Three Things No One Tells Prospective Condo Buyers

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.

Your Condo Has the Power to Bill you Large Sums of Money

Possibly unexpected bills are one of the things no one tells prospective Condo buyers.
Possibly unexpected bills are one of the things no one tells prospective Condo buyers.

Every Condo Association has the ability to levy a Special Assessment on its Owners.  Up to a certain dollar amount, they can do this with no warning and demand payment within 30 days.   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.  

Your Condo May Be in Poor Condition and Need Extensive Maintenance – And it Won’t Even Be Disclosed!

Deferred maintenance is no fun to deal with.
Deferred maintenance is no fun to deal with.

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.

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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