Having an HOA (Home Owner’s Association) to handle all maintenance and repairs remains one of the greatest advantages of owning a condo versus a home, but it can also be a nightmare in disguise if it suffers from poor management or gets embroiled in legal issues. Want to ensure you’re getting a good deal? Here are some of the most important questions to ask when buying a condo.
How many units are rented vs owned?
Are you planning to rent out your condo? Sometimes property owners have considerations about renting. Sometimes they only allow certain units for certain purposes. If you prefer not to live in a building that rents out too many units, then be sure to ask beforehand.
Is there a rental cap for investors in the building?
Does one entity own more than ten percent of the total units?
Typically, no single owner may own more than ten percent of the total units. If one person or entity does own more units, it could cause problems for others who want to secure a loan from a mortgage broker.
Is there any current litigation; if yes, what’s it for?
It’s good to know if litigation is pending. If there is legal trouble in the works, a lender might be less willing to put money into the building. That could affect your prospects in the long-term. Also, be sure to ask what the litigation is about and how serious it is.
Is there more than ten percent going into the reserves as a line item on the budget? If you already have the budget, please send a copy of the budget.
The HOA should always have enough reserves to cover major repairs and routine maintenance. Current mortgage rules require at least 10% of the annual budget to go toward the reserve fund. Be sure to send a copy of the budget to your A and N Mortgage representative so we can determine whether it meets current standards.
How many units are delinquent on their assessments?
If too many condo owners are delinquent, there may not be enough money in the Homeowner’s Association reserve to pay for things like repairs.
Is there a special assessment coming up—if yes, what is it for?
Sometimes, the HOA gets behind on its reserves. In that case, the association may levy special assessments to make up the difference.
Are you able to send the last few months of meeting minutes?
It’s good to look over the meeting minutes to get a sense of how the HOA works, what the community is concerned about, and whether management is running smoothly.
Who is the contact for the association?
Don’t start the buying process before you know to whom to speak in case of emergency or questions.
Who is the contact for the master insurance policy?
You should always know whom to contact if you have questions about the master insurance policy.
Get Help from Your Chicago Mortgage Broker
If you’re looking to buy a condo in the Chicago area, speak with your A and N Mortgage brokers. We can guide you through the lending process and help you sort through the ins and outs of condo buying. You can also browse through our tips and resources to learn more about buying, moving, and borrowing or contact our team today for more information at (773) 305- LOAN.