Tips When Shopping for a Condo

When helping a buyer shop for condos, I make sure to answer the following questions:

How many of the other units are sold?
These days, lenders are very wary of mortgaging condos, since so many buildings are in financial distress.  Often times, if a newer building has not sold all the units (or has only half sold), the lender won’t finance your purchase.  Make sure to check the financial status of the building.  If there are over 80% of the units sold, you’ll probably be just fine.

How big is the reserve account?
The reserve account is essentially the building’s “savings” account for repairs and upgrades.  If the account has a large balance, then I am less worried my client will face  a special assessment anytime soon.   Large reserve accounts usually mean higher HOA dues (monthly charge you’ll pay for general condo maintenance).  If you’re only going to hold the condo a few years, perhaps you’d rather not contribute to a fat reserve account since you’re not likely to benefit from it. 

What makes this condo different from the others?
Despite the development slowdown, there are still a lot of condo buildings in Seattle.  Make sure you buy into one that has a unique feature (location, access to Lightrail, etc.) so that, when you go to sell, you have something special to offer.  If you buy a “ho hum” building that is affordable but doesn’t have much else that sets it apart from the others, you’re not likely to see as much appreciation, or have a very easy time re-selling it.

Has the current owner done improvements on the unit?
I ask this because I care about remodels, but more importantly, I care about what insurance covers.  A condo building should have an overall “umbrella” insurance policy.  However many of these policies will not cover damages caused by “unoriginal” features.  For example, if the current owner installed a new sink or washer, and it leaked into the unit below, the building’s insurance policy might not cover the repair.  Because individual homeowner insurance policies are only $15-$30 a month for a condo unit, I suggest buying the peace of mind and applying for your own policy when purchasing a condo.

What is the building’s rental policy?
Some condos will not let owners rent at all.  Some will allow some percentage of the building to be rented at a given time.  Some will have other restrictions on renting.  Whatever the case, I recommend my buyers know the policy before buying.   When you go to sell, if the market is not working in your favor, you want to know if renting the unit is a backup plan you can rely on.  It’s also good to know how much of the building is really functioning as an “apartment”, as fully owner-occupied buildings often take better care of the property.