Nolo's Essential Guide to Buying Your First Home (42 page)

 

CAUTION

 

Signs of association money troubles:
Ask further questions and think twice about buying if you spot evidence that:

• more than 15% of the units are in foreclosure or have been on the market for several weeks and remain unsold

• more than 15% of owners are overdue on their homeowners’ fees

• the association’s reserve account is almost empty, or

• major litigation is pending.

 

Also check on the ratio of units that are, or are allowed to be, rented out. The more units that are owner-occupied, the better the community usually is at attending to details like the budget and maintenance. Also, in a down market, investors are often the first to go into foreclosure.

Why so much research early on? First, if there are restrictions you can’t stomach, you’ll know the place isn’t for you. Don’t assume that the rules will change, or that an exception will be made for you! Second, you want to know how well funded the association is. If there isn’t enough cash in reserve, your monthly dues may go up, or you may have to pay special assessments.

 

CD-ROM

 

Use the “Condo/Co-Op Question Worksheet” in the Homebuyer’s Toolkit on the CD-ROM for suggested questions.
A sample is shown below.

Condo/Co-Op Worksheet

 

Here are some basic questions you’ll want to ask the seller, seller’s agent, and neighbors about a particular condo or co-op. Tailor this list according to the particular property (Hawaii homebuyers can delete the question about snow removal!), and add other questions of interest—for example, if you have specific questions about waste disposal or want more details about use of a pool.

1. Do you enjoy living here? What are the best and worst things about it?

 

 

2. What percentage of the properties are rented out to tenants?

 

 

3. Are you happy with the community association? Are there any particular problems? What do you wish it would do differently?

 

4. What exactly is included in your monthly association or maintenance fee? (Some might include heating, parking, storage facilities, and use of the clubhouse, while others charge separately for these services, if they’re available at all.)

 

5. Where is your parking? Indoor? Outdoor? Reserved? Private garage?

 

6. What amenities are included in your membership (for example, a clubhouse or laundry room)? Are there any waiting lists?

 

7. Are any special assessments planned? When was the last one? What was it for?

 

8. What taxes can you expect—for example, local school taxes?

 

9. For co-ops: How much is the mortgage on the property itself? (This may affect your monthly maintenance fees and whether they are deductible because they pay the underlying mortgage.)

 

10. In the event of snow, by what time can you expect it to be shoveled or plowed? Does this include parking areas?

 

11. Are there any annual surcharges, such as for fuel?

 

12. How high is the reserve fund (of emergency money)?

 

13. Who determines how much is spent on various things?

 

14. Are meetings of the board or association open or closed? How do members or shareholders have input into decision making (for example, by submitting questions in advance of meetings)?

 

15. If people will be living above you, is there a rule saying the floor must be carpeted? Are the walls well insulated?

 

16. Are any of the neighbors difficult or inconsiderate?

 

17. How are package deliveries handled in the building if there’s no doorman?

 

18. Do you have a right to sublet your unit?

 

19. Are there many vacancies in the building or development? How long does it take for the average unit to sell—are they in demand, or does it take a while?

 

20. When are workpeople allowed to enter and work on your unit? Saturdays, Sundays, evenings? Must they be licensed?

 

21. What kind of repair or construction work can be done without the approval of the association or board? What’s the procedure for approval? How long does approval usually take?

 

 

CHECK IT OUT

 

For more about meetings and other features of community living:
See the resources offered by the Community Associations Institute (CAI,
www.caionline.org
). Your state’s website should also link you to your community association law.

What’s Next?

 

Still having a hard time finding the right house at the right price? Look to Chapter 9 for alternatives.

 

Meet Your Adviser

 

Steve Elias
, an attorney who consults with homeowners and others dealing with foreclosure and bankruptcy, author of numerous Nolo books including
The Foreclosure Survival Guide
and
Chapter 13 Bankruptcy: Keep Your Property & Repay Debts Over Time
, and a programmer and volunteer at KPFZ 88.1 FM radio, in Lakeport, California.

What he does

ʺMy work as a lawyer is somewhat revolutionary, actually—Iʹm the only one I know of helping people who canʹt afford lawyers but want to do their own bankruptcy. For a flat rate, Iʹll interview the person and be available for questions afterward. Iʹve worked with over 1,000 people so far. Because a number of the people I consult with were also homeowners, Iʹve gotten into foreclosure advising as well. We discuss priorities—whether theyʹre hoping to keep the kids at the same school, sell the property when it makes sense financially, or what?

ʺIʹve worked with Nolo for years on its bankruptcy and foreclosure books—and because the law keeps changing, so do the books. In fact, because the recent bankruptcy laws made the process so difficult and expensive, itʹs become more important than ever for readers to have access to useful, plain-English information.

ʺAs for my radio work, I do three live programs every week, which include news and commentary.

 

First house

ʺIt was a brown-shingled place, with redwoods in the front and back yard, that we bought in Berkeley, in 1969. Both my wife and I were being paid as law students in legal assistance offices, but at $21,000, it didnʹt feel like too much of a stretch. Unlike many California houses, it had a basement, where friends would come and stay.

ʺWe moved to Vermont a year later, and sold the house for a small profit. Now itʹs probably worth over a million.ʺ

 

Likes best about his work

ʺWhether itʹs working on my books or talking to people about their economic troubles, I like providing people with the information and perspectives they need to make their own decisions and handle their own legal affairs in the areas I cover.ʺ

 

Top tip for first-time homebuyers

ʺThink about the reason youʹre buying. People who choose a home because of the local schools, public transport, and liking the feel of the neighborhood—theyʹre going to live there forever. But when itʹs your first home, thereʹs a good probability youʹll move on to other homes, so you also have to think about affordability and investment.

In fact, you might want to buy in a place that isnʹt vulnerable to a lot of foreclosures—though there are good deals to be had in vulnerable areas, so itʹs hard to give general advice here.

ʺAnother important tip Iʹd give is, donʹt overstate your income just to get into a house. Itʹll only lead to trouble later. People who didnʹt overstate their income are in most cases doing fine even in the midst of this foreclosure crisis.

ʺOne last point: If youʹre happy where you are, your houseʹs value shouldnʹt be a concern—youʹve got shelter, and would otherwise be paying rent.ʺ