When Buying a Home
Advice on What to Look and Ask for Before You Close
The Surfside, Florida condominium tragedy, while thankfully extremely rare, is a good reminder that home buyers need to thoughtfully consider all the risks — physical condition, financial health, and overall safety — when purchasing any kind of real estate, whether it is a condominium, cooperative or single-family home.
Benjamin Dixon and Matthew Mackay — top-ranked licensed real estate brokers who lead the Mackay Dixon Team at Douglas Elliman — have cumulatively handled over a billion dollars in real estate transactions. Together, they offer the following advice on what buyers should consider and what questions to ask before they purchase any property.
Physical Condition
“In larger condominiums or cooperatives, buyers, or their representatives, need to review board minutes and request a capital plan,” notes Dixon. “It is also important to ask whether there is any pending litigation. This generally takes the place of a physical inspection of the building. Here we are looking for discussion of building defects or upcoming expenses in the board minutes, or outsized maintenance expenses for past work, or reserves for work that has been deferred.” Construction defects almost always end up in the courts, hence the need to find out about any pending litigation. Professionally managed buildings should have all these items available to review. If they are holding back, consider it a red flag, warns Dixon.
On the other hand, when purchasing a single-family home, or a smaller self-managed building, it is important to do a physical inspection. “It is best to be present when the inspection happens,” advises Mackay. Reports are helpful, but not nearly as helpful as seeing things in real time as the inspector reviews the property. Also, not all inspectors are created equal. Know the certifications in your area. “Depending on the purchase, a home inspector may be fine, but in other circumstances, a structural engineer may be appropriate,” says Mackay, who advises buyers to speak to their real estate agent as these nuances are critical and complex. “You need a professional who knows what to look for, and what to ask, on your side.”
Don’t overlook doing your own due diligence. Some things to keep in mind:
- For buildings large and small, consider researching the developer and contractor. Are they still in business? If not, find out why.
- Have they been the defendant in multiple lawsuits regarding material construction defects? What was the outcome?
Overall Safety
Mackay, a 20-year real estate veteran, advises buyers to request and review board minutes, especially for larger buildings. Keep an eye out for any complaints made by other residents. Regardless of building size, many cities also have public records regarding quality-of-life issues.
Dixon advises home buyers to be particularly alert to the following:
- Noise complaints filed by building residents or neighbors
- Crimes that have happened in or around the property
- Security cameras in the building and/or neighborhood
- Security staffing levels and what times they are on duty
“Your dream home does not exist in a vacuum,” says Dixon. “You don’t want to move in and find out that the area is not exactly what you expected.”
Financial Health
A financial review is most important for larger buildings, including both cooperatives and condominiums, as the home buyer’s single-family home property inspection will likely unearth any significant upcoming — and potentially costly — required repairs. That being said, says Dixon, home buyers should ensure that they can verify and understand annual property taxes and any homeowner’s association fees that may be levied. “If in doubt, get an expert to review,” advises Dixon, a CPA and former alternative investment professional.
For larger buildings, a detailed financial statement review should be performed. Dixon recommends that the home buyer look for and/or ask these questions:
- What are the building’s reserves?
- Is the building operating at a profit or a loss?
- How did the building recently perform compared to the budget?
- What is the budget for next year?
- Will there be any monthly fee increases or assessments to owners?
- If the building benefits from commercial rents, are any significant leases coming due soon?
- Is the building’s insurance policy sufficient?
In the end, Mackay notes, buying a home takes time, energy and effort. “A building collapse is rare,” he reiterates, “while problems such as security, safety and financial health are much more common. By taking time to research and ask questions, you will save money and stress in the long run.”
