In this edition of First-Timer Primer, we look into the question of how to determine if a condo building where you are considering buying is in good financial health.
Below we highlight four important things that will tell you if the financial situation is sound in a condo building.
1. Are there any delinquent accounts?
Specifically, are there any unit owners who are more than 60 days behind on their condo fees or are there any units in foreclosure. If so, this can prevent financing and be an indication of poor management and/or engagement with homeowners in trouble.
2. Does the building have a budget and are they sticking to it?
Well-run associations will have a written budget and a monthly report showing the budget to actual expenditures. Whether a building is staying on budget or not can give you a sense of how well they are managing expenses. For smaller associations, you may have to look at 12 months of spending records to see how many unexpected expenses came up and how the management handled them.
3. Is the master insurance policy up to date?
It’s easy to let it lapse if someone isn’t keeping an eye on things.
4. How much money is in the building’s reserve fund?
This will vary depending on the building. If it’s a large building, there should be a fairly recent reserve study report that will show how much should be in reserve. If it’s a smaller building, then have a home inspector look around and give you an idea if any major repairs are on the horizon. Major expenses in smaller buildings are usually the roof and elevators.
The information above can usually be provided to potential homebuyers by the condo association or management company.
- First Timer Primer: How Much Cash Do You Need to Buy a House?
- First-Timer Primer: The Mortgage Pre-Approval Process
- First-Timer Primer: How Do Mortgage Payments Work?
- First-Timer Primer: The Escalation Clause
- First-Timer Primer: A Condo Fee Tutorial
- First-Timer Primer: What is a Rent Back?
- First-Timer Primer: What is an Adjustable Rate Mortgage?
- First-Timer Primer: Taxes and Profit from Selling a Home
- First-Timer Primer: How A Retirement Account Can Help You Buy a Home
This article originally published at https://dc.urbanturf.com/articles/blog/first-timer_primer_how_can_you_tell_if_a_condo_building_is_financially_heal/7426.
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