My Mistakes Buying a Condo

In a previous story I had mentioned that I bought and sold a condo. It did not go well. This is mostly a story about my own mistakes that I hope to share with other people so they don’t do the same.

In 2015, I had a full-time job, girlfriend and thought it was a good time to move out from my parents to look for a place of my own. I started looking at apartments to rent but I couldn’t really find anything I liked. This lead me to considering the classic debate between buying vs. renting. After all, “buying a home is the best investment you can ever make” right? Low and behold, there was a 1 bedroom + 1 bathroom condo listed online at $110k. I contacted the realtor and went to look at it. The place had been through a lot of tenants. It had smoke stains and smell everywhere and a makeshift room in the basement. Nevertheless, I was eager to have my own place so I told the realtor I’d like to make an offer. I didn’t have my own realtor at the time so I agreed to let her represent me (the buyer).

Mistake #1: Using the same realtor as the seller. The realtor has a fiduciary duty to represent your interest in the sale. If both the seller and buyer use the same realtor, how can you trust them to act in your own interest. In the buyer’s case, the realtor won’t provide valuable advice and guidance needed buying your first property.

Because I chose the seller’s realtor, we rushed through the bidding process and never stopped to question why the seller was selling the condo. The process is fairly easy for the buyer when the seller is desperate to get out. I was told the seller needed the cash because of a separation. Nonetheless, I had a lawyer review the status certificate and everything was set to close 3 months later.

Three months went by, and I moved in. The first day at the new place, there was a “lunch for the owners” in the yard. At the lunch, the owners of the condos were told that the Condo board had decided to fire their property manager and “self-manage”. It turned out the other building had asbestos in several units and had to be fumigated. On top of this, the condo corp was paying hotel fees for all of the tenants to live temporarily while the units were cleared. They also announced plans to renovate the roof by the end of 2015 because of a city requirement.

Mistake #2: Not checking the updated status before closing. This potentially could have been avoided if I checked the status of the condo corporation in the 3 months before closing. Then I could have cancelled and moved on.

Fast forward to Winter 2015–16. A contractor had quoted $700k to do the roof and construction is underway. The reserve fund (intended to pay for future repairs) was depleted from paying for the hotel tenants. That means the owners had to be assessed for the roof-repair money. This amount was between $19–25k depending on the unit. Half of the owners paid cash out of pocket and the other half went onto a group loan. The roof ran behind schedule and we the owners had already paid $700k to the contractor. The main contractor then told us we owed $1.3 million because the deal originally put in place was a weak “hand-shake” contract. They put a lien on the condo complex for another $700k. On top of that, the contractor never paid any sub-contractors so we had two more liens of $500k and $80k. The board was now scrambling to find a construction-lien lawyer who had expertise in condo disputes (super rare).

Mistake #3: Self-managing a condo corporation. I wasn’t on the board but this was a huge mistake by the board. With no property manager or procedures in place, the owners take on all the risk themselves. It is now required by law to have a property manager (where I live).

2016–2017 was a mess to say the least:

• The condo corporation was in huge debt and had to fight the liens.
• The owners took on another private loan to pay for all the losses and the lawyer fees
• The property superintendent was found to be using the corporate account for their personal expenses.
• Each meeting the board promised us that things were looking better, even though they weren’t.

Things did start looking better in 2018. The superintendent was kicked out and it was now illegal to run a condo corporation without a property manager. The property managers helped quite a bit because the condo corp had no audited financial statements since 2016. It was also illegal to carry loans on a condo corporation’s balance sheet. This meant that the owners had to be assessed again to pay for the 2 loans on the balance sheet. Luckily, I had paid cash instead of the first loan and was only liable for $14k. Many owners owed up to $48k. In 2019, we finally sold the condo to an investor after listing it for 4 months on the market.

The main lesson here is to do your own due diligence especially when it comes to a long-term commitment like a property. Buying and selling real estate is really expensive and its how many people go bankrupt.

Disclaimer: The information provided on this blog is not financial advice and it is for informational and entertainment purposes only. Read the full disclaimer.