When purchasing e a condo, you look are likely first drawn to the building or the condo’s layout and size. You review and investigate the systems and appliances that will convey with the condo and visual inspect the style and architecture to see if they are a good fit for what you want and need in your new home.
An important step in your due diligence of buying a condo is examining the financial strength of the association of which you will be a member upon purchase. A thorough review of the Condominium Resale Documents is important.
The three main areas to consider during that review include budget, delinquent accounts and the association reserves.
Budget: You will want to carefully review to the monthly and yearly budget for the association to determine the management of the monthly income and monthly expenditures. Make sure you review the numbers for budget shortfalls and areas where future expenses might not be appropriately budgeted.
Delinquent Accounts: As an owner, you will be responsible for paying your monthly condo fee, or assessment. If owners fail to pay their monthly fees it can negatively impact the financials of the association and affect the building’s ability to obtain financing.
Reserves: Condo associations keep reserve accounts to plan for future expensive capital expenses like a lobby remodel, roof replacement, or elevator repairs. Make sure the association is putting away reserve funds on a regular basis and also has a sizable fund on hard should a large capital expense be needed. What number is sizable? That depends on many factors like age of the building, number of units, current building condition and more.
Do you have more questions on condo purchases? Let's get together over coffee or a meeting in my office to discuss.