For thousands of Northwesterners, a switch to condo living opens a whole new lifestyle free of chores like mowing, painting and cleaning gutters. If, during this time at home, you've been crafting your plan to downsize, you'll want to add one more consideration to the mix: what it really means to share building ownership with other people.
As a condo owner, you'll be part of a group called a Condominium Owners Association (COA), which is headed by a board of directors. The board sets the monthly dues you'll pay to maintain and repair the building's common areas (grounds, amenities, siding, roofs, etc.). Those fees need to be accurate, because if something goes wrong and the COA under-budgets, you could receive a bill (called a special assessment) to make up the shortfall.
Before you commit to a property, you'll want to answer five big questions:
- How well is the condo maintained? Check maintenance and repair records. Don't consider a fixer-upper. Your insurance doesn't cover costs for maintenance, neglected maintenance or defective construction. In the Northwest, rot and mold are common uninsured problems in condominiums – and they're expensive to fix.
- Has the condo's reserve fund run short in the past?
- Are any major repairs or maintenance projects planned? Can the reserves handle it?
- How well does the COA work together? Think twice if there's a history of in-fighting or litigation, and ask for that history in writing. If there are active lawsuits, is the COA's insurer handling the defense? You may even want to run the situation by your own attorney. The advice won't be free, but it could help you decide whether or not to walk away, potentially saving you big money in the long run.
- Are you comfortable with others making decisions about your home? If you're unsure, rent before buying.
You'll also want to understand how condominium insurance works. The COA will have a master insurance policy to cover the structure if, for example, wind damages the roof. As an owner, though, you'll still be responsible for your portion of the deductible and, if the master policy's coverage is too low, any repair costs that exceed its limits. Ask us about "Loss Assessment Coverage" through your personal PEMCO Condo policy (which covers you for liability and protects your unit and personal belongings). It can provide affordable coverage so you don't get hit with a surprise bill – $50,000 of coverage for as little as $25 a year in some cases.
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