So you have been looking for a new home, and have been doing your homework in real estate, trying to decide if you wish to live in a house, a townhouse, or a condominium. After careful consideration, you finally decided you liked condominiums.
You need to look after yourself in any investment, and one important detail to defend yourself when buying a condo is to research the Home Owners’ Association (HOA). Try to sit in on an HOA meeting; talk to the people who will be your new neighbors to see if they are satisfied with how the community is handled. You can ask about the noise level and other important issues. Make sure to get a copy of the HOA by-laws to figure out what is actually handled and covered by the HOA. Another idea is to get copies of minutes from past board meetings, and find out the history of how much the HOA dues have increased in the past few years.
Another area to delve into is the board’s tax and legal records. You may find that there have been lawsuits that you would not want to be involved in, if you should choose to purchase. Check into the treasury report. Believe it or not, some condominium associations have been forced into bankruptcy for unpaid HOA dues. If this happens, lenders may stop lending on the units, which could affect the resale value of your home investment. Look into fiscal accounts for delinquencies, or check to see if there is money in reserve for maintenance, etc.
A good association should have at least 25% of its gross income held in reserve for emergencies and repairs. If they have run out of money before, chances are it could happen again, and you may be hit with a judgment. Also, check out recent tax assessments. If your condo sale price is low, but the tax assessment is high, you may be in store for a higher tax bill than you anticipated. Be sure that taxes are in line with the true values of the property; this can also determine the value of your surrounding community.
Condominiums can be a good investment for the right buyer in the right location, but when times get tough, they are harder to buy and sell than single-family homes. Work with a real estate agent with extensive history in buying and selling condominiums; one who knows the area well.