Thinking About a Condo? Know What You're Buying - And Know What You're Buying Into, Cautions Mass Association of Buyer Agents
Boston, MA - July 31, 2012 – As with single-family homes, sales of condominiums here in Massachusetts remain strong; some recent reports show June condo sales up nearly 30 percent over the same period last year. While many of these buyers understand the nature of condominiums and the distinct differences they present to owning a stand-alone home, some do not, according to the Massachusetts Association of Buyer Agents (MABA), and later come to regret their decision.
"We see it all the time," says Sam Schneiderman, president of MABA. "People want to buy a condominium because 'it's all taken care of.' Many don't understand the concept that when they purchase the condominium they become part of a condo association. They are partners in a business and the business is the maintenance and operation of the building. Condominium living can be great but it's critically important for buyers to understand this before purchasing one – or they are likely to be disappointed."
Know What You're Buying
"First things first," says Schneiderman. "Figure out exactly what you're buying." That, he says, means going through all of the building documents, floor plans and relevant municipal records to determine the precise square footage of the unit, where the boundaries are between the units and common space, and who owns the decks, porches, and other exterior spaces – if there are any. Likewise, if there are parking spaces, are they permanently deeded or assigned to the units?
Schneiderman recounts how a few months back he was representing a couple who were interested in a condo unit in a three-family building in Brookline. The unit consisted of the condo itself and a back porch that had been converted over ten years ago into heated living space with an additional bathroom. When he set about to verify the square footage of the condo, what he found surprised even him. The back porch was not legally converted to living space and was still owned by the association. While marketed as some 1,800 square feet, without the "addition" the unit was less than 1,600 square feet and considerably overpriced.
"Next," says Schneiderman, "you'll want to have a complete assessment made of the building itself. Hire the best inspector you can find – one who knows condominium buildings and what to look for in the way of problems and defects," says Schneiderman. If there are problems, you'll need to know their full extent as they will impact on your negotiations with the seller and, ultimately, on your decision whether to buy the property or not.
Know What You're Buying Into
"Understanding what you're buying into is just as important as understanding what you're buying," says Schneiderman. "You need to find out about the people who live in the building – are they tenants or owners with a long-term stake in the building – and the association that runs the building."
"Try to meet some of the folks who live in the building – especially if it's a small building," says Schneiderman. "A condo building is a community – they'll be living next door to you and, in all likelihood, co-trustees with you in the association. Best to know who you're dealing with going in. If they don't want to meet with you, that tells you something, too. It would certainly give me pause."
You'll also need to take a good, hard look at the association, of course, prior to purchasing a condominium. Here, according to MABA, are some of the some of the key questions you'll need answered.
- Who are the trustees and what is their general approach in terms of taking care of the building (and your investment)?
- Is the building self-managed or is there an outside firm involved in building management? What is the financial condition of the association? Is it solvent and are there adequate reserves – or do they depend on special assessments to maintain the building?
- What are the condo fees for the unit you’re considering buying?
- What is the history of assessments? Are there any assessments in the works?
- Does the association have a long-term plan for maintenance and/or upgrades to the building?
- In addition to the master deed and bylaws, are there any rules and regulations currently in place or being contemplated?
Based on the answers to these questions, you'll need to determine if the building and the association are right for you. "If you go into a large, luxury building paying $1,400 a month in condo fees and living first class, if that's not part of your value structure and you can't justify paying it out, you're never going to be comfortable there," says Schneiderman. "Same thing at the other end of the spectrum; you may not be happy in a small building where you're paying special assessments and having to pull teeth to get any work done."
"Buying a condominium is complex and time-consuming," says Schneiderman. "There are a lot of moving parts. When you're looking to purchase a condo, you need to find a good buyer's agent who understands condominiums and how to determine exactly what you're buying - and buying into. Not all buyer's agents have the expertise to guide you through this process. Spend the time and interview agents until you find one who you are confident can meet your needs. Otherwise, you're either going to overpay for the unit or end up in a situation that's not right for you."