It is easy to forget about the details when you are in love, when you find the right one for you but when you do it can often lead to a lot of surprises down the road. It is important when you find the right condo or apartment for you that you do some due dillegence before you buy. It isn't easy to hear if there is something wrong but it is always better to know before you buy a property.
Due dillegence is simply taking extra steps and measures to make sure that there are no surprises in the building, the unit or in the future. It takes extra effort but could save you a lot of heartache in the end. These are the recommendations for what to include in your due dillegence:
- Take time to inspect the property very well, along with the unit. Pay close attention to any leaks, traffic or noise issues, appliance condition, or other trouble spots. Visit the building and unit at different times of the day, if you tour it at night first make sure to go in the morning or the afternoon, make sure the noise isn't an issue, or that there isn't heavy traffic which will pose a problem for you later on.
- Talk with a few other owners and the property manager, ask them what the strengths and weaknesses are of living in the building and the neighborhood, get their opinion on the board or about any upcoming building projects or improvements.
- Find out how many units are owner occupied, this could be a stumbling block for your mortgage approval if the percentage isn't high enough.
- Get confirmation on any closing costs, or other fees you would owe upon closing.
- Review the by-laws, house rules and proprietary lease. From these documents you will find out what the policies are on subletting, pets, or any other restrictions or policies you may not have been aware of and you can decide if this building is the right place for you.
- Look at financial statements to see how the expenses have gone up over the past 3-5 years. It is ideal to see them go up 2-3% each year. If there is a dramatic jump in expenses ask why.
- What are the capital reserves per unit? Ideally you would want to see about 10% of the annual reserve budget or 2,500.00-5,000.00 per unit. Also ask how much of the reserve is funded annually.
- Find out if any mold or asbestos testing has been done in the building. If so what were the outcomes of those tests. You don't want to get stuck paying for issues you didn't know about when you bought the unit. Make sure you review the documents.
- Are there any planned or contemplated special expenses for improvements or repairs? You can also ask to review the minutes from Board Meetings for the past several years to verify or find out if there is anything being considered in the next few years. If the answer is yes make sure you understand what your obligation is for these expenses.
- Ask if there are any pending legal actions against the building or the unit which could affect you.
- When reviewing the financial statements look at the underlying mortgage, the maturity date on the mortgage loan as well as the terms. Is it a self-amortizing loan? What is the interest rate? It is important to understand where the building stands financially. If the financial statements aren't up to date look through the board meeting minutes to garner some of this information.
- If the condo building is still being built or re-modeled verify that the developer is fully funded for completion and any warranty work that might need to be done. You don't want to buy a building that never gets finished.
While these take extra time each item is important so you are not surprised financially or otherwise once you move in to your new home.
The Warmack Group sold more condos in Belltown in 2016 than any other realty group in Seattle so we are experts at navigating the waters of due dillegence, and condo ownership. Contact us to schedule an appointment. You can also follow us on Facebook and Twitter to keep up with all the latest Seattle news and real estate information.
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