How To Buy A Condo
Condominium buyers have to consider variety of issues related to the collective ownership of a property. Buying a new condo is different and more risky than the purchase of a resale unit.
What Is A Condominium
Condo owners possess individual units and have undivided interest in common areas of the property like hallways, lobbies, the land and recreational facilities.
They elect a board of directors which governs the condominium corporation. Its daily operation is usually contracted to a property management company.
You have to pay a monthly fee, mainly used for the maintenance of a building. A portion of this payment is saved into a reserve fund to cover the cost of major repairs and upgrades of common areas.
Condos are usually more affordable than single-family homes, but due to the downside of shared ownership they don't appreciate as well as a house.
Buying A New Condo
If you haven't read the previous page yet, you may find it helpful as buying a brand new house is similar in many ways to the purchase a pre-construction condominium.
Your developer must give you a Disclosure Statement which contains governing documents, and other essential information about the property, financial responsibilities and critical dates.
It's imperative that your lawyer reviews every document relating to the sale. Your purchase agreement may not reveal all conditions. Finding perplexing clauses, hidden in a legal jargon of the disclosure is a real possibility.
For example, some developers own guest suites in a building, which will have to be bought back by a condominium corporation on unfavourable terms, or it may have to pay for expensive lease on boilers, furnaces and other equipment.
These expenses will be funded by your monthly fee. If you overlook them at the time of your purchase, they will become your responsibility.
Be prepared for a substantial increase of a monthly fee in a year or two. Maintenance fees are usually calculated below the actual cost when condos are sold. It's a deliberate sales practice developers use to make the fees more affordable.
Many buyers unaware of this ritual are later caught in a trap of a surprisingly high monthy fee. A lawyer or an agent experienced in condo sales should be able to tell you what the real cost is.
Review with your lawyer all adjustments you'll have to pay on closing. Running into thousands of dollars, they're often listed in a fine print of the purchase agreement.
This isn't a trivial matter, as stories of condo buyers who were hit with a $20K or so overhead on the $350K purchase price aren't fictional.
Beware of open-ended adjustments. A prudent buyer wouldn't sign a legally binding agreement which doesn't give a clear picture of how much has to be paid .
Most builders consent to putting a cap on closing fees. If you can't negotiate it, do yourself a favour and spend your money somewhere else.
Don't assume that your unit will look exactly like the one they show you. Developers usually showcase fully upgraded suites to entice buyers.
Get a list of upgrades to know exactly what isn't included in a basic model. If you pick extras have them enclosed in your puchasing agreement.
You may find later that the unit isn't as large as it was advertised. Therefore, a condo floor plan detailing all dimesions has to be included in your contract.
An agreement lacking this essential component will give you no legal leverage when the condo doesn't measure up to what you paid for.
Delays are often a part of the process. However, you may find them more painful if there're no stringent procedures which must be followed, or no limit to how long a builder can play a waiting game.
Don't proceed with your purchase unless you have some protection against delays, warranted either by laws in your province or a contractual clause.
The quality of your purchase depends very much on builder's reputation. Start off with asking them how long they have been around and how many projects they have done. Then examine the builder's record with a new home warranty program.
Talk to your friends. Perhaps they'll refer you to someone who already bought a suite from that builder. And had you ever hired an agent before, ask if she or he can get more information through professional contacts.
If you don' know any agents visit realtor.ca to find out who is certified as a condo specialist and mostly deals with condominiums in your area.
Feel free to contact them and seek an advice. True professionals will answer even if they don't get any immediate business from you.
Feedback from previous buyers is priceless. Some developers may not give you a reference list due to privacy concerns. Regardless of what you get do your own reserach on the net.
You may discover some media reports, or find a review board where condo buyers express opinions and share experiences they had with builders.
Your provincial legislation may provide cooling off period. Some new condos sell out fast, and you may want to snatch a unit before it's gone. If there was no time to see a lawyer, you have the right to cancel your purchase within 10 calendar days.
Buying A Resale Condo
Make your offer to purchase conditional on the review of a Status Certificate by a lawyer. It's a portfolio of documents about the unit and the condo corporation.
The certificate will give you an insight into the financial condition of the corporation and its performance over time. You'll find in it reports from previous years, current receipts and expenses, and how much is saved in the Reserve Fund.
The latest Reserve Fund Study can tell you how much money will be required in the reserve. Such studies are commissioned by a condominum corporation every three years to determine the cost of anticipated repairs.
If the reserve is too small the condo corporation will ask unit owners for more funds. They are raised through Special Assessments - the board of directors' decisions to charge unit owners a lump sum or several payments.
Mismanaged Condos routinely make special assessments for major repairs. If you refuse to pay the corporation can register a lien on your property or sue you to recover the money.
A sluggish management record is harmfull to the resale value. By contrast, condos where reserves are substantial and assessments are kept low tend to appreciate faster.
Most condo buyers in the resale market choose not to hire a home inspector as all necessary repairs are already identified by the technical audit, which is a part of the reserve fund study.
Instead, they can focus on the review of the status certificate to determine if the corporation in question has enough money to handle upcoming repairs.
Make sure that upgrades in your unit made by previous owners are in line with corporation's rules, or have been done with its approval. Otherwise, the board of directors may order removing them at your expense.
Avoid buildings with lots of renters. A high percentage of absentee owners impaires resale prices, and makes it very diffcult to sell a unit in such buildings.
Know what other people say about the condo corporation. Introduce yourself to other owners, and ask to them how they feel living in the building.
Search condomiums review sites on the net. There's quite a number of them, and you might be lucky to find more clues.
A resale unit is more predictable than a new condo. You can see different suites before buying. Even if you have to renovate, you still can be sure that you will get pretty much what you expected.
Established condo corporations have a long track record. They give you an opportunity to ensure fiscal responsibilty, a balanced budget, and a sufficient reserve fund.
Pre-construction condos, no matter what precautioanary measures you take do not offer the same level of security.
Other Condo Issues
View From a Unit - It can be spoiled by a new high-rise. Ask your lawyer to inquire about construction plans for adjacent open areas.
Unit Location - Consider the distance between the suite and elevators, garbage chutes and a party room, as well the noise levels generated by a street.
Rules - Make sure your lifestyle and needs fit into the rules. If you disobey them you may be in conflict with other residents and the condo corporation. Unresolved disputes can get you fined or even land you in a court.
Parking - Ideally, you will own it. You may not be able to transfer exclusive rights to your buyer when you sell. If the parking is sold separately ensure that you have full ownership of it.
Lawsuits - They should be disclosed in a status certificate of a resale unit but some corporations fail to do that. Developers have no obligation to reveal if they were sued.
Ask your lawyer to search court records, and you may cast more light on a company you are dealing with.
Hire Experts - Many agents and lawyers who don't have any condo experience may readily offer own services to get your business. Inquire if they specialize in condos, see their work record and check on references they give you.
When you talk to agents and lawyers ask them what condo problems they have encountered and how they handled them. Experts will give you a long list of examples. Those who don't know much about condos will dodge the question with generalities.
Amenities - An indoor swimming pool or a gym will drive up the price and the maintenance cost. Even if you don't use them you still have to pay your share.
© housepages.ca - all rights reserved