Dear Monty: I found a condo near my office, but my agent quickly let me know that the outside of the complex has structural damage and that a special assessment would come. It is also in poor condition inside. There are signs of water penetration and mold everywhere. Nothing works; there is junk around and a horrible smell. That may be why it has been on the market for months. My father worked in the construction industry and can do a complete remodel. He says fire, but I think the damage is from being in some hoarder environment—or someone passed away but wasn’t discovered for some time. It is only $200k, which is very reasonable. We are still determining how to evaluate the situation. Any thoughts will be appreciated.
Monty’s Answer: It seems unusual that the condo association has allowed what you describe to occur. With the mold and potential water penetration, I wonder if the building has a flat roof. That may be part of the structural damage the agent mentioned. There are two separate projects to undertake that will help you to decide. The first is due diligence on the condo association and then determining what you can pay for the unit if the association is solid.
Is The Condo Association A Problem?
If poor management is a problem, you may decide to avoid looking further. Obtaining the condominium documents should only take a few days to sort out. Ask your agent for help. Your agent may suggest you wait until you have an accepted offer. Consider holding off on an offer because you need to know more
before you make an offer. You can better establish the price
after you learn what you are buying. You will also learn how well they manage the
condo association by their ability and willingness to produce the information. The following docs contain the critical information. No. 1: Articles of organization; No. 2: Bylaws; No. 3: Rules and restrictions; No. 4: Current financial statements; No. 5: Meeting minutes from the past seven meetings; No. 6: Definitions of common areas and limited condo areas; No. 7: Survey; No. 8: Evidence that the condominium project is not non-warranted. Condo sales sometimes fail when a unit buyer receives these documents
after a contract is signed. Here is a story that offers an additional perspective at
DearMonty.com.
Is Remodeling The Unit Logical?
It sounds like much work in this unit. Are any remodeled units in the project for sale? Look at it (them). Also ask your agent to gather all the remodeled resales for the past five years. Are units appreciating or depreciating? This look will give you and your dad an idea of the sale prices of remodeled units. If your dad estimates it will take $50k to make it like new, and the renovated units are selling for $250k, you may be better off buying one finished for $250k. It makes sense if they are selling for $295k, and you can remodel for $50k. The final step is for your dad to verify the cost estimates. You will need a complete list of what work must be done and then determine the specifications. You want to be careful not to over-improve, which is another reason you should look at other units for sale.
