Everyone needs to go in knowing their budget: 

1. Determine how much you can afford – with cash or to borrow.

2. Add up how much you have for a down payment if borrowing.

3. If you are tapping into your retirement accounts for a down payment, choose wisely

4. Calculate an affordable purchase price.

5. Know the local housing markets and plan accordingly.

 

Help on these questions can be found easily on the internet along with calculators to see what your monthly loan would be when borrowing.

 

In addition to your monthly bank payment if, if there is one, there will be some additional costs:

 

Real Estate Taxes

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Each owner pays the property tax just like owning a single detached home.  A listing on the County Assessor’s Office web page will detail the properties current tax and the breakdown of taxes, the tax value of the property, the property legal description and include the percentage of common interest. Rembmer the tax, if you find it unusually low, is likely receiving a senior or disabled discount). It will also normally list the legal recording number of the Declaration and each of any amendments. If you have a mortgage you may have or will be required to have property taxes included in your mortgage statement. If not, like any piece of property the County sends out an invoice once a year and taxes are due usually twice a year.  Again, just like a singe home.

 

Condo Fees (in total)

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Understanding the condo fees is important as it may affect your buying decision.  The fee, known as your monthly assessment, and often called monthly dues, should be made up of specific items, primarily budgeted utilities and reserve costs for the year.  Condos in the same area normally will have the same water, sewer and electric provider.  The condo's home owner monthly assessment, normally referred to as 'dues' is made up of items such as water, sewer, garbage, common area cleaning, windows, maintenance, and insurance.  It might also include items like gardening.  Check to see what is included and not included.  Often electric or gas are not included if they are the primary source of heat.

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​Common Area Fees

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When you look at the "dues" fee structure for a unit, it can be based on the “some” percentage of common space, the floor it is on, square footage or a combination of items - and may include more that we are suggesting. Check this out carefully.  This normally will affect your percentage of maintenance, reserves and special assessment.  Not always so to be sure get all the facts up front. The and usually it is evenly divided expense or utilities.  A common way utilities are divided may go beyond water and sewer and include items such as gardening.  The allowable “utilities” will normally be stated in the Declaration. Going back to the unit percentage, it could be based on square footage, what floor the unit is on, or the original cost of the unit as common examples.  You should ask how the percentage of common space costs are divided. Some Declaration split fees and whatever is included in utilities is evenly split and the other fees, maintenance, insurance and so forth are split based on the particular formula as discussed.

 

Reserve Fees

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Let's start with the bottom line, reserving is a good thing.  Putting away a small amount of money based on the life of each replacement or long term maintenance issue is prudent.  In effect,  you pay for what you use.  

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An example of this is new carpet.  As an example, lets say the condo will need new carpet in 15 years from now after just being replaced and it cost $25,000.  Lets project that same carpet will cost $30,000 in 15 years.  Then the condo needs to reserve that $30,000 over the 360 months, that would be $83.33 a month or $1,000 a year.  If the condo does not reserve - save- that money, then whom ever is living there would have to pay 100% of the unit's portion.  Imagine paying for a $150,000 - to $250,000 roof that way, many have.

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Some states do not require reserving, some require the disclose of a reserve report, while others require and have strict guidelines about reserving.  It is a priority for you to understand this aspect.  We have personally seen $80,000 per unit special assessments - read below- imaging moving into a condo and in a short period you get a mandatory special assessment from some to many thousands of dollars.  No fun, and all too true.

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Starting January 1, 2012, Washington State required all condominiums to have a reserve report completed.  There is a minor exception, but the State must allow the opt out and if the property has not completed a reserve report a State required paragraph must be included in the re-sale certificate.  For more on Reserve Fees click on this link or refer to the table of contents.

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For a list of the most current reserve requirements, we could find click here.

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Special Assessments

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Remember we discussed monthly assessments, what are commonly called monthly dues.  It includes regular common condo expenses.  A "special assessment" is normally a one-time or defined period of time amount of dollars to address one or more specific items and or issues.

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It might be an unforeseen leak in the roof, or legal bills.  Then there is the foreseen, often called deferred maintenance.  This is where the condo did not reserve - save any money for necessary down the road items like, paving the parking lot, a new roof, carpet, painting and so forth.  In this category when no dollars are saved the HOA often pushes the date down the road, or finds the cheapest way to accomplish the task.  In my real life, we had a 10 warranty year roof that was installed, it was the cheapest they could find, cut every corner they could and it lasted 8 years.  Even then the condo has spent thousand of dollars in repairs and had many thousand dollars secondary issues caused by not installing the right roof.  Now we are spending $150,000, using a 10 year loan.  But, we are already saving for a new roof 25 years from now.  

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The goals should be to reserve and anticipate.  If you do this correctly, it is easier to plan for expected cost instead of having any special assessment.  Remember, you own a building, not just an apartment.

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Checklist:  

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• What monthly utilities and maintenance fees are included in the monthly 'dues' fee:  Water, garbage, landscaping, cable TV, some include internet?

• The HOA "dues" should include property/building liability insurance, but ask about earthquake insurance.  So do and some do not?

• Reserves: How much of the monthly fee includes reserve fees, this is a big issue and not often broken out, so check.  (See below)

• Unit insurance: Most Declarations require an owner to have insurance on the unit.  That is an additional cost, but again, normal.

• How are common area fees split, what does the declaration/ CC&Rs state?

• What is the animal policy - is it in the declaration/CC&Rs?

• ... make your list, ask the question and do not be bashful about this ...