“There are More Questions than Answers” – Prince Tui Teka
Condo ownership can be “easy living”! It’s not for everyone but those that embrace it know the compromises you make in a communal living environment! Condos have definitely gained popularity in Oregon in the last 20 years. In Portland, we’ve seen urban condo neighborhoods develop in the Pearl District, downtown, NW Alphabet District, John’s Landing and the South Waterfront!
In the state of Oregon we have what’s called a “Condo/Townhome Sale Agreement” or a “Condo/Townhome Addendum” that can be added to any sale agreement. There are a list of documentations, meeting minutes, CC&Rs (covenants, conditions, restrictions), financial statements, by-laws, rules & regs and more that you can request as a contingency of your offer. You’ll learn a lot of the inner workings of the HOA (home owner’s association) and in the process, you’ll learn how responsive — and organized — its members are.
1. What percentage of units is owner-occupied? What percentage is tenant-occupied? Generally, the higher the percentage of owner-occupied units, the more marketable the units will be at resale. Fannie Mae/Freddie Mac guidelines want at least 70% home owner and no more than 30% tenant occupied.
2. What covenants, bylaws, and restrictions govern the property? What grandfather clauses are in place? You may find, for instance, that those who buy a property after a certain date can’t rent out their units, but buyers who bought earlier can. Ask for a copy of the bylaws to determine if you can live within them. And have an attorney review property docs, including the master deed, for you.
3. How much does the association keep in reserve? How is that money being invested?
4. Are association assessments keeping pace with the annual rate of inflation? Smart boards raise assessments a certain percentage each year to build reserves to fund future repairs. To determine if the assessment is reasonable, compare the rate to others in the area.
5. What does and doesn’t the assessment cover—common area maintenance, recreational facilities, trash collection, snow removal?
6. What special assessments have been mandated in the past five years? How much was each owner responsible for? Some special assessments are unavoidable. But repeated, expensive assessments could be a red flag about the condition of the building or the board’s fiscal policy.
7. How much turnover occurs in the building?
8. Is the project in litigation? If the builders or homeowners are involved in a lawsuit, reserves can be depleted quickly.
9. Is the developer reputable? Find out what other projects the developer has built and visit one if you can. Ask residents about their perceptions. Request an engineer’s report for developments that have been reconverted from other uses to determine what shape the building is in. If the roof, windows, and bricks aren’t in good repair, they become your problem once you buy.
10. Are multiple associations involved in the property? In very large developments, umbrella associations, as well as the smaller association into which you’re buying, may require separate assessments.