Navigating Condo Associations: Avoiding Financial Surprises and Protecting Your Investment

What if you moved into a condo with a perfectly good roof, only to face a hefty assessment fee for its replacement just a short time later? On this episode of the Standing Out in Ohio podcast, join Jim Troth and Laura, our office goddess, as we tackle the perplexing world of condo association decisions and their financial implications. We share a listener's frustrating experience with an unexpected roof replacement decision made by their condo association, despite a promising home inspection report. We illuminate the often murky operations of condo associations, explaining how their large-scale project decisions can stem from strategic financial planning or reactions to external events, like the tragic condo collapse in Florida.

For those navigating the condo-buying process, this episode is a goldmine. We discuss a proactive strategy: insist on reviewing the condo association's reserve study before signing on the dotted line. This detailed document could save you from financial surprises, outlining anticipated maintenance and repairs. Whether you're a real estate professional keen to protect your clients or a potential condo buyer looking to avoid hidden pitfalls, we offer valuable insights to empower your decision-making process and safeguard your investment. Tune in and equip yourself with the knowledge to face the complex landscape of condo ownership with confidence.

Transcript

Speaker 1 0:02

Welcome to the Standing Out in Ohio podcast, where we discuss topics, upcoming events, news and predictions with real estate professionals and entrepreneurs. Listen and learn what makes their companies and themselves stand out and gain advantages over the competition and gain market share. Subscribe for the latest news and discussion on what it takes to stand out from the crowd.

Speaker 2 0:24

Now here's your host, jim hey everybody, welcome to the Standing Out in Ohio podcast. This is Jim Troth and of course we have Laura, the office goddess, right here.

Speaker 3 0:38

Hello everybody.

Speaker 2 0:40

Okay. So we had somebody. They complained the other day that they bought a condo and then, maybe a month later was how long after what? They all of a sudden, the condo association decided they're gonna replace all the roofs on all those buildings it was within a year, because it's been like three years since we did the inspection oh so easily.

Speaker 3 1:09

Two years after a year to two years after.

Speaker 2 1:11

Yeah that makes it even more sad, okay, so?

Speaker 4 1:15

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Speaker 2 1:42

The person calls upset that we did not tell them that the roof was going to be replaced by the condo association. Is that right?

Speaker 3 1:49

Well, we said that the roof was in good shape, which it was.

Speaker 2 1:53

Useful Wow.

Speaker 3 1:55

I can't remember. No, it wasn't that bad. And they said that she had, you know, like 10 years of life left, or something like that. I don't remember the specific Her building had about 10 years of life left Her building.

Speaker 3 2:06

know like 10 years of life left or something like that I I don't remember the specific her building about her building had about 10 years of life left, and so she was upset that we didn't tell her that the condo association was going to be replacing the roof and that we had told her that the roof was you know, it still had life left in it. Well, it did, and we have nothing to do with what the condo association determines, because they're the ones that establish the maintenance schedule, the repair, the replace and all of that, and we have nothing to do with that. Oh no.

Speaker 2 2:37

Well, and also say you have four buildings, okay, you live in one building. Right. The other two maybe there's two of that need replaced and everything's getting about the same age, right, and they figure out. You know what. It is cheaper for us to go and replace them all right now. We'll get a little bit of discount because of volume and that saves the association money right, probably a pretty significant yes but I think what they did for this lady, they billed her an assessment fee yes because, hey, we're replacing we have extra expenses, so you're upping your fee and I can't remember how much they upped it but anyway is common that condo associations will do that and there's assessment fees.

Speaker 2 3:28

But there was a story of a place down in Florida. What was it? They, I think they charged everybody an extra $134,000 for the exterior work. Here's a couple bought this place for $490,000 for the exterior work. Here's a couple bought this place for $490,000. They put in an extra $100,000 to renovate it.

Speaker 3 3:53

Okay, Installed Italian porcelain tiles. Like it was high end, it was well done.

Speaker 2 3:59

They did a nice job with it. The condo board proposed a nearly 30 million dollar special assessment for repairs like roof replacement, waterproofing the exterior, and that came up to 134 000 per unit owner there's. So I mean it happens they do that, especially in florida.

Speaker 3 4:24

You got all these storms something gonna happen well I think part of this was because of that condo collapse down there and that they're trying to get ahead of stuff and make sure that everything's in good shape maybe they need to make sure they do proper maintenance on things which you must have to do.

Speaker 2 4:43

But these assessments, this is not rare that they do this, but you know, I've never heard of and maybe they do a real estate agent putting in the contract that the condo association needs to show them their reserve study.

Speaker 3 5:00

Right, that's a good idea.

Speaker 2 5:01

I've never heard of that reserve study is. This is basically what it is. Uh, the cotton association will hire somebody to do an inspection on all the buildings. Okay, typically it's just the exterior landscaping, parking lot, roof. They're not going into the buildings, right, the units or anything, they're looking at the exterior. So then that condo station takes that report and go all right, what do we have? And let's talk about just roof. They go hey, we got roof. Everything's like 10, 15 years old. We need some repairs done.

Speaker 3 5:34

We need to start budgeting.

Speaker 2 5:36

Yeah, they look how much do we have in the bank account to take care of this stuff, and then much do we have in the bank account to take care of this stuff, and then they'll go. All right, we're good the kind of fees coming in, we have enough money to take care of it or put it on the schedule for two years.

Speaker 2 5:49

Down the road we'll get it all set, yes yes, no, but no budget, no budget for that if they do not have enough money for what's coming up, that's where you run into the problem. That's when they're probably going to do the special assessment and go hey, we got to raise everybody's fee by $100 a month, so in three years from now, everybody can get new roof, we can fix this. So that is something that I've never heard looked at by any agent.

Speaker 2 6:18

Or client yeah, totally caught that one client off, off guard, off guard, yeah, and this, that one client off guard, and this is, like you said, three years later. Three years later. So much can happen in a year. But this is one of the things that they need to do. They got some special Florida damage. We've had hurricane winds up here recently. Not too long ago we had a bunch of trees come down here on the property. But you get those special expenses emergencies, floods, high winds, depleted reserve funds.

Speaker 2 6:52

Yes that's going to shrink those reserve funds and they go crap. We have these storms, we damaged the roof. We can't wait Our five years on our plan plan.

Speaker 3 7:03

We need to get money but when the condo association have insurance for that too, or are they not able to get insurance because it's a condo association? I'm sure they have insurance because I'm still amazed 134 000 per person to get the roof redone yes, oh, oh yeah, and yet you have insurance. Something's weird.

Speaker 2 7:25

Insurance is not all that great.

Speaker 3 7:27

Especially not in Florida.

Speaker 2 7:30

So, in order to cover those extra expenses, your compensation association is going to do an assessment and go hey, here's what we need Extra $100,000 in the next two years. There's 100 of you. We're going to divide this up. Well, it sounds like the place in Florida gave it all one big lump sum. We need $134,000 from you.

Speaker 3 7:53

Yeah, that didn't happen. Yeah, that sucks.

Speaker 2 7:56

I don't know if they did that way or not, that's what it sounds like. Yeah, because there's one couple that read it all. They put all this money. They bought it. They put some money to it. They were just going to sell it out at a loss, right?

Speaker 3 8:08

because they know that they tapped theirself out.

Speaker 2 8:10

There's another guy who also selling it for a loss, because like.

Speaker 3 8:13

Well, he tapped into his retirement fund to buy it so he had nothing.

Speaker 2 8:18

Never do that, but you know, you got extra cover.

Speaker 3 8:21

Right, and then yeah he. So it's really sad what's happening. Some of the stuff down.

Speaker 2 8:27

Yeah, so a reserve study is basically the con association or HOA will hire an inspection company or a specialty company to come out. Hey, to look at our roof, look at our landscaping or parking lots. Right, tell us what we immediately need fixed and what we can defer maintenance and how much will we need?

Speaker 2 8:52

how much will it cost in five years from now? Right, and that's how they can know how much money they have, cause some places get called off guard and they're like Nope, let's raise everybody's fees, cause we weren't expecting this and you cannot predict the storms.

Speaker 3 9:06

No, you really can't.

Speaker 2 9:08

You can predict whether or not you're going to have extra fees, because you should never just be barely making it no, but there are condo owners in Florida that are just dumping their homes at condos. They can't afford it. Yeah, nobody expects $134,000 extra fee.

Speaker 3 9:26

I wouldn't expect that much of a fee. I mean, that's insane. Like yeah, I don't even I can't envision how $134,000 per person is needed when our roof was just brand new and it was what? 15? This roof, no, our house, oh, our oh yeah, old house, isn't that? Like 15, 12, 15 something like that.

Speaker 2 9:53

I don't remember yeah insurance, look at it because it's, because it's part of it yeah yeah so like 12, 12 to 15 000 for a new roof.

Speaker 3 10:05

How many roofs do they have, like I? I don't imagine. This is like great big, huge condo association in florida where you're gonna have hundreds upon hundreds. I don't see how. 134 000 per person yeah, I don't know that just that seems an insane amount of money to me, like they're just trying to pad their coffers it was here.

Speaker 2 10:27

I'm'm not going to talk about it, but this is the name of the place.

Speaker 3 10:31

See, it's a tower, so there's only one roof.

Speaker 2 10:36

Well, they seem to pull this up. This one was for waterproofing, but that it's one tower. Wow, this is like a big old hotel tower. Wow, all right, this is like a big old hotel building. Yeah, I mean, this is a big place, who? All right, it has one roof, all right. All right, but look how many floors do they got 24? Is there? Easily, yeah, and they. So this con owner, let's pick one. This one guy here is paying for the waterproof one all the way over this other side and I'm not arguing that, but look how big that tower is.

Speaker 2 11:14

I know it's only one roof, so it's one roof they should hope it's just a roof, but now they're gonna do waterproof on the outside and everything so yeah, I still think they're getting screwed. I really probably. I really think if somebody's buying a condo.

Speaker 3 11:27

You need to ask for that, you need to get the reserve study.

Speaker 2 11:31

What is the condo association's finances?

Speaker 3 11:34

How much do they have?

Speaker 2 11:37

And what's the plan expenses?

Speaker 3 11:39

You don't want to just know what the HOA fee is, because that can change right after you move in.

Speaker 2 11:45

Yeah, part of the article that I read was AOL, which, yes, that's still a thing.

Speaker 3 11:51

Is it really? Oh my God, oh yeah.

Speaker 2 11:55

Well, florida is requiring stricter safety standards and more frequent inspections, and associations are raising fees to get larger reserves for repair. So that sounds like to me that cons associations know they got some deferred maintenance and they need to play catch up.

Speaker 3 12:14

It sounds like a personal problem.

Speaker 2 12:15

Wow, yeah, it doesn't matter what state you live in. If you are buying a condo, you need to find out are they going to have money to take care of this for themselves without bumping your condo fees? That's what you need to ask. I've never seen that in an inspection or heard about it in a real estate transaction, but I think it's very important.

Speaker 3 12:37

That's something I should put in to our email and have you know. If this is a condo, maybe look at getting the condo reserve study.

Speaker 2 12:48

Condo maybe look at getting the condo reserve study. There's no reason why we couldn't do roof and exterior inspections, parking lot we do commercial inspections. We could easily do the roof exterior through the parking lot and then get estimates for them. Yeah, send it to a contractor that we know specializes in those areas and go hey, these are your immediate, five-year, 10-year projections.

Speaker 1 13:17

Yeah.

Speaker 2 13:18

That would work. So that's what needs to be done. So, anyway, if you're a real estate agent, yeah, look out for your condo buyers or HOA buyers. For your condo buyers or HOA buyers, hoas may have a pool, a community room, a little exercise facility.

Speaker 3 13:37

Sometimes they have separate buildings.

Speaker 2 13:39

Yes, you need to find out what their finances are to see. Are they going to ding your client two years from the road now Because they tapped out all the reserves on?

Speaker 3 13:50

some other stuff. Yeah, your client going to be able to afford that.

Speaker 3 13:52

Because, like I know, like for caitlin, we looked at condos because I mean, let's be realistic, the child doesn't like to mow or do yard work she never did not mechanically maintenance handy so we looked at condos for her, and by the time we got around to finding something that was in her price range, the condo fee or the hoa fee always took it out, and then, if there was anything where it would ever increase, that would have just put her out of that house and she wouldn't have been able to afford it.

Speaker 2 14:26

No, I don't like having a fee in the first place. It's good if you're older or you're so busy. You don't want to ever deal with that stuff. Expect to buy a smaller place because you're paying the extra fees for someone to take care of all the exterior stuff. But every now and then you need to expect, like I'm going to get dinged, I'm going to get dinged and money's going to be up. Yeah, so that's it for this one. Thank you everybody and bye-bye, bye, guys.

Speaker 1 14:57

You've been listening to the Standing Out in Ohio podcast. Be sure to subscribe on Spotify or Google Podcasts to get new, fresh episodes. For more, please follow us on Instagram, twitter and Facebook, or visit the website of the best Ohio home inspection company at homeinspectionsinohiocom or jimtroffcom. That's J-I-M-T-R-O-T-H and click on podcast. Until next time, learn and go do stuff.