The “Ins and Outs” Of Condo Buying

You have researched real estate prices on Kaua`i, are downsizing, or have a busy lifestyle, and have decided that maybe a condo may be a better investment than a single family residence. What are the “in and outs” of a condo purchase? Here are a few pointers:

GET THE “COMPS”. Your Realtor can provide you with inventory, sales history, and market trends of the area you may be interested in. What kind of appreciation has the project seen over the years? Some real estate professionals live in or specialize in certain condo projects. Their insight is invaluable.

“MAY I SPEAK TO THE MANAGER?” The management company or resident manager of a condo project has good information with regard to number of owner occupied vs rental units, % of delinquency of maintenance fees owed, ongoing preventive and deferred maintenance projects, and other information which give a good indication of the general state of the project under consideration.

TALK TO THE RESIDENTS. The current residents at the condominium project have an invaluable perspective on what it is to live onsite. Generally, tenants provide the straight “scoop”. There is no sugar coating; they have nothing to gain. One note: the renters of the specific unit under consideration for purchase may disclose everything wrong and more, as they may not want to move, so take their comments with a grain of salt.

AFTER HOURS VISITS. To get a true feel of living anywhere, it is a good idea to visit the grounds at different times….early mornings, evenings, as well as weekdays and weekends. The visits will provide a good sense of typical noise levels, maintenance & landscape schedules, vehicular traffic, and other general activity of your future neighbors.

UNIT SPECIFIC. When the search has been narrowed down to a specific project, there will probably be several units to choose from. What are features which may affect the final choice? Some units are superior with respect to views, floor plan, general condition, appliances, window coverings, modifications, and upgrades. Other factors to consider are prevailing trades, sunlight, natural lighting, assigned parking location, interior vs exterior (corner) unit, street noise, and ground vs upstairs location. Ultimately, the most desirable features for the best price will provide the best buy.

LENDER APPROVED PROJECTS. Whether considering an existing project or a newly constructed condominium, it is important to know that financing is available. When a new project first comes on the market, the various lenders have their legal department review all documents and aspects of the project to determine if the lending institution feels it is a good project to issue loans on. Lenders also have guidelines for issuing loans at condo projects which have vacation rentals and/or minimal owner occupant units. Occasionally, a previously approved project will be taken off the lender’s approval list due to loan delinquencies or other issues adversely affecting a project.

WHAT’S IN A MAINTENANCE FEE? Maintenance fees are monthly fees paid by each unit owner for the general maintenance of common elements and amenities such as the physical building, roof, siding, walkways, landscape, parking lot, pool, recreation building, insurance, water, sometimes utilities and/or cable, as well as insurance for the grounds and buildings. A reserve fund for future capital improvements is also established and included in the monthly maintenance fee. The monthly maintenance fee is usually set annually by a Board of Directors, members who are elected by the condo owners.

REVIEW THOSE DOCUMENTS! Typically, after a purchase contract is executed, the Seller provides the Buyer with condominium documents which include, but are not limited to: Condo Declaration and Amendments, House Rules & ByLaws, Budget and Financial Statement, Board of Directors Meeting Minutes, Annual Meeting Minutes, as well as any pending litigation against the Association. Do not simply file these documents away. The documents contain information with regard to the financial strength of the project, as well as indications of future “assessments”. An assessment is a charge against property owners to cover additional or unplanned for costs of maintaining a project.

On Kaua`i, many of the condo projects are 20-30 years old. In recent time, several of the projects have had to assess the unit owners to cover the cost of physical repairs such as re-roofing, re-siding, cesspool to septic system conversion, termite treatment/damage repair, and stairwell/railing replacement. These assessments can run from a few thousand dollars up to $30,000 and more, and are charge either in lump sums or increment payments.

CONCLUSION. The purchase of a Kaua`i condo is much more complicated than it appears on the surface. To make the best buying decision possible, it is advised that one consults various sources, use various information gathering methods, and review (or have a professional review) all necessary documents. Proceeding with caution will make condo living on the Garden Island a most enjoyable experience!