What First Time Condo Buyers want to know ….

I had a chat with my daughter, Jade, today about the kinds of things a first-time buyer wants to know about condos. And all of her questions, not surprisingly, related to costs. What are condo fees exactly? she asked. Why are they so high? Will they go up? What kinds of other expenses do I need to know about? She also wondered how she could tell who was a good builder from a bad one.

Clearly, first time buyers are concerned about money; they don’t want to be caught short.

Monthly condo fees are high because a chunk of them are set aside to cover major repairs. That chunk goes into something called a reserve fund. The reserve fund is intended to provide a budget for the kinds of big ticket repairs that are part of the maintenance of any structure: roof, exterior, foundation, windows etc.

If the condo board gets it right, and keeps a healthy reserve fund, and nothing unexpected happens, condo fees will usually only increase by the rate of inflation. (If they didn’t go up by inflation, they would quickly be inadequate to pay for the things that they include: which are usually building insurance, a caretaker or superintendent, cleaning, snow removal, and water, and maintaining any common elements, like a pool.) It’s when they don’t, or unexpected repairs arise, that condo fees will either be increased, or something called a “special assessment” will be levied.

Newer buildings don’t have to worry about a special assessment for the most part, but these are hitting older buildings hard, so to answer Jade’s last question, be sure to consult with a realtor. They can tell you which buildings may be having problems as they age and need major structural elements replaced; they can usually also tell you which builders to avoid.

And if you do put in an offer, make sure your realtor asks for a status certificate review by your lawyer as one of the conditions: your lawyer can check the amount in the reserve fund, what is projected for future repairs, and whether he or she thinks there may be problems down the road.

The other expenses to be mindful of are heat and hydro, if these aren’t included in the condo fees. Where a condo has baseboard heating, depending on whether the windows are older, glazed, sealed, etc. the monthly costs can be high or low. There may be a shared laundry and if there is, you will have to pay to do your laundry. And you may need to think about cable and internet costs as well. The one thing you won’t likely have to worry about is snow removal; that’s almost always included, so is water.

What you will need is insurance for your belongings which covers improvements, so if you move into a condo and replace the kitchen counter, be sure to let your insurance broker know.

The way to find out what’s included in condo fees is to check the listing for the property: it should provide a brief summary as well as the monthly costs, and it will indicate if there are any special assessments pending. Typically, if there are, the seller picks up those costs, but sometimes they will only agree to “participate” which means negotiating how much the buyer will be on the hook for and what will be paid by the seller. Your realtor is the best person to advise you on what’s reasonable. Does that help?

This entry was posted in Buying a house, Condos, First time Buyers and tagged , , , , , , . Bookmark the permalink.

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