If you’re considering buying a condominium, you have to consider that you’re not just buying a unit. You’re buying membership in a condo association. If the association has any type of problems, they will be your problems. Some due diligence before closing on a condo can spare you from unfortunate surprises.
Most states require condominium associations to maintain audited financial statements. However, associations sometimes get behind in preparing their statements. Ask to see the associations financial statements and operating budget.
Inadequate Reserve Funding
Some associations must have a certain level of reserve funding in accordance with state law or an association’s governing documents. If financial statements show that an association has little or no reserve funds, it could indicate financial mismanagement. Also, the association won’t have funding to address certain repairs.
Upcoming Capital Needs Projects
One of the biggest red flags when buying a condo is an impending capital needs project such as a roof replacement or concrete restoration. If the project is not accounted for in the yearly budget, unit owners will almost certainly need to pay an assessment to fund it. An assessment could cost each unit owner several thousand dollars or even tens of thousands that would be due separately from your monthly maintenance fees.