Six Things to Know About a Condo Complex Before You Buy

Robert Bruss had a great article out earlier this year about the key questions you should ask before buying a condominium called “Make Your Condo Purchase a Smart One”.  Below are excerpts from his article along with my comments. 

1.  WHAT IS THE FINANCIAL CONDITION OF THE CONDO ASSOCIATION? If you are considering purchase of a brand-new condo, to attract buyers the developer has probably set the monthly condo fees very low. Watch out for inadequate allocations for replacement reserves which are sure to increase in future years as the building ages and needs repairs.If you are considering buying an older condo, study the replacement reserves. Depending on the building’s age and anticipated replacements, such as a new roof every 15 to 20 years, if reserves are inadequate a large special assessment might be levied on each owner when an unexpected cost arises.

For example, I own a condo where each owner incurred a $2,000 special assessment to replace the leaking windows.There is no minimum replacement reserve guideline, but two standards are (a) at least $2,000 to $3,000 per unit, and/or (b) 25 percent of the annual gross income for the homeowner’s association should be in the reserve account.Smart condo buyers ask if there are any major replacements anticipated in the next 12 months and if there will be a special assessment. Review the board of director’s meeting minutes for the last six months to determine what issues are being discussed.

In Connecticut, condo buyers have the right to review the condo association’s rules and regulations, financial statements and by-laws within 72 hours of an accepted purchase contract.  Generally, an attorney will review these for a buyer but it is important for the buyer to also review. 

2. HOW DO THE MONTHLY FEES COMPARE WITH COMPARABLE NEARBY CONDO COMPLEXES?The answer is important not only to your wallet, but to the resaleability of the condo. When the condo fees are very high compared to the competition, that holds down the market value of condos in that complex. Be sure to inquire what services are included, such as central heat and air conditioning.

I’ve seen condo fees as low as $120/month to as high as $550/month, depending on what is included. 

3. IS THE CONDO ASSOCIATION PROFESSIONALLY MANAGED? Unless it is a small condo building of five units or less, professional management is a good sign. The cost usually pays for itself because an experienced condo manager knows where to get repair discounts that often “save” the equivalent of the professional manager’s fee.A related question to ask is how long the professional manager has been managing the complex. The right answer is: the longer, the better. That indicates the condo owners are satisfied.For example, in the condo complex where I own a unit, the management company has been there over 30 years and the current manager has been with us over 20 years (after his father retired). Needless to say, we are very pleased with the service quality.

The listing agent or homeowner can tell you who manages the property.  To find out how good they are, talk to homeowners. 

4. HOW GOOD IS THE SOUNDPROOFING? Because poor soundproofing is the number one complaint of condo owners (especially for buildings converted from apartments), when you focus on buying a specific unit, it pays to test the soundproofing.This can easily be done by asking the upstairs, downstairs, and adjacent neighbors to turn on their TVs and stereos to normal levels and see if you can hear them in the unit. Also, check for upstairs noisy floors, especially in wood construction buildings if the upstairs neighbors don’t have carpets with heavy padding. 

There have been many condo conversions in Connecticut, including some really interesting factory or mill buildings.  Noise and energy efficiency seem to be the biggest problems with these conversions.  Other conversions go from rentals to condos and the biggest issues I have with these is the quality of construction. 

5. WHAT IS THE PERCENTAGE OF RENTERS? Mortgage lenders know the risk of foreclosure default in condo complexes with more than 20 percent to 30 percent renters is very high. Many lenders either refuse to finance units in such complexes, or they charge above-normal interest rates.The reasons are absentee landlords often have little interest in properly maintaining the condo complex and their renters aren’t as considerate as owner-occupants. The result can be declining maintenance quality.Condo complexes with anti-renter rules are considered very desirable for owner-occupants and often bring premium resale prices. 

To find out the percentage of owner occupied units, have your agent contact the property manager. 

6. ASK CURRENT RESIDENTS, “WHAT DO YOU LIKE BEST AND LEAST LIVING HERE?” Or you might prefer to ask, “Would you buy a condo here again?”Most condo owner-occupants are friendly and willing to share their good and bad experiences. Be sure to talk with several residents just to be sure you aren’t talking with a “bad apple,” professional complainer. Just to verify your soundproofing test of the unit you are considering for purchase, casually ask, “How is the soundproofing here?”

If I can, I try to talk to a member of the board for my clients.  Board members are a great source of information about the associations, the property managers and the overall atmosphere of the complex. 

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