So you want to buy a condo or townhome, but aren’t sure where to start. First off, don’t assume that buying a single family home vs. condo/townhome are one-in-the-same. There are nuances with purchasing a property that is apart of an Homeowner Association (HOA) and that is what we will be diving into here.
What is a Homeowner Association (HOA)?
An HOA makes and enforces rules and regulations for a planned community, subdivision or condominium building; its members are is residents.
Why do condominiums and townhouses have an HOA?
Unlike a Single Family Residence (SFR) when you purchase a condo, you are buying just the unit itself, not the entire building. The HOA agrees to take care of the general maintenance of the building and collects the monthly dues from each resident in order to pay for the ongoing upkeep of the building and grounds. If there is security, private gate, or guard, these services are generally paid through the monthly HOA service fee as well.
Who makes up the HOA and how is it formed? How do I participate in the decision making?
The board of directors is elected by the residents of the building- you! Generally, board meetings are held once a month to discuss the happenings within the building. Everything from how recycling and trash is handled, planning for the replacement of the roof, new exterior paint or getting new furniture in the lobby (to name a few).
When purchasing a condo, you’ll want to review all meeting minutes for Board and Member meetings. These will provide you insight on any potential financial and building issues that you need to know before making the commitment to purchase.
Why is it important to review the Meeting Minutes?
In 2018 I sold a condo at the Allenmore Ridge Condominium. The complex has a large footprint that spans the west portion of Allenmore Golf Course. Surrounded by evergreens and buildings constructed of cement and steel, it’s a captivating and peaceful place to call home. The buyers absolutely loved the condo building and unit itself and were immediately ready to say “yes.” That said, I made sure that they had a copy of the Resale Certificate and meeting minutes, so not to be surprised by any damning financial information once they moved in. Sure enough, we discovered that the elevators in all of the buildings were needing repair/replacement and the funds the HOA had saved were not enough to cover for the cost. We reached out to the HOA president and board members to fully understand the scope of the situation. After learning all we could about the potential replacement costs and likelihood of a special assessment, the buyers happily decided to move forward. It was still a great next home and future investment for them.
Had we not learned about the elevators in this 1981 building, it would have been a very different situation. The key takeaway: read through all of the financial information and meeting minutes. You are buying not only a condo, but also becoming a member of a an HOA that may or may not be functioning well. This was was a highly functional Board and HOA. We learned this as we gathered more details about the elevator.
Here are a few condominiums I’ve sold in the past, if you are curious about a specific building or want to start the process of buying a condo, send me a message – 253-381-9788
What is a Resale Certificate?
In Washington, it is required that the seller provide you (the buyer) the resale certificate. This lengthy report is one that details the buildings financial standing. These reports for an untrained eye can be difficult to decipher. Fortunately, I have resources that assist with the dissection of these reports and can provide an analysis in plain terms.
I’m considering buying a condo as an investment property, are there any risks?
Along with the financial analysis there are many rules and regulations that buyers must follow. Some hot buttons include: pet restrictions, rental limitations (on both short and long term) and parking. If you are looking to purchase a condo and make it a short term rental, I would strongly reconsider. Although this is an area of growing interest, know that HOA’s can make new rules and requirements. I would not be surprised if we see HOA communities vote to ban short terms rentals.
Phew! Lots to discuss here. If you are looking to purchase or sell a condo, reach out directly.
Jenny Wetzel (253) 381-9788, Jenny@jennywetzelhomes.com