Before you make an offer on a condo apartment, you’ll want to get some key information from the management company/board. Here are some crucial questions to ask, no matter where you’re trying to buy:
1. Unit Ownership Percentage: Primary User VS Investors
What percentage of the units are owner-occupied, and what percentage is rented out to tenants? Generally, buildings with a higher percentage of owner-occupants are more marketable when it’s time to resell the property.
Ask for a copy of the bylaws; if possible, review them with your buyer’s broker and attorney. Be aware of any grandfather clauses that govern the property. You may find that residents who bought the property after a certain date can’t rent out their unit, while those who bought earlier can, for example.
3. Building Financials
Ask for a copy of the building’s financials. How much money does the association or board keep in reserve, and how is it invested?
By Wally Gobetz on Flickr
4. Current or Future Assessments
Are assessments keeping pace with inflation? Is the board raising assessments each year to build reserves to fund future repairs? Compare assessments to other condo developments and co-ops in the area to determine if they are reasonable.
5. Reason for Assessment
What is covered by the assessment? Maintenance of the common areas, recreational facilities, Local Law 11 building repointing, trash collection, and snow removal are common activities paid by condo associations and co-op boards. Be sure to find out what is not covered, as well.
6. Historical Frequency of Assessments
Were there special assessments mandated in the past five years? How much was each owner’s share? Some assessments are unavoidable, but frequent, costly assessments may be a red flag indicating a building in poor condition, or imprudent financial policies with the board itself.
7. Sales Turnover in Building
How many apartments have sold in the building in the past 12 months, and how often do they sell?
8. Law Suits
Is the board involved in any litigation? Lawsuits involving homeowners or developers can rapidly deplete association reserves.
9. Quality of Buildings Construction
Has the building’s developer worked on other projects? If your development was converted to condos or co-ops from another use, ask for an engineer’s report. If the roof, windows, and bricks are in poor repair, they will affect the value of your housing investment and possibly quality of life.
This information will help you decide if the condo or co-op unit is right for you; it will also give you some insight about the condo board’s cooperation, organization, and helpfulness.