the building’s
management opts to continue to patch it. The result is the roof
gets leakier and leakier, and repairs become more and more
costly. And when all is said and done, you still need a new roof.
Many condo associations have extensive deferred maintenance. It
may be because they are conversions – former apartment buildings which
deferred and sold to a developer who didn’t repair it either. Other
condo associations have deferred maintenance because they don’t
even know the damage is there. They haven’t commissioned the
proper reports to identify the age of their relevant systems. While a
condo must provide disclosures of needed repairs, it doesn’t
have to disclose something it hasn’t discovered. So if there’s no
roof report, there’s no disclosure to you. What your future association
doesn’t know might cost you – big. This is one of the
toughest things no one tells prospective condo buyers to deal with,
because even the association may not know the issue.
What this means to you:
Deferred maintenance could mean that the building is in need of
substantial repair. In the short term, you might have to deal
with leaking roofs or faulty elevators or fire alarms (depending on
what’s been deferred). Your condo association may trigger a
Special Assessment to pay for these things – see the previous section
on that.
What you can do about it:
When you get the appropriate documentation after putting in an offer on
a condo, you need to review the documents to identify when key major
systems were last replaced, and if the condo is appropriately budgeting
reserve funding to replace future issues. This will allow you to
decide if the condo association has its financial house in order, or if
you need to make sure you budget additional savings to pay for future
repairs.
3. Your condo
fees may be artificially low
Condo fees cover a huge range of things – everything from regular
maintenance of the building to repairs of future systems. However, the
vast majority of Associations – 70% – are not funding
their reserves properly, which may keep condo fees artificially
low. New buildings also often depress condo fees in order to
attract buyers. Once the building is sold out, the condo association
realizes it needs to raise fees.
What this means to you:
The condo fee number you’re being quoted is this year’s condo
fees. There’s nothing to stop an association from raising the
fees dramatically if they need the money for things like repairs. This
is one of the things no one tells prospective condo buyers that
can seem very unfair and unpredictable.
What you can do about it:
When you’re factoring in your budget and buying power, you need to make
sure you have some margin in case condo fees increase sharply. A
safe number is to assume condo fees might increase as much as
20%. If that number screws up your housing budget, you might need
to reconsider that property.
You must be an
informed buyer before buying a condo
Condos are great because they include things like included
maintenance. However, it isn’t as simple as just buying and
forgetting. There are a lot of moving parts in a condo association, and
you need to make sure you understand them so you don’t
get surprised or caught off guard. Unless your real estate agent
is awesome, trustworthy, and knowledgeable about condos (or all of the
above), they may not make you aware of any of the things no one tells
prospective condo buyers. There are plenty of condo horror
stories. Don’t let it happen to you.
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