Right about this time two years ago, I was beginning the exciting search for a condominium. After 20 years in a single family home, my love/hate relationship with house projects was tilting toward the latter. In the midst of sealing the wood fence one hot summer day, it occurred to me that I had options.
Five months later I was moving into my new place and I am thankful to be able to say that my purchase has turned out well. But purchasing a condo is far more complex than I imagined.
Along with all homebuyers, condo purchasers need to consider proximity to the job, resale value, how the space fits their lifestyle, appliances, and neighborhood. What is often overlooked by condo shoppers, however, is the condition of the building and its components. Along with thoroughly inspecting the unit that they are purchasing, wise buyers should ask serious questions about the state of the building that they are purchasing.
If a major repair is necessary, and the homeowners’ association doesn’t have the reserves to cover the cost, guess who has to ante up.
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“I have never had [a potential buyer] ask to speak to the building engineer or maintenance person so they could find out about common area things like the roof, the boiler, the building plumbing, the elevators, etc,” says Marion Slocum, Association Manager for Gittleman Management Corporation. “If the roof is old and needs to be reroofed, the buyer should know that expense is coming.”
Joel Songstad of Edina Realty has a similar warning. “The thing that I used to hear from buyers that makes no sense: ‘Oh the association will take care of me’. A buyer needs to read the financial report during the 10 day Right of Rescission and seek help from someone familiar with what amounts the homeowners’ association should have in reserve for replacement of roofs, heating plant and so on.”
Determining the likelihood and financial impact of future building repairs is not an easy task, but buyers need to investigate as thoroughly as possible. Major repair assessments can be thousands of dollars per unit. Along with all of the other considerations of purchasing a condo, don’t neglect to ask about the building.
David Osborn, CPA (inactive) founded CFO Business Partners, a Minneapolis accounting firm in 1994. CFO provides a wide variety of accounting services to non-profit organizations and churches. He provides one-on-one coaching and consulting.
A first-time condo buyer, particularly should think carefully about such expenses. One must always remember that the difference between apartment expenses and homeowner expenses is not just the rent payment versus the mortgage payment!
Good point Terrie – thanks