Condo Juice Condo Association Advice for Small Condo Associations

Condo Fees. How Much Should You Pay?

When buyers evaluate a condo, or when owners try to assess how well things are going, it's best to approach the situation in medical terms.

You're the doctor. The condo association is the patient. You'll need to take several vital signs in routine checkups with the association to make sure the condo is on the path to good health. After all, healthy condos only come with strong, healthy owner's associations.

Condo dues are one of these important vital signs to check. We all want a lower price on anything, from gasoline to condo fees, but buyers beware. A low condo fee might be just as much of a red flag as a very high one.

Residents pay condo dues to maintain common areas and amenities. This can include painting, roof replacement, and other items that single family home owners usually handle all on their own. It would be nice if condos associations could just roll all these costs into the price of the unit, but unfortunately it just doesn't work that way.

Condo dues may seem like a downside to buying a condo, or an extra cost but they're really just the opposite. Single family homeowners bear the full weight of these costs for their whole property. On the other hand, condo owners can defray these costs among themselves, making the financial burden relatively light.

There is a downside, however. Condo Association fees are often determined at the discretion of the condo association. Since most condo associations are made up of human beings, they can make mistakes. A condo fee too high or too low could be fatal to property values, maintenance, and the whole ownership experience.

Condo dues that are too high naturally tend to chase away new buyers. This means, however, that the association has plenty of money in the reserve fund for maintenance. The end result: the property is well maintained but the residents are disgruntled. Some people might even be trying to sell and move out, but they'll have a tough time talking a new buyer into paying exorbitant dues.

How can condo dues be too low? Since condo dues are meant to cover routine maintenance and replacement costs, dues that are too low will result in declining property values, not to mention decreased functionality of the facilities themselves (ie, leaky roofs, unusable swimming pools, etc.).

That's not to say that condos don't have other ways of covering routine maintenance and replacement costs. Condos can charge what are called special assessment fees. These are usually stand-alone fees that everyone pays. For instance, if the roof replacement costs $2,000 over and above what the association had in reserve for a 20-unit building, the association may charge each unit $100, a nasty surprise in everyone’s mailbox.

Condo associations that try to keep all the residents happy don't like to charge special assessments because tenants get disgruntled and feel gouged. All this can be prevented with good planning.

A healthy condo association will pay for what's called a reserve study. This is a professional evaluation of all the costs the property will incur on a regular basis. Reserve studies aren't free, but they help the association determine the proper amount to charge each resident in dues. This saves a lot of money and headaches in the long run, preventing the need for special assessments.

But how do you tell if an association has set the dues where they should be? It's safe to assume that any association that hasn't conducted a reserve study probably hasn't set the optimal amount for monthly dues. A healthy condo association will conduct reserve studies at least annually. A summary of this study should be available. The summary lists all the things that may need maintenance or replacement now or in the future. Check out the "Remaining Useful Life" column for each item. If the numbers are low or at zero, chances are the dues aren't high enough and, in fact, some replacements are past due.

A perfect reserve schedule will show identical income and expenses on the balance sheet for the reserve account.

These vital signs should help you correct your own condo association or avoid a dysfunctional community in the first place.

You can also compare your dues to other condos in your area here.

3 Questions You Must Ask About Your Neighbors Before Buying A Condo

Buying a condo can be a magnificent way of realizing your dreams of home ownership. If you think you have found the perfect condo and are ready to commit to a purchase, it is imperative that you understand certain things about your future neighbors. Whether or not those neighbors are responsible ones can affect the manner in which your homeowner association is run. Many prospective condo buyers do not realize what a dramatic effect this can have on the value of their condo in the long run. Therefore, there are three important questions you must ask about your neighbors before making this important financial investment in your future.

Question #1: How many units in the building are rentals?
Any potential condo buyer should check to make sure that the number of renters is limited to a particular percentage of the building. Renters can be less likely to take proper care of their condo or any common areas than owners who have a vested interest in the property. This type of situation has a negative effect on property values. Because of this, in some areas the major private mortgage insurers currently require no more than 30 percent of units within an association be occupied by renters. This stipulation, down from 40 or 50 percent, has become more stringent over time. Lenders are also taking a closer look at loan applications for condos in buildings with high rental saturation. Lenders assert that history proves buildings with a high rental occupancy ratio are difficult to sell and do not maintain their value as well.

Question #2: Do neighbors pay their dues on time?
Buying a condo and being a member of the homeowner association means that you understand your obligation and fiduciary responsibility to pay dues in order to enjoy the services and amenities that all residents come to expect. Neglected landscaping and swimming pools and decaying parking lots, for example, also erode property values and make it very difficult to sell vacant units. A failure to maintain the building and its systems can quickly send an entire condo community into a downward spiral. As a potential buyer you will want to request a history of dues payments. You do not want to find yourself living in a building among other dwellers that are bringing down the entire association due to their irresponsibility. In some situations, when other members of the association are not paying their dues, it is the responsible condo owners who end up footing the bill to compensate. In the worst case scenario, some condo owners have even occasionally found themselves being foreclosed upon due to months of dues being in arrears. You do not want to wind up living in a building with a high rate of foreclosures.

Question #3: How do the homeowner association issues get discussed?
Having an open line of communication is the cornerstone of any well-run homeowner association. You should check to ensure that some sort of system of records is in place for all matters that are discussed. For example, the association might utilize email, online forms, minutes of meetings, etc. Knowing the guidelines for communicating with the homeowner association will come in handy if, for instance, you ever have a complaint or concern about a neighbor, or if you find yourself on the receiving end of a concern or complaint from a neighbor. Furthermore, it is also wise to find out what access members have to those records and what steps are necessary to request them if it becomes necessary for legal purposes.

Purchasing a home is a decision not to be taken lightly. It is a fatal mistake to think that purchasing a condo does not require the same careful thought as purchasing a single-family home. Considering the impact your neighbors will have upon your decision is no small part of the matter either. Gathering this kind of information now will make you better informed as to whether the condo you have your eyes on is truly a sound investment. It is preferable to do as much research as possible now as it is to discover later on that you are living in a situation from which you may not be able to get away.