What happens when the condo owner who lives a few doors down can’t afford to pay their mortgage or monthly fees? The entire building suffers.
Condos in crisis: What you need to know
The Washington Post recently visited Grand Bel II, a Maryland condominium complex that’s in a state of crisis. For five years, a tarp has covered the swimming pool because there’s no money for lifeguards, chemicals or insurance. The 1960s-era complex is simply broke.
But Grand Bel II isn’t alone. Years after the recession, there are communities just like it that haven’t recovered. Foreclosure, aging infrastructure and limited resources have continued to take a toll, and even residents who never miss a payment are paying the price.
What exactly is the problem? Differing opinions
As the Washington Post explained, frustrated owners may be quick to blame inexperienced or ineffective members of the elected condominium board – those who make the decisions.
But board members point the finger at lenders who aren’t processing foreclosures quickly.
At troubled condominiums, the story is often the same. Struggling owners stop paying their monthly fees, which lowers cash reserves. And when something goes wrong with the building, either the monthly fees are increased or there’s a special assessment to cover the repairs.
Potential buyers don’t like either of those scenarios, so some units in unhealthy buildings stay on the market forever.
Clark: You can’t afford to overlook this!
On top of that, Clark said on the radio show that condos are becoming more difficult to rent out. In fact, some communities forbid it. That’s why this purchase can’t be taken lightly.
If you’re interested in buying a new condo, plan to stay put for 10 years.
And before you make a commitment, there’s something besides the purchase price that you have to consider: the health of the condo association.
It’s a step that many people overlook, but you can’t afford to.
As a potential buyer, you want to review the condo’s financial documents, and pay close attention to the operating budget and the balance of the reserve fund. Is the place solvent? If not, it’s not your place.
And if you have a bad feeling about the community, trust your gut and move on to the next property.
Read more: Tips for first-time homebuyers