Selling a condo is a 2-way street. The seller not only has to decide on setting the price but also the seller has to think like a buyer. That is difficult to do because it is only natural to view your condo as perfect and needing no upgrades or improvements. I often recommend the seller have an impartial third party inspect the condo unit to develop a list of interior problems or impediments that would reduce potential buyers’ interest. To that end, here is a list of the top 10 issues buyers consider in their condo purchase due diligence:
Testing: Buyers should always test the heating and air conditioning systems. Turn everything on upon beginning the inspection so that all systems will be fully operational before leaving. If it is the winter, turn off the heat and crank up the air conditioning, reverse in the summer. Turn on all major appliances.
Plumbing & Electrical: Operate every fixture. This includes taps, the Jacuzzi, shower, and toilet. Watch for both water pressure and adequacy of drainage. Turn on every electrical switch, light, and plug a night light into every outlet. The outlets should be GFCI trip protected around sinks and open water sources while having 3-prong outlets where computers or small appliances will be used.
Floors, Walls, & Ceilings: Turn the lights off. Use a powerful flashlight and shine on every surface, especially at junctures of walls, ceilings, and floors. Flaws, cracks, spot painting will be illuminated. The light can also be used to check for plumbness in the walls and bowing or warping of floors and molding. A golf ball is a great devise for checking for floor levelness. Every window should be operated and every door opened and fully closed. Look for new or spot painting on the top floor ceiling at the north side of the building to discover past ice dam water infiltration and damage repairs.
Updated Reserve Fund: Buyers and their agents are becoming smarter and are asking about reserve levels and matching with specific repairs planned. One rule of thumb suggests young condo should have 10% of replacement costs in reserves, while 10-20 year old condos need 30%, and older properties need 50%. However, like people, all condos are different and need customized reserve plans. If a formal reserve plan is available, read it and determine if the plan is being followed.
Legal: By-laws should be current and accurate. The re-sale certificate should report any outstanding legal matters. Determine the potential liabilities; this is particularly important for any property that has experience serious events including fire, flooding, or environmental hazards.
Issues: Be nosey. Buyers should check the last few Board meeting minutes to discover what problems are on the table. The re-sale certificates often do not address these important matters.
Renters: What is the condo’s disposition toward renting units? Some condominiums try to limit renting due to the perception that renters do not care for the properties as much as live-in owners. On the other hand, if you plan to use the property as an income source, now or in the future, does the management assist in find or dealing with renters? Also, the new FHA rules place restrictions on buying into condominiums that have restrictive policies against renters.
Insurance: Buyers should always review the insurance policy limitations and cost to be assured the replacement costs covered will cover the property’s rebuilding. This includes covering new ordinance or code upgrades. It is always a good idea for the buyers to review their unit insurance policy against the coverage the association provides.
Delinquencies: The recent history of unit owners in arrears on their assessments might show signs of reserve under-funding or owner discontent in the condo. FHA loan policies are also paying a great deal of attention to these statistics within a condominium. All of this can have a direct bearing on market value.
Management: A quality property manager can make all the difference in the quality of condo life. There are many condominiums that are efficiently self-managed but they may be the exception. This is especially true for unit owners who live in the complex part-time or are investors ‘from away’. Even with a professional managing company present, it is a good idea to check out their reputation with other owners or associations.
Testing: Buyers should always test the heating and air conditioning systems. Turn everything on upon beginning the inspection so that all systems will be fully operational before leaving. If it is the winter, turn off the heat and crank up the air conditioning, reverse in the summer. Turn on all major appliances.
This list will probably not be seen on the DIYS channel but following these ten simple steps could go a long way for everyone involved in condo transactions to make the process as orderly and painless as possible. As in all plans, waiting to the last minute to implement changes or performing due diligence is never a good idea. What is rushed can be missed, and what is missed can often not be undone.