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Condo Assessments

AlanAlan
edited July 2007 in Seattle Real Estate
I just found out that the condo I am renting is looking at a $40k assessment soon. I rarely see people look at the risk of assessments when considering the financials of buying a condo. My neighbor is retired and on a fixed income. She is absolutely livid about it.

Comments

  • MatthewMatthew
    The condo I am living in recently has a 13k assessment, the second assessment in less than 10 years.
  • wreckingbullwreckingbull
    My brother just took a $65K gut-punch, on a place that is probably worth $375K. He told me the worst thing was not the money itself, but the worry that some of the residents would not pay and they would end up bogged down in court. Luckily, they were all able to tap into equity and cough up the cash.

    This works out alright if homeowners have some equity. At his place, all of the people had been there for years. Now that the appreciation of the last five years is gone for good, I hate to think how future versions of this story play out for those who are buying today.
  • femtofemto
    We had a substantial (over $5K) assessment for plumbing in my building last year, but in general the economies of scale in condo buildings actually work to owners advantage most of the time. I've heard plenty of stories of homeowners hit with unforeseen repairs (roof, heating system, sewer etc.) for tens of thousands.
  • mike2mike2
    The only people I've known that haven't had an assessment were those that bought brand new less than 3 yrs ago. Every other condo owner from my grandma, to friends and co-workers has had at least one, usually related to water damage.

    $20K isn't that bad if the property is appreciating as much. In a flat market it's a serious problem for most owners.
  • wreckingbullwreckingbull
    I'll accept that maintenance costs, as a percentage of value, are probably about the same for a condo owner vs. SFH owner. The thing that keeps me from ever buying a condo is the loss of control. If the south side of your condo is a soggy mess, and your condo is full of people contributing to our country's negative savings rate, you are not in a good situation. You will be paying lawyers first, then (if you are lucky) contractors.
  • RottedOakRottedOak
    wreckingbull wrote:
    My brother just took a $65K gut-punch, on a place that is probably worth $375K.
    Yikes! Special assessments of $40K or $65K for normal condos (not some retreat multi-millionaires) are outrageous. We've experienced several assessments over the years at different complexes, but never more than $10K. Unless there was an unexpected disaster, big assessments suggest poor management of the HOA. They should be including money for reserves in the regular monthly dues. We always reviewed the HOA budget and meeting minutes carefully to avoid places with poor HOA finances before buying, and then made sure to be active in the association so that things wouldn't go downhill after we bought. I once advised a friend not to buy in a complex where it was obvious that big assessments would be coming due to deferred maintenance.
  • mattmatt
    Condomium owners insurance policies usually cover loss assements. Of course, this assumes that the owner purchased an owner's policy, and that the owner paid for an appropriate amount of assessment coverage. It's usually paid for in increments of $5000. Some associations require that owner's carry a policy with a certain amount of loss assessment coverage. There is no reason why an owner shouldn't have it (other than ignorance) - a condominium owners insurance policy is usually dirt cheap compared to a traditional home.
  • redmondjpredmondjp
    This doesn't surprise me at all. I've lost track of all of the condo exterior retrofits that I've seen done over the past 10 years (yes, bingo, water damage).

    What continues to amaze me is the just plain stupid design and shoddy construction used in these buildings (most new houses too) which most often leads to water damage in 5-15 years. Lots of these 'sins' aren't terribly serious if the annual rainfall is minimal (ie eastern WA, the desert SW), but around here, we all know it's a different story most of the year. Let's review:

    - Multi-story units (unavoidable, but leaves lots of siding exposed to rain)
    - Little to no roof overhang (not avoidable, but see above)
    - Poor design/construction of exerior walls (lots of horizontal surfaces/seams where water can accumulate and also get inside the wall)
    - Poor choice of construction materials (chipboard/osb vs. real weather-rated plywood, $1/tube caulks vs. $5/tube, etc) and lack of moisture prevention methods such as PROPERLY installed exterior wraps (eg Tyvek)
    - Flat roofs, roofs with insufficient slope, and/or goofy extra-complicated roof designs with many valleys, flashings, skylights, fireplace vents and other likely areas for potential leaks
    - The one-molecule-thick layer of 'paint' that is hastily sprayed on, almost as an afterthought, onto the cheap siding. This is going to protect the wood how? I drive around and look at new construction where the siding is just screaming out "(re)PAINT ME". From a 50-ft. drive-by you can see how paint-starved the surface is, with the vertical lines of the studs clearly visible, like the ribs of an anorexic celebrity.
    - Outdoor shopping malls (Redmond Town Center) in a rainy place like Seattle (not related, or IS IT???)

    While on the Big Island in Hawaii recently, I was looking at some new homes being built and to my amazement, ALL exterior (siding and roof) sheathing was plywood. I don't know if this was due to a code requirement related to the level of humidity there, or maybe just custom-built homes by a top-notch builder. Sure it costs a few hundred dollars more on the front end. But could help to avoid those nasty assessments later!

    How many of today's 'savvy' condo buyers really bother to look beyond the tile floors and granite countertops to see what they are buying? But even worse, once the building has been completed, how does one go about getting any data on the construction details? Compare this to the amount of data available online for just about every consumer item from a digital camera to a new car. Too bad this same kind of information isn't readily available for the biggest purchase of one's life!
  • financefinance
    Our building was constructed in 2001 and converted in 2006 (originally built as condos...but the economy wasnt so hot in Oct/Nov of 2001, so they rented them as apts).

    I am currently the Treasurer and will have over $300,000 in reserves by the end of the year. We are thinking of installing a 15 person hot tub on the roof (~$25,000 for everything). At this time ~22% of our HOA Dues go into reserves and run a pretty tight ship. Our maintenance guy also used to live here and does an amazing job!
  • wreckingbullwreckingbull
    Finance,

    300K does not even get the contractor started on a major moisture intrusion problem (which RJP points out, happens more than you would think.) That amount probably handles legal, (it is usally worth it to go after the builder first), architectural, and engineering services, but none of the actual repair. That being said, I hope you never have to tap into it and can build hot-tubs in every elevator lobby.

    By the way, one thing I learned from my brother is that as soon as you claim something like this on a Condo's policy, you are dropped at the next renewal. No other insurance company will touch you with a 10-foot pole. You must then find a 'high-risk' insurer (read Tony Soprano type) who triples your rates.

    As I said before, not my cup of tea. I prefer something I can fix myself.
  • mike2mike2
    wreckingbull wrote:
    Finance,

    300K does not even get the contractor started on a major moisture intrusion problem (which RJP points out, happens more than you would think.) That amount probably handles legal, (it is usally worth it to go after the builder first), .

    I agree. It depends on the size of the building. At $25K/unit (which is fairly normal) that would cover 12 units assuming there are no significant legal fees.

    If you're in a small building with good reserves $300K is fine. 30 units? Not so much. Put in perspective, $300K is replacement cost for ONE 1 bedroom unit.
  • perfectfireperfectfire
    What the heck is an assessment? It doesn't sound very good. Another reason not to jump on the condo bandwagon?

    -Joel
  • EconEEconE
    perfectfire wrote:
    What the heck is an assessment? It doesn't sound very good. Another reason not to jump on the condo bandwagon?

    -Joel

    Assessment= Ooops...something broke/wore out/whatever...the reserves aren't enough to cover it...we'd better send out a bill for the additional amount to the unit owners.
  • Lake Hills RenterLake Hills Renter
    Screw that. Reason #571 not to own a condo.
  • redmondjpredmondjp
    Lake Hills Renter wrote:
    Screw that. Reason #571 not to own a condo.
    Not much different than owning a house, except that when you have to buy a new roof, or a new furnace, or dig up the front yard because a tree root collapsed the sewer line, it's not called an 'assessment.' :lol:

    And, if you made the (1st-time homeowner) mistake of buying into a privately-owned cul-de-sac like I did, you end up being responsible for your own street, sidewalks, storm drains, and sewer lift station, EVEN THOUGH you still pay the same taxes and bills as those people one block away who have city-maintained street, sidewalks, storm drains, and sewer system. It REALLY sucks. Don't do it. So when our asphalt finally crumbles away, me and my five neighbors will have to fork out the $30-40K to get it repaved. Ain't gonna happen! Don't even ask about the sewer pump failing in the middle of the night, I have weekly nightmares about that . . . and every 1.5 years or so, I live it instead of dreaming about it. :x :x

    OK, sorry about the rant, if you want to know more, post your interest and I'll start a new thread about the whole thing, as I can help people learn what not to do.
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