There are many differences between owning a condo and owning a single-family home. People who live in condos tend to do so because they enjoy the convenience and benefits that come from condo living. These include but aren't limited to: lawn care, snow removal (for those here in Alaska), some utilities, exterior maintenance such as roof and siding, and community amenities like pools, playgrounds and patios. They offer a community lifestyle where much of the property maintenance isn’t the owner’s responsibility. If you are thinking about purchasing a condo, consider these five concepts.
1. Covenants, Conditions and Restrictions
First, you must understand what CC&Rs are. CC&R stands for Covenants, Conditions and Restrictions, and are the rules placed upon a condo association when it is formed. These rules can only be altered by an association vote, and include expectations that pertain to appearance of the units, ability to rent them out, how many people can live per unit, noise restrictions, parking, and other stipulations of living in the community. Each person who lives there must abide by these rules and enforce their guests to do the same, or be subject to fines. Before you complete the purchase of your condo, make sure to get a copy of the CC&Rs and read them. It may be a long, boring read, but it will save you from liability in the long run. This especially pertains to instances where you are trying to purchase the condo as a rental investment and the CC&Rs state that you can't.
2. Condo Association Meeting Minutes
Second, look into the meeting minutes of the condo association. Condo associations are incorporated, so they have to keep track of what was discussed at every meeting. They also have officers, like a president, vice president, secretary, and treasurer. These meeting minutes will give you a glimpse into whats going on with the association and the community. You can see the big complaints, the motions that were passed, and the topics that are brought up for discussion frequently.
3. Association Dues
Third, it is important to know the condo dues amount and what they cover. In addition to your mortgage payment, you will also have to pay the condo association a certain amount each month. These are called condo dues and they cover a variety of things that vary between each association. Common dues cover things like exterior maintenance of the building as in roofs, siding, and any community-used features. These dues can also include landscaping, grounds maintenance and any snow removal that may need to happen. Some condo associations even cover certain utilities. Association dues can range in price as well, I’ve seen them as low as $50 per month and as high as $750 per month. Check with the condo association, your realtor and the condo management to determine the actual dues amount before moving forward with your purchase.
4. Special Assessments
Fourth, find out if there are any special assessments coming up. Special assessments are extra payments or increased payments paid to the association for proposed projects in the association. For example, if the association needs to replace the parking lot or the roof, they may increase dues for a certain period of time in order to raise the capital to do so. These assessments are proposed well in advance and people are aware of them, so when looking to purchase a condo you will be able to tell if there are any assessments pending before you buy.
Lastly, look to see how much the association has in reserves. The reserves account of the association will help pay for some of the unexpected repairs to be done on the buildings and community. A large reserve account is a good thing while a minimal or empty reserve is a risky situation to get into. If the reserve account is empty or near it, you should expect dues amounts to increase to help replenish those funds.
The association should have all of the information above summarized and recorded by their management in a document called a Resale Certificate. When purchasing a condo you will have the opportunity to look this over and read through. Not enough people take the time to do that, but I highly encourage you to do so. Some condo association management companies even offer consultations to potential buyers to help them read through all of these documents, and explain all of the association regulations, in order to find out if this purchase is a good one for them.
If you need any assistance with navigating the Resale Certificate or CC&Rs, or have any questions in regards to purchasing a condo reach out to us at email@example.com and I will help you make an informed condo investment decision