All Condo's Are Not Made The Same
There are a lot of things to look out for when you have a buyer who wants to submit an offer on a condominium. Several factors can impact the financing. The lender will do a condo questionnaire to determine how they will go forward. However, it is a smart idea to get this information early in the process, so the buyer knows if moving forward with an offer is a good idea.
These questions are a good starting point for buyers and even a good reminder for sellers. Most of the items below pertain to condo associations with more than four units but they are all still a good idea to understand!
How many units are owner occupied?
Occupancy rate is a factor for the mortgage. Make sure the area is what the buyer is looking for. If the buyer wants to rent out the condo as an investment, consider purchasing in areas with colleges or in big cities. Also, if the buyer is an investor, it’s important to know if the association allows rentals, as not all do.
Does one person own more than 10% of the units?
The resale of any condo in this complex would be extremely difficult as most lenders would not approve the mortgage in this situation.
Is the association involved in any litigation?
The condo unit will become difficult to sell for many reasons regardless if it was the owner’s fault or not. This is usually a sign of a poorly run association, something to perhaps stay away from!
How many units are in arrears?
Either large or small units will feel the effects over time if too many units are in arrears and people are unable to meet their common area expenses.
Who holds the master insurance?
The buyer may want to consider getting individual unit insurance through the same company that holds the master insurance. This will help diminish the back and forth if a common area and personal unit overlap issue arises. This policy should also have a decent amount of money in the account.
Are there any special assessments?
These are fees turned over to individual unit owners for capital improvements such as paving, new roof, etc. The payment will vary association to association. Some will increase the monthly condo fee to cover the expense and some will do a separate charge that either needs to be paid in full or over the course of pre-determined amount of time. Dive into recent meeting minutes from the condo associate to make sure there is nothing planned.
What is the parking policy? Do you own your space? Is there guest parking?
Parking will vary from locations; some condos will have personal garages where other will have on street permit parking. Parking is important especially in New England, the difference between parking in a garage or parking on the street in the cold, rain, and snow will make a huge difference every day. Guest parking is important also, some places will have designated guest parking while others will not. Determining what the client needs will help in the search process.
The buyer should always obtain all information from the condo documents. Depending on what is important to your buyer you should also add a condo document review contingency in your offer and have the buyer and the buyer’s attorney review the following documents.
Master Deed
Declaration of Trust
Rules and Regulations
Meeting Minutes
Budget