Buying a Boston downtown condo requires an extra measure of due diligence. Far more complex than buying a single family home, buying Boston a condo means you are buying two entities: (1) the unit you’re going to live in and (2) membership in the mandatory Homeowner’s Association aka condo association. The faster you can identify potential deal killers with the unit and most importantly the condo assoc, the more efficient and less expensive your Boston condo search will be.
The Condominium Unit vs the Condo Assoc.
Understanding the unit itself is quite straight forward – what you see is what you get. The condo association is a business entity. It is the financial vehicle that operates and governs by a set of by-laws with a Board of Directors. The condo association controls monies flowing in and out, operational expenses, budget, management issues and legal considerations.
Questions you must ask
Once you have a good handle on the actual condo unit, the next step is to find out as much as you can about the condo association before you are committed to buying it. If you can’t live with how the condo association operates, you’ll likely not be happy with your condo, no matter how much you love the actual unit. Here are the must ask questions should ask, Ask these questions before you write an offer on a Boston downtown condo, or during the investigation phase of the condo buying process, to really understand what type of condo association you’re buying into.
#1: Is the Complex Eligible for FHA Financing and FHA Approved?
If you are going to obtain a loan to purchase a condo in downtown Boston, asking if the condo complex is FHA approved is the #1 question to ask. FHA loans allow borrowers to purchase condos with as little as 3.5% down. Boston Midtown Condo requirements for FHA insured loans have become far more stringent due to the potential risks of group ownership. The stricter rules have made obtaining a Boston downtown condo financing much more uncertain and expensive. Even if you aren’t planning to purchase your Boston midtown condo with an FHA loan, complexes that are FHA approved are easier to finance with a conventional loan. If you are considering getting a loan to buy a condo, work with a lender who is experienced at cutting through the red tape specific to Boston midtown condos. If the complex is not FHA approved, securing a loan will be more difficult and costly. If you are paying cash, consider the obstacles you might face if you buy into a complex that’s not FHA approved when it comes time to sell. This restriction will limit your pool of buyers to only those who can qualify for conventional financing.
#2: Are there any Lawsuits Pending or Anticipated Involving the Condo Assoc?
Lenders are allergic to Boston high rise condominium complexes involved in litigation. Very few lenders will loan on property in the midst of a lawsuit, particularly if the issue of the suit is construction defects. Shoddy construction is probably the most common cause for condo association suits against the developer/builder. If you ask upfront whether there is a lawsuit pending will save a lot of time and frustration, especially if you need to get a loan to purchase.
#3: What are the Monthly Homeowner Association Fees?
Ask how much the monthly condo fee is and what it covers exactly. Condominium association fees are typically based on the number of units in the complex, what it costs to operate the complex, whether the association is professionally managed and whether there are funds set aside for periodic improvements, major repairs, unforeseen lawsuits or property damage.
What Does the Monthly Condo Fee Cover Typically?
Condo fees vary in amount and coverage from community to community, association to association. Typically – but not always – the monthly fee covers:
- Exterior maintenance of the building structure
- Grounds maintenance including landscaping, lawn mowing, and snow plowing
- Master hazard and liability insurance
- Water and sewer services
- Trash and recycling collection
In some Boston high rise condominium complexes you may find amenities such as a pool, or a recreation center that you have no use for, but are nevertheless included in your monthly condo fee. The notion of paying for amenities that you don’t use may affect your buying decision. You’ll want to check out what’s covered and what’s not.
#4: Who is Responsible for Maintenance?
In other words, who fixes what? You’ll want to know precisely what you are responsible to repair and what repairs are the condo assoc responsibility. Generally, interior maintenance is the condo owner’s responsibility. Most everything within the interior surface of the exterior walls is an owner issue.
A common, sometimes vague area of responsibility in many Boston high rise rise condominium developments is window replacement. Is this an item that the condo association is responsible for or is it the owners? Another example of a grey area is decks, balconies and porches. Refer to the master Deed and CCRs to see who actually owns the deck, balcony or porch. The general rule is the entity which owns the feature is responsible for its repair and maintenance. The CCRs should spell out repair responsibility.
#5: Is the Condo Assoc Complex Professionally Managed?
Almost every large Homeowner Association – 10 units or more – are professionally managed and many small condo assoc are self-managed. Smaller condo assoc often elect self-management to keep their operational expenses down, however it comes with a downside; lenders do not look favorably on self managed condo assoc. If the complex is professionally managed, you will want to get the contact information and give them a call. Often times they are a great information source for anything you could possibly want to know about the complex. But, sometimes the management company will refuse to answer questions from a non-owner. If that’s the case, go to the President of the condo assoc and the Seller to get the answers you’re looking for.
#6: How Much Money is in the Reserve Fund?
The amount of money in the reserve fund is an indication of the financial health of the condo assoc. You’ll want to know whether the condo assoc has budgeted sufficient monies to pay for ongoing maintenance costs and unforeseen repairs. As a general rule, a repair/reserve fund should contain about 10% of the annual revenue budget if the complex is under ten years old. If the complex older than ten years, the budget should be closer to 25%, or more, for major expenses. Repairs for older buildings become exponentially more expensive as time passes.
Bonus Tip: Beware of Abnormally Low HOA Fees
Beware of condominium projects that seem to have abnormally low condo fees, you need to find out if they are funding their reserves adequately so you are not surprised by a mandatory cash call. Finding out how much money is in the reserve fund will help determine the financial health of the neighborhood.
#7: What’s the Delinquency Rate of Owner’s Paying Condo Dues?
Another indicator of the condo assoc financial health is the delinquency rate of the owners paying condo fees? Bills must be paid so owners who are not paying their share will erode the financial base and undermine the ongoing operation. You obviously don’t want to be caught in a neighborhood where a large number of owners are not paying their condo fees.
#8: Are there Special Assessments Due or Anticipated?
Special Assessments are cash calls necessitated because of a unexpected repair such as storm damage or deferred improvement such as roof replacement. Sometimes, special assessments are spread out over a period of months or years; other times the condo assoc votes to impose a lump sum payment from the owners. Be sure to ask – in writing preferably – about special assessments due and payable and any that may be anticipated. Read the minutes of the condo assoc board meetings to get an ideas of what items may be coming up for vote.
#9: What Are the Condominium Association Rules?
The condo assoc rules and regulations are found in a set of documents called the Covenants, Conditions and Restrictions (CC&Rs). Get a current copy and read them carefully. Ask questions about what you don’t understand. These are the governing documents of the complex and they are enforceable. Read the CC&Rs to make certain there are no current regulations or upcoming amendments to the condo by-laws which may deter you from buying the condo. Both condo assoc and property managers charge the Buyer a fee (which varies) to provide documentation. Our recommendation would be to ask the seller to pay the fees.
You’ll want to read the CCRs to learn about:
- Pet Policy
- Parking Rules
- Leasing Restrictions
- Short Term Rental Policy
- Gardening Limitations
- Storage Space
- Aesthetic Approvals
Considering Buying a Condo in Boston?
Our team of experienced buyer’s agents know how to help buyers find the right condo in the right complex for them. We know the questions to ask and how to help you investigate what you’re buying so you’re confident you made the right choice.