Tuesday, January 4, 2022 / by Linda Maxwell
Before you buy, contact the association with the following questions.
In the process, you’ll learn how responsive, and organized, its members are.
- What percentage of units is owner-occupied? What percentage is tenant-occupied? Generally, the higher the percentage of owner-occupied units, the more marketable the units will be at resale.
- What covenants, bylaws, and restrictions govern the property? What grandfather clauses are in place? Are rentals allowed? You may find, for instance, that those who buy a property after a certain date cannot rent out their units, but buyers who bought earlier can. Ask for a copy of the bylaws to determine if you can live within them. Have an attorney review property docs, including the master deed, for you.
- How much does the association keep in reserve? Request further information on how that money being invested?
- Are association assessments keeping pace with the annual rate of inflation? Smart boards raise assessments a certain percentage each year to build reserves to fund future repairs. To determine if the assessment is reasonable, compare the rate to others in the area.
- What does and doesn’t the assessment cover—common area maintenance, recreational facilities, trash collection, snow removal?
- What special assessments have been mandated in the past five years? How much was each owner responsible for? Some special assessments are unavoidable. However, repeated, expensive assessments could be a red flag about the condition of the building or the board’s fiscal policy.
- How much turnover occurs in the building? Request additional information on how that money will be spent.
- Is the project in litigation? If the builders or homeowners are involved in a lawsuit, reserves can be depleted quickly.
- What is the insurance deductible on the master policy? When the association makes a claim that policy has a deductible. Talk to your insurance carrier regarding the coverage for paying your portion of that deductible.
- Are multiple associations involved in the property? In very large developments, umbrella associations, as well as the smaller association into which you're buying, may require separate assessments.