Editor’s note: This is Part 3 of a three-part series. Read Part 1:"Condo rules a deal-breaker for some"; and Part 2: "How healthy is your HOA?"

Meet Bernice Ross at the upcoming Real Estate Connect conference in San Francisco, which runs from Aug. 5-7, 2009. She will be available to meet with conference attendees from 12:30 p.m. to 1:30 p.m. on Thursday, Aug. 6, in the Palace Hotel’s Ralston Room. Click here to send Bernice a message.

Are you considering buying a condominium? This week’s column looks at three additional pitfalls that can trap an unsuspecting buyer as well as how to avoid them.

The first two parts of this series provided three important questions you must ask before purchasing a condominium or planned unit development (PUD). Those three questions are:

  • 1. What type of ownership are you purchasing?
  • 2. What obligations and restrictions do the covenants, conditions and restrictions (CC&Rs) place on you?
  • 3. Is the homeowners association (HOA) financially healthy?

Here are three additional questions that you must also address:

Who is responsible for maintenance and what is the process?

For example, if a pipe breaks inside your unit, who is responsible for the repair? Do you call the plumber or does the management firm handle that? (Many associations have a management firm that handles the maintenance, bookkeeping, and bill-paying on behalf of the HOA.) As a rule of thumb, if the issue occurs in the common area, it is the association’s responsibility to fix, not the homeowner’s.

While this arrangement may seem like a good one, it can cause problems. I had a client who was selling his townhouse. There were six two-story units per building, and each unit shared a common attic. The termite report came back saying there were termites in the attic and that the building would have to be fumigated. The HOA called its pest control service to do an inspection. If there were termites, the terms of the HOA’s agreement required the pest control company to pay for fumigation. The pest control company said there were no termites. The seller was convinced that the pest control company was trying to avoid paying for fumigating the building. Since the seller was desperate to close, he offered to pay to have his portion of the attic treated. The HOA said "no," because the attic was common area. Without a clear pest control report, we couldn’t close. Furthermore, both inspections had to be disclosed to the buyer.

I persuaded the seller to obtain a third termite inspection from a different company. The third inspection showed evidence of dead beetles, but no termites. This scenario illustrates how hard it can be to resolve issues regarding the common area. If there had been a termite issue, the next step would have been for the seller to sue the HOA to live up to its obligations as outlined in the CC&Rs.  …CONTINUED

What does the master insurance policy on the property cover?

In most condominium associations, you will pay your pro-rata share of the master insurance policy that covers the entire building. You will have to purchase a separate policy to protect the interior portion of your unit, including your contents. The question you must address is what is covered under each policy.

For example, if the building were to burn down, would your built-in refrigerator and appliances be covered? It’s important to know exactly so you can order the correct amount of coverage.

One of the stickiest issues deals with earthquake and hurricane insurance. These policies generally have high cost and high deductibles. If you live in a high-risk area for this type of event, you can usually obtain this coverage if you live in a PUD because you hold title to both the land and the improvements.

If you own a condominium or co-op, however, you will probably have to rely on the HOA to order this insurance. If the HOA decides not to obtain coverage, then you have to decide whether you want to live in a building that is not insured for these hazards.

Are there noise issues?

Regardless of what type of property you purchase, it’s smart to visit it on different days and at different times. Is there heavy traffic at certain times due to a nearby school or business? Is there airport noise?

Even more important, how much noise will you experience when you move in? Is your unit near the pool or spa? Does the HOA enforce limits on when these facilities can be used and who can use them? Does the building have double-paned windows that reduce exterior noise?

One of the most widely reported issues with condominiums results from noise from neighbors. Be particularly wary of any condominium property that allows upstairs units to install hardwood floors. Depending upon the quality of the construction, if your upstairs neighbors have hardwood floors, you may end up listening to them every time they walk across the floor. It’s also important to check how much noise comes from your neighbor’s bedroom and bathroom. Needless to say, you don’t want to be stuck owning a unit where your neighbors keep you up at night.

Finding the right condominium, PUD or co-op for your lifestyle takes some work. If you ask the right questions ahead of time you will avoid many of the pitfalls and have a lifestyle that you can truly enjoy.

Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of "Real Estate Dough: Your Recipe for Real Estate Success" and other books. You can reach her at Bernice@RealEstateCoach.com and find her on Twitter: @bross.


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