The most important thing to do before buying a condo is reviewing the resale certificate. I’ve highlighted every single step in a previous post – see here. I’ve created a video to help explain the review process and to act as a forum for questions and concerns as they come up. This is the single most important thing to do before buying a condo. Trust me.
Understanding the Resale Certificate is critical – here are a list of pitfalls you can avoid by reviewing the Resale Certificate
The building is underfunded (not enough money in the bank)
The condo building wont allow your 30 pound dog
You can only have cats, not dogs
In the following year the building needs a siding replacement
The building needs a new roof
There is water damage to the penthouse units from a leak
The condo doesn’t have enough money to pay the concierge
Theft in the condo garage
No rentals allowed in the entire building
You would have to join a waiting list if you want to rent your condo
Do I have your attention yet? I would watch the building and review the graphic I designed below:
HOW TO REVIEW A RESALE CERTIFICATE
The Reserves (Bank Accounts)
The reserves are the bank account for the building and often times the safeguard when something unexpected arises and needs attention. Knowing the amount of reserves a building has is critical. The reserves help you estimate how often the building will receive special assessments (when owners help to pay for major expenditures based on their percentage of ownership). The more adequate the reserves, the higher percentage that you will spend less out of pocket when the building needs an upgrade (example…windows, new carpet, new roof, etc…)
The Reserve Study
This is a licensed and professional report that gives an overview of the financial health of the building and will list the projected maintenance schedule for the next 30-50 years. This is helpful as you can see what the upcoming projects will include during the time that you own the unit. If there is a major siding replacement planned in the next 4 years, you may want to avoid making a purchase. It’s very important to look this over carefully. As your real estate agent or your attorney to review it with you!
The Meeting Minutes
The meeting minutes are important to review. The minutes give insight to the current topics of discussion in the building. The will often reference current issues, plans for building updates can give insight to legal disputes and more. Make sure to take the time to review each set of minutes.
Rules and Regulations
Rental caps, pet policy, guest suite policy and more are found in the rules and regulations. You need to know if your yellow lab meets the 50 pound pet limit. You may also want to know if the project allows Air B&B or other short term vacation rentals. Is there a minimum lease? Look at these in detail so you are prepared and can follow the rules of the building.
The declaration is full of important information but one item in particular you may want to reference is the percentage of ownership. The square footage of your unit and the percentage that you own, not only helps you calculate what you pay in monthly dues, but also what you may expect to pay if there is a special assessment levied. You may also find your parking and storage number in the original declaration as well.
Annual Financial Statements and The Budget
What is the currently operating budget? How much does the concierge cost per year? Are there enough reserves to cover upcoming maintenance? How quickly is the HOA building reserves or are they running over budget and having trouble building the reserves? These can all be found in the annual financial statement and the operating budget. Pay attention to the details. If you can’t or don’t want to, hire an accountant to make sure the building is in good health!
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