You've found your dream condo, and you're ready to relax among the mango trees and swaying
date palms. Hold everything. To keep from getting stuck with a lemon, you've got to do some
homework. Here are the seven most important questions you need to ask before buying a
condo.
1. "What's the Beef?"
Take a look at the minutes of the condo association board meetings to see what the owners
have been griping about. If everyone was complaining about the faulty plumbing or the
gardener's absence, you know that the complex is having management difficulties. Even if
there aren't any complaints, reading the minutes will reveal the sorts of projects that are
under way at the complex -- projects the seller may have neglected to mention.
2. "Who's Been Naughty and Who's Been Nice?"
Find out the delinquency rates of present owners. If people aren't paying their association
dues on time, that is either a sign of discontent or an indication that the association
might be underfunded.
3. "How Much Is In the Repair Fund?"
Ask if the community has done a reserve-fund review in the past five years. Lester Giese,
the author of The 99 Best Residential & Recreational Communities in America,
recommends the following formula: If the complex is one to 10 years old, the reserve fund
should have 10% of the cost of replaceable items (roofs, roads, tennis courts, etc.).
Between 10 and 20 years old, the repair fund should be at 25% to 30%. At 20 years, that
amount should be 50% or above. Residents who brag that they don't pay much in maintenance
may be in a complex that either is not being kept up well or is living beyond its means.
4. "Can You Cover Me?"
If you look at nothing else, get a copy of the certificate of insurance, which is a summary
of the association's policy. First see if the replacement costs covered by the policy are an
accurate estimate of the cost of rebuilding. Then make sure that the policy has a
building-ordinance clause, which means that the insurance will cover the cost of bringing
the building up to code if there is any rebuilding to be done. On older buildings, there may
have been many code upgrades since the time of construction. Finally, make sure that you
understand exactly what the association policy covers and what you are responsible for. The
smart condo owner will insure his or her personal belongings, along with any other items
within the unit that are not covered by the association's policy. If you have trouble
understanding the insurance lingo, take the insurance certificate to an agent whom you trust
and who understands the state laws.
5. "Does the Association Present Any Legal Problems?"
Buying a single-family home without a lawyer is no big deal for many people. But with a
condo, there's so much more involved. Contact a local real estate lawyer and have him or her
go over the bylaws of the association. Do they make sense? Are they consistent with the
state laws? Giese, the author, once found that the association bylaws of a large
garden-style condo complex had been lifted from the books of a high-rise condo, leaving
confused tenants with rules about shared hallway space and the correct use of garbage
chutes. Benny Kass, a Washington real estate attorney, recommends that you also have your
lawyer screen the association at the local courthouse, to see if any owners have filed suit
against it.
6. "Is the Complex Renter-Friendly?"
If the renter population is over 10%, there should be clear rental policies, either listed
in the bylaws or tacked on as an amendment. Does the management company find renters for
you? If so, do they get enough good renters? Ask other tenants about their experience. In
addition, ask to see the association's rental lease, and have a real estate lawyer look it
over. Keep one thing in mind, though: An association can change its bylaws to prohibit or
restrict renting at any time. The more owners who rent, the less chance that will
happen.
7. "Am I My Community's Keeper?"
Watch out for a condo whose owners manage the place themselves. Although many are operated
efficiently, self-management can lead to more hassles for owners -- especially those who
live thousands of miles away. If the complex is professionally managed, check out the
management company as thoroughly as you check out the association. Ask other owners. Ask
people in nearby buildings. And be sure to interview the day-to-day manager directly. If you
hook up with a bad manager, you can be sure of this: Your dream condo will keep you up at
night.