Hidden pitfalls/traps in buying a condo?

[freeat57]

Does anyone have advice on buying a condo?  I have bought and sold two single family houses in my life, but never a condo.  I know to check the HOA association minutes and reserve fund, ask about any upcoming repairs and assessments, etc.  What else do I need to look out for?  This will be my residence, not an investment.  Thanks in advance!

[CuencaSolo]

I've been a renter all my adult life, but on moving back to the US this summer, I'll probably be buying a condo, so I'm getting an online education.  Even if you don't need a mortgage, it might be worth talking to a few mortgage lenders who operate in the area that interests you.  To write a conforming mortgage on a condo, the complex/HOA must pass the questionnaire provided by Fannie Mae/Freddie Mac, or the slightly different one provided by HUD/FHA.  They have several concerns; you mentioned the biggest one, adequate repair reserves and no big pending special assessments.  They also don't want to see too many rentals, or REOs and other properties that are vacant year round (25%  of the units maximum.)  A local loan officer might know offhand that this complex qualifies, or does not, or the manager of the HOA can tell you if they have prepared a recent questionnaire.  Just as smaller local financial institutions are the ones most likely to write a baby mortgage of under $50,000, that's where you might find a lender willing to write a non-conforming mortgage on property they know, and keep it in their portfolio until you sell.  I found one of those, a local credit union with an expanding deposit base, who will write an 80% LTV mortgage at 4% interest, of an amount as small as $25,000, but only for 15 years.  I also found a small local bank which will do conforming mortgages, with a full 30-year term, as small as $35,000.  It turns out different institutional buyers of conforming loans have different requirements.  Some will take a small mortgage in a qualifying condo complex as long as they get to pad the interest rate ("high 4s," the loan officer said), and maybe charge an extra point or two, and maybe ask for 25% down.  Others recoil from the type of place I will be buying like the Devil from holy water, saying, "A Florida condo?  We've still got some from 2010!"

While looking over the candidate complex in person, it might also be wise to strike up a conversation with a gabby old long-term resident who knows everything that is wrong with the place.  Just filter out the negativity and catch the issues for further inquiry.

(OT:  I'm interested in baby mortgages because my Web browsing turned up spots in Florida where reasonably nice-looking older condos are cheaper than in the city in Ecuador where I now live ($30K to $60K.)  I'm particularly intrigued by a small suburb northeast of Tampa, Zephyrhills, which has both cheap property and a below-average crime rate.  There are even lower prices in more urban areas, but a few minutes of research usually found that the unit was an REO in need of rehab, and the area was a scary combat zone.)

[redbirdfan]

Check the number of units that are delinquent on HOA fees and the limits/deductible of the Master Insurance Policy (HO-6).  Depending on the part of the country you are in, check to see if the  master policy includes earthquake insurance, etc.  Make sure the exterior is a good match for the area (i.e. stucco in wet environments is usually bad).  Are there swimming pools, multiple elevators, i.e. expensive ongoing maintenance items?  Are they accounted for in the budget?  What year was the building constructed?  What were some of the typical issues of buildings of that era and have those issues been remedied?  What types of things require board approval (pets, hardwood flooring, guests over 2 weeks?, someone else using your parking spot (significant other or house-sitter, remodeling)?  Is the building self-managed or is there a property management company.  If the latter, do a yelp/google check on the company. 

Do you plan to use the unit as a future rental?  Is there a rental waiting list, a rental cap, hardship exemption?  I would also check to see how long it took for other units in the building to sell.  Make sure there is not any pending or anticipated litigation.  Condos in litigation are almost impossible to finance.

[brycedoula]

It depends on where you live. In my province if you put in an offer that's accepted you have a 48-hour "cooling off" to review the condo documents. Make sure you read those documents carefully - for example in my old condo pets like cats & dogs were allowed, but must not touch the "common area" flooring - so obviously this excluded large-breed dogs that couldn't be carried. Also owning any other type of animal was prohibited (no farm animals or fowl).

If you do plan to rent it out in the future confirm what the restrictions are for tenants vs owners. In my old condo owners could park in the underground parkade, but tenants were ONLY granted above-ground spots IF there was room.

I'd also ask what demographic lives in the building. A building full of older retired singles/couples may not be the best place for a growing family

[freeat57]

Thanks for the pointers, everyone!  There are some good ideas here.  I'll be sure to check the demographics of the building and whether other owners are good about paying their dues.  How forthright (honest) can I expect building managers to be? 

I recently had an interesting experience looking at a condo.  The agent was late showing up for the open house, so I walked around a bit.  For about 20 min, there were two residents standing by the pool area griping about the managers not keeping up with maintenance.  Mark that one off the list!!

CuencaSolo, It does look like there are still bargains to be had in FL.  I used to live in Indianapolis, and there were snowbirds there who had condos in Zephyrhills.  I always imagined that the community was heavily snowbird, so you would have the place to yourself in summer.  Looking on real estate sites, Fort Myers looks like fertile ground too.  You might check it out if you want to be closer to the beach.