Interesting suggestions from Michael Silberman, one of our preferred closing attorneys at Ganek Wright Minsk, an Atlanta based real estate firm. If you’re thinking about buying a condo, he offers some pretty compelling rules of the road. I’ve hyperlinked some key terms that you may not be familiar with- just click on them for more information.
1. “”What’s the Beef?””
A prospective buyer should always ask to see the minutes of the condo association board meetings to see what the members have been complaining about. If there are numerous complaints about things like plumbing or maintenance it’s a bad sign 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 the way of maintenance fees may be in a complex that either is not being well maintained or is living beyond its means.
4. “”Can You Cover Me?””
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. “”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.