Tips for Buying a Condo

This post over at The Baglady about unexpected and extremely large condo fee assessments got me thinking back to when we bought our townhouse. At the time, the San Fernando Valley was in its final recovery phase from the 1994 Northridge earthquake. After our offer on the townhouse was accepted, we wanted every document we could get our hands on to show the property was sound and the homeowner's association had its act together. We received hundreds of pages of board minutes, financial statements, and other documents, which we pored over. It was boring as heck, but we knew how important it was to find out as much as we could while we could still legally back out. And we knew that the seller was required to make full disclosure.

We discovered that there was some kind of fee assessment made by the homeowner's association after the Northridge quake that the seller had been paying on a monthly basis, and we confirmed that the seller would pay off the assessment in full when we bought the property. I don't recall getting any major details, but the assessment must have been for the overall property and not for damage to the unit itself, since we learned that only very minor repairs were required to our townhouse after the earthquake.

Since buying our place, we've watched friends buy their own, and we've concluded that we bought very wisely - some of that was due to our care, but a lot of it was luck, too, since we were novice homebuyers. Here are my first-hand experience tips on buying a condo (keeping in mind that I'm no real estate expert):

1. Take a good look at the outer property. Are the building and grounds well-maintained? When we went to check out our townhouse, we saw gardeners cleaning up the grounds and caring for the trees and plants. The pool looked clean. And the neighbors' front doors looked neat as well. Contrast that to a friend's condo, where getting repairs done was like pulling teeth and the pool was practically unusable.

2. Ask for all of the homeowner's association (HOA) documents available. Are the fees accounted for? Is there a budget? Are the minutes detailed or sketchy, and do they involve legitimate issues or the meowing of a neighbor's cat at noon? It was reassuring to us to see that there were projected and actual budgets for the current and previous years. The amounts seemed reasonable, and there were funds set aside for future maintenance and repairs. Everything about the minutes indicated that the HOA was run by competent people who weren't wasting everyone's time and money.

3. Have a competent real estate agent and/or mortgage broker. I loved our real estate agent and have recommended him without reservation to friends. He knew the business well, was straightforward with us, and never once got pushy. When he told us the list price of a condo, he also always told us the HOA fee. If there had been anything fishy going on, I'm confident he would have caught on and alerted us to it.

4. Ask lots of questions. Our real estate agent and mortgage broker got used to hearing my voice a lot during the 30-day escrow period. I was always nice, of course, but I was persistent. I insisted on all of the HOA documents, and I remember there was some trouble getting all of them. Ask anything you can think of: what your exact monthly payment will be, the amount of the HOA fee, whether there will be a prepayment penalty, etc.

5. Read everything you sign. It's tempting to skip over all those paragraphs pages of boilerplate, but it's important to read all of it. At least skim it for something out of the ordinary. And you should scrutinize anything that's not boilerplate, i.e., anything that needed to be filled in. Yes, the escrow office's document preparer will impatiently tap her nails on the table. Ignore her. In our case, I had run all of the mortgage numbers and talked extensively with our mortgage broker, so I knew what all of the numbers in the escrow documents should be. With the escrow worker sighing heavily as Marc and I diligently plowed through the paperwork, I noticed that one of the numbers was wrong. It was years ago so I don't remember exactly, but I'm pretty sure she had put down an incorrect loan amount. She seemed so surprised to be told that there was an error, but she checked and sure enough, it was wrong. At least it took her less than a minute to print out a new copy of the page.

6. Get good insurance. As soon as we closed on our townhouse, we got an insurance policy that covers up to $50,000 in HOA assessment. As the post over at The Baglady notes, HOAs can levy substantial assessments to cover repairs, so we pay less than $500 a year for a policy we hope we'll never need but will be very glad to have if we do.