Buying a condo vs. a house
Diligent research can have long-term benefits

Reprinted with the permission of the Las Cruces Bulletin, December 23, 2011, Business section

Buying a condominium is a great lifestyle choice for lots of people, from downsizing retirees to busy professionals who don’t have time to worry about maintenance and yard work.

Many people tend to think of a condo as a house without a yard, but it’s far more than that. In reality, it’s a business partnership that’s managed by the individual owners.

Typically, condo owners enjoy 100 percent ownership of the interior of their unit, from the first coat of paint on the walls inward.

Each owner also owns a proportional share of the common area, which includes the exterior of the buildings, the grounds, parking areas, roofs, swimming pools, playgrounds, etc. In a 120-unit complex, each owner also holds title to an undivided 1/120th of the common area, often adjusted by the proportionate size of the individual units.

Owners are responsible for paying their share of the expenses required to operate the complex, which is where things can get sticky.

Let’s say it costs $3,600 per month to cover basic monthly expenses, such as maintaining the grounds, operating the pool, providing outside lighting and performing general maintenance. That amounts to $30 per month per unit. But wait, there’s more.

Let’s also say that projections indicate it will cost $120,000 to replace the roofs, resurface the parking areas and repaint the building exteriors after 10 years. To cover those expenses, the owners will have to set aside an additional $100 per month per unit, resulting in a total condo fee of $130 per month per unit.

In a perfect world, projections are accurate, and sufficient funds are set aside to cover daily and future expenses. That’s not always the case, however. When expenses fall short of income, one of two things has to happen.

Either the monthly fee is increased or a onetime, lump sum special assessment is levied upon each unit owner. So, how can a condo buyer determine true fiscal health of a condo complex before deciding to purchase?

First, ask if there been any special assessments levied during the past three years. Are there major maintenance or improvement projects anticipated in the next 12 months? If so, are there sufficient reserves to cover those expenses? Next, ask if there are any current disputes among owners or lawsuits the association is trying to resolve. Also, ask to see the current and previous year’s budgets and yearto- date current expenses. Finally, review the balance sheets for several years. Balance sheets are snapshots of the association’s financial condition at given points in time.

New Mexico law requires condo associations to provide all relevant financial information to prospective purchasers prior to closing a sale; so take advantage of the opportunity and review the info before making your final purchasing decision. Doing your due diligence will eliminate any unpleasant surprises after the sale.

See you at closing!

Gary Sandler is the president of Gary Sandler Inc., Realtors in Las Cruces and the host of Gary Sandler’s Real Estate Connection, which broadcasts from 4 to 6 p.m. each Monday on KSNM-AM 570.

Sandler is the 2007 and 2010 recipient of the New Mexico Broadcaster’s Associations Talk Show Host of the Year award. Questions or comments may be directed to Sandler at 525-2400 or by emailing gary@garysandler.com.