The one thing that you want to avoid when purchasing a condominium is buying into an association that is low on money. A portion of your monthly dues will go into a reserve account, which is set up to pay for the repair and maintenance of the commonly areas. These common areas include the roof, siding, decks, windows, and exterior doors. When the common areas need to be replaced, the condominium association taps into their reserve account to pay for the expenses. When a condominium association has not saved up enough money in their reserve account to pay for the replacement or repairs, they have to ask the owners for the money. This is known as a “Special Assessment”.
Special assessments are the worst thing that a condo owner can incur. Special assessments are often very expensive and seldom benefit the owner of the condo directly. Common special assessments are for the replacement of the siding, windows, and/or roofs. The cost to reside condominium complex can easily run into the $100,000 range. The total cost is typically divided up between all of the owners of the building. Therefore a $100,000 special assessment would cost a condominium association of 10 owners, $10,000 each. This can be a large and unexpected expense for a lot of condo owners. Sometimes condominium associations will plan special assessments out and set the owners up on a payment plan a couple of years ahead of time to collect the necessary funds. Regardless of how the funds are collected, they are always collected from the owners, so the key is to not get involved in poorly run condominium association.
There are a few things that you can do to avoid special assessments and poorly run condominium associations. During the purchase process, you should give yourself an opportunity to review the condominium resale certificate. The condominium resale certificate will have the entire budget itemized, as well an annual and monthly balance sheet. There is no rule of thumb when reviewing the financials of a condominium association, but you should think about the age and condition of the condominium and consider how much it will cost to replace some of the major common areas. If you feel comfortable with the amount of money that has been saved to make future repairs, then you are probably entering into a sound condominium association. If you do not feel comfortable with the amount of money being saved by the association and notice that there will likely be a considerable amount of repair needed in the near future, you should strongly consider choosing a different condominium.
Author Resource:-
Ryan Martin is full time real estate agent with Windermere Real Estate/Whatcom, Inc. in Washington State. He specializes in selling condominiums in Bellingham. Ryan has been selling condos in Bellingham and Fairhaven for over six years.
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