6 Valuable Things to Know Before Buying a Condo
Condo ownership can be a smart real estate investment. However, if you want to buy a condo, you should know that condo living isn't for everyone. It's important to understand what it means to own a condo.
In this blog article, I'll share 6 helpful tips to help make the right choice before buying a condo or home with a homeowners association.
Living in a condo can be a challenging form of homeownership that brings different people together with different opinions, motivations, needs and desires.
Education about condo living and active involvement in your association will help you to have a positive condo experience.
Buying a Condo? 6 Quick Tips about Condo Living
Condo living is NOT living in an apartment you own
Living in a condo is a community living arrangement in which you own a percentage of the entire property along with a number of other owners.
You must be willing to compromise with your neighbors and understand that the needs or desires of the whole may supersede your personal needs or desires. Condos often carry restrictions that some owners find difficult to work with.
Quick Tip # 2
You're buying an ownership stake in a corporation
A unit’s “ownership percentage” in the common elements of the condominium determines that unit’s monthly assessment and often the weight of the owner’s vote for certain matters (including Board elections).
If you buy a condo in a 10-unit building, you will not necessarily have an equal 10% ownership percentage. Ownership percentages are established by the association’s governing documents.
This is like buying a stake in a business. It carries with it financial, administrative, legal and governmental responsibilities.
Read my helpful blog article, 5 Reasons Buying a Condo May Fail Due to the Condo Association to learn about condo financing issues.
Quick Tip #3
Condo associations must adhere to their "Governing Documents"
At its heart, a condominium association is a business and should be run like one. The governing documents exist to guide its operation.
Each association is governed by two documents known as the Declaration & By-Laws. In some states, these documents are known as CCRs (Covenants, Conditions and Restrictions).
In a nutshell,
- The Declaration creates the association and defines the property.
- The By-Laws outline how the Board of Directors is formed and their responsibilities.
These documents contain everything you need to know about how the association is to be managed. The association’s governing documents can help answer nearly every question you have
If you need to know how to handle a specific issue, you can review the association’s governing documents. Adhering to the governing documents provides consistency and objectivity, and can therefore help owners to avoid personal conflict.
Quick Tip #4
Condo associations are subject to Federal and State laws
In the hierarchy of laws that guide condominiums, federal and state statutes take precedent over the association’s governing documents. An association’s governing documents cannot contradict federal or state law, or they will be determined to be unenforceable.
Many condos face complicated legal problems related to how the association is run and often have to go higher up the hierarchy of law to resolve conflicts.
Quick Tip #5
HOA board of directors
Every condo association or homeowners associations are managed by a Board of Directors. These are unit owners voted in by the members of the association (meaning all of the owners). These individuals have the right to make decisions about your building.
The Board of Directors owes a “fiduciary duty” to the association. This means that they must act in the best interests of the association as a whole at all times.
A Board is considered to be upholding their fiduciary duty if they are operating according to their understanding of the governing documents and not engaging in willfully negligent or criminal behavior.
The determination of the Board is binding. Electing a new Board is always an available option to owners who are continually unhappy with the Board.
Quick Tip #6
Special assessments are common with condo ownership
If your building requires major repairs and the condo association has not built up enough funds in the reserve account to cover the expense, a special assessment may be required.
There will inevitably be financial responsibilities above and beyond your monthly assessment and mortgage payments. Be aware that you will be responsible for paying your proportionate share of any expenses that are required for the repair and maintenance of the building.
Keep this in mind when you’re thinking about how much can you afford.
If you want to buy a condo, you should gather as much information as possible before you take the plunge. Contacting local real estate agent can help you understand your options.
Many condo owners have little information about how a condo functions before they buy. Understanding these 6 helpful tips and researching more about how to buy a condo will help you to make the right choice.