Condos are not all the same

When looking for a condo you need to look beyond the look of the home and the features of the complex.  What is the health of the association?

1)      Is the association deferring repairs because of lack of funds?

2)      Are there a lot of owners not paying their monthly HOA fees?

3)      How many tenant occupied properties are there in the complex?

4)      Is there pending litigation?

From the pages of Pat’s personal journal

6/06 – I bought a 1 bedroom condo in Florida for $143K.  Right around the closing time a question was raised about the roofs failing.  I thought it can’t be that bad the complex was only built 6 years prior.  I proceeded to close the property as I already had a long vacation planned there the following week.  DUMB move.

1/08 – Move forward 18 months, the complex decided to go after the company  that did the condo conversion and all of a sudden the complex was in litigation.  So what is the big deal?  Litigation in a complex usually means NO lender will make new loans in the complex.  Hence only cash buyers.

9/08 – Enter the market downturn.  Florida was hit pretty hard.  A number of owners start to quit paying their HOA fees.

9/09 – Now there are 30% of the owners not paying their regular association dues and, oh, I forgot to mention since the litigation is still ongoing and the problem from leaks was still ongoing each homeowner was hit with a special assessment.  GREAT (I say that facetiously).  Now we have a $412 dues payment each month on a small 1 bedroom condo which can only be sold to a cash buyer for $40K (bought for $143K). 

4/10 – I am writing a blog about keeping your wits and not falling into this trap.

All the things I mentioned above can cause trouble if found out late in the purchase phase and cost you money and result in no sale.

Things you can do to be proactive –

1)      Find out if the owner already ordered the HOA documents.  The sooner  you get these the better.

2)      Invest in an HOA condo document review by a professional in that area.  Some agents will say you don’t need to worry the lender is reviewing the budget of the association, etc.  However, my viewpoint is a trained eye can point out weaknesses they see in the association.

3)      Lenders will not lend when there is a high tenant- to-owner ratio and if delinquencies are way up.  That is something you can ask your lender about.

So my advice is pay to have the documents reviewed and you will sleep better after the home closes.

Let me know what you think.

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