Are you currently looking at local condominiums for sale? If you are, then you should think twice before purchasing units in developments that fit the following criteria:
Buying a unit in a condo development that is still under construction isn't for two main reasons. First, it will be difficult to get a mortgage for it because lenders are wary of such constructions. A lot of things can change in a development whose construction is still underway, and those changes may affect the value of the property. Secondly, those changes can also affect your appreciation of your unit. For example, new plans may be put in effect that places an infrastructure right in front of your house, blocking your view.
The HOA Has Pending Litigation
If the resident homeowners association (HOA) has pending litigation, wait until the issue is resolved before buying one of its units. This is because the resolution may affect all members of the HOA, which would be bad for you since you didn't participate in the infraction that led to the litigation. For example, the HOA may be ordered to pay a monetary fine if it loses the lawsuit, and your money shouldn't be used to pay for something you didn't participate in. Another example is a condo developer having problems with the city planning authorities; your home can easily be affected if the developer loses the fight.
The Fidelity Coverage Limit Is Low
Fidelity coverage is the insurance needed to protect the HOA against theft or embezzlement of its funds by the board members. As you know, HOAs are tasked with maintaining the common areas in condos. They won't be able to discharge their duties if the board members collude and steal the HOA funds. Apart from losing your money (collectively owned via the HOA), it means you will also have to deal with poor HOA service since the insurance won't be enough to cover the loss.
The Sales Are Excruciatingly Slow
Lastly, you should also be wary of buying a condo unit in a development where the sales are extremely slow. This is especially true if other similar properties in the area are selling like hot cakes. It might be that other potential buyers have unearthed issues with the development, issues that are keeping them away from the area. At the very least, learn why the units have been in the market for a long time before making a purchase commitment.Share