Hidden Danger of Condos
Q: My wife and I found a really good deal on a condo 25% cheaper than what the last buyer paid for it. What do you think? Kenny, West Orange, NJ
A: Well on the surface, a 25% discount definitely looks like a bargain, however, the market value of the condo may have been very different when the last buyer purchased it and residential property values are typically only valid for about 6 months.
Another thing to consider is that there are hidden dangers in condominiums that you should be aware of–as a former condominium developer myself, I know this from experience. One big danger with condominiums that many people aren’t aware of is an underfunded association. Condominiums are normally run by a condominium association that’s entrusted to make repairs, pay common expenses and maintain the condominium’s common areas. Many condominium associations don’t have enough money to fulfill their duty because of owners who are behind on their monthly condo fees or maybe because the monthly dues the association charges are too low to cover expenses like insurance, common utilities, landscaping or snow removal. Sometimes there is pressure from owners to keep monthly condo fees low and sometimes developers keep monthly condo fees low when they sell condos to entice buyers.
I’m not saying this condo you found isn’t a good deal, Kenny–my point is that I think you may want to consider doing more due diligence and research before you make up your mind, because you should always do you homework BEFORE you buy.
Thanks for your question, Kenny, good luck.
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