The Wall Street Journal

By Dan S. Barnabic, March 24, 2015

If you come across a condo unit that’s selling at a rock bottom price, but with an unusually high maintenance fees, think twice before signing the contract.

10 golden rules of condo buying

Beware of condo bargains with high fees

By Dan S. Barnabic

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If you come across a condo unit that’s selling at a rock bottom price, but with an unusually high maintenance fees, think twice before signing the contract.

Some troubled condominium complexes may have no choice but to sell their vacant units for a song. Because of mismanagement or poor construction, often coupled with a drop in the real-estate market, these complexes may have depleted their reserve funds to cover maintenance and repairs. They compensate for low selling prices by charging higher than normal monthly maintenance fees.

In other words, what you save on the price of the unit, you’ll end up paying back in higher maintenance costs. Over time, you may find yourself imprisoned in a financially troubled complex with a unit that’s nearly impossible to resell.

Many buyers of these “bargains” are driven by the notion that writing a monthly check for higher maintenance costs will pay off in the long run once the market turns around. They hope that by the time they eventually sell their unit, its value will have increased to the point of recouping the costs they’ve racked up in paying those higher maintenance costs.

Unfortunately, it may take months — or, more likely, years — for the market to improve. These unfortunate owners may end up losing money as in all likelihood they’ll end up being bombarded by myriad ongoing demands from their Homeowners Association (HOA), demanding special assessment surcharges to replenish the reserve fund, service the common loan, etc. Should unit owners be unwilling or unable to meet these demands, the HOA will place a lien on the units and eventually take them over and sell them — again at a bargain price — to the next crop of unsuspecting buyers.

Historically, financially weak condo complexes are prone to being wound down, through insolvency or bankruptcy proceedings.

Bottom line: Beware the marketing schemes of desperate condominium complexes promising better days in the future.

This column is the third in a series of forthcoming articles on the “10 golden rules of condo buying”:

  • Don’t rush
  • Buy at the right time
  • Beware of condo bargains with high fees
  • Make a low offer
  • Make sure you can afford the carrying costs
  • Buy with a solid down payment
  • Be cautious when buying during preconstruction
  • Beware of complexes with many units rented out
  • Check the physical facts
  • Consider demographics and future resale value