10 questions regarding buying a condo

Richard Vetstein at the Massachusetts real estate law blog, posted these ten questions on Active Rain.

Many Savannah real estate home buyers are looking for a condo -- it pays to have information before starting the search:

Here are the 10 questions buyers should ask when deciding to purchase a condominium unit:

1. What is the monthly condominium fee and what does it pay for? The monthly condominium fee can range quite dramatically from condominium to condominium. The fee is a by-product of the number of units, the annual expenses to maintain the common area, whether the condo is professionally managed or self-managed, the age and condition of the project, and other variables such as litigation. For budgeting and financing you need to know the monthly fee and exactly what you are getting for it.
2. What are the condominium rules & regulations? Condominium rules can prohibit pets, your ability to rent out the unit, and perform renovations. Make sure you carefully review the rules and regulations before buying.  Needless to say, the buyer's attorney should review and approval all condominium documents, including the master deed, declaration of trust/by-laws, covenants, unit deed and floor plans to ensure compliance with state condominium laws as well as Fannie Mae and FHA guidelines, as necessary.
3. How much money is in the capital reserve account and how much is funded annually? The capital reserve fund is like an insurance policy for the inevitable capital repairs every building requires. As a general rule, the fund should contain at least 10% of the annual revenue budget, and in the case of older projects, even more. If the capital reserve account is poorly funded, there is a higher risk of a special assessment.  Get a copy of the last 2 years budget, the current reserve account funding level and any capital reserve study.
4. Are there any contemplated or pending special assessments? Special assessments are one time fees for capital improvements payable by every unit owner. Some special assessments can run in the thousands, others like the Boston Harbor Towers $75 Million renovation project, in the millions. You need to be aware if you are buying a special assessment along with your unit.  It's a good idea to ask for the last 2 years of condominium meeting minutes to check what's been going on with the condomininium.
5. Is there a professional management company or is the association self-managed? A professional management company, while an added cost, can add great value to a condominium with well run governance and management of common areas.
6. Is the condominium involved in any pending legal actions? Legal disputes between owners, with developers or with the association can signal trouble and a poorly run organization. Legal action equals attorneys’ fees which are payable out of the condominium budget and could result in a special assessment.  In most states, you can run a search of the condominium association in the court database to check if they've been involved in recent lawsuits.
7. How many units are owner occupied? A large percentage of renters can create unwanted noise and neighbor issues. It can also raise re-sale and financing  issues with the new Fannie Mae and FHA condominium regulations which limit owner-occupancy rates. If your buyer is using conventional financing, check if it is a Fannie Mae approved condo. If FHA financing, check if it's an FHA approved condo. (Thanks Lou Corcoran for the links) 
8. What is the condominium fee delinquency rate? Again, a signal of financial trouble, and Fannie Mae and FHA want to see the rate at 15% or less.
9. Do unit owners have exclusive easements or right to use certain common areas such as porches, decks, storage spaces and parking spaces? Condominiums differ as to how they structure the “ownership” of certain amenities such as roof decks, porches, storage spaces and parking spaces. Sometimes, they are truly “deeded” with the unit, so the unit owner has sole responsibility for maintenance and repairs. Sometimes, they are common areas in which the unit owner has the exclusive right to use, but the maintenance and repair is left with the association.  Review the Master Deed and Unit Deed on this one.
10. What Does The Master Insurance Policy Cover? The condominium should have up to $1M or more in coverage under their master condominium policy. For buyer's own protection, they should always buy an individual HO-6 policy covering the interior and contents of the unit, because the master policy and condo by-laws may not cover all damage to their personal possessions and interior damage in case of a roof leak, water pipe burst or other problem arising from a common area element. Ask for a copy of the master insurance policy and don't forget to check the fine print of the by-laws.  Sometimes, there's language that would hurt a unit owner in case of a common area casualty.  Condominiums over 20 units should also have fidelity insurance to protect against embezzlement.

The Fairways at Savannah Quarters

Okay, I'm back to blogging on a regular basis -- it's been a hectic last couple of months. The market is showing some positive signs of recovery and the deals are good at this point, along with good interest rates.

One thing I accomplished in the last two months was meeting with Frank Curran and Gary Turnbull with Epcon who are heading up the development and sales of The Fairways condominums at Savannah Quarters. I was given a tour of the clubhouse and the two models for sale -- the Canterbury and the Abbey -- both of them spacious, maintenance-free, one-story town homes with great floorplans. The Abbey is 2 bedrooms, 2 baths, with a separate dining room, a 2 car garage and a large living room that opens up to the kitchen which is ideal for entertaining -- also, there's a small porch adjacent to the foyer and a large glassed sunroom in the front of the unit.

The construction and details are top notch -- convenient living at it's best for singles -- couples, retirees who love golf, or young professionals too busy to worry about maintenance. It would also make an ideal second home for anyone wanting to be close to Savannah, yet have all the conveniences and security of gated living.

The Canterbury model is larger and has an optional third bedroom which could be used as a den. Go -- here -- for the floorplans and more information.

I was impresses by the quailty of the construction, and the location is perfect for getting to the bustling westside, Pooler Parkway area, and also getting downtown. Savannah Quarters is near I-16 which runs straight downtown -- it's about a seven minute drive. There is already some commercial development around Savannah Quarters for shopping and dining, and there are plans to complete the 16 West project which will be a major shoping, dining and entertainment venture right across from Savannah Quarters.

The prices for the homes at The Fairways are reasonable, especially considering the golf course, the clubhouse (which has an inviting atmosphere conducive to socializing) and the fact there is no maintenance and all of it is secure, so if you travel often or if it's a second home you don't have to worry -- just lock it up and forget about it.

If you're interested in taking a tour, give me a call -- 912-429-3431 -- Gary and Frank promised me they would take good care of my buyers.