High costs of high-rise living

Before buying that condo with all the amenities, make sure to understand what it will cost in fees.

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The costs of operating a condo building are on the rise, and that means owners and potential buyers will pay more in homeowners association fees, according to a report by the Institute of Real Estate Management.

The report says expenses for operating condo buildings have risen by 25 percent over the past decade. Those costs include building and grounds maintenance, property taxes and insurance.

As always, boomers want lots of stuff

But above and beyond the basic expenses, the report indicates that many condo developers are attracting baby boomers interested in amenities such as swimming pools, tennis courts, golf courses and ample parking. The most expensive amenities are the professionals needed to provide extra levels of service that many buyers are seeking.

While demand for condominiums is still strong among buyers, says Bob Moulton, president of Americana Mortgage Group, financing a mortgage may prove difficult, especially if the condo is an investment property or second home.

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What lenders watch out for

“When we’re underwriting loans, we’re looking at the condo’s financials and making sure there are no delinquencies that will affect other owners,” Moulton says, adding that some areas of the country, such as Florida, are still suffering from large numbers of foreclosures. Those areas are attractive to buyers seeking investment or vacation properties, but they should be aware that foreclosures and short sales can have an impact on fees.

Depending on the condominium bylaws, existing owners can expect to be on the hook for some of the expenses lost to delinquencies. “If there are 100 owners in a condo building where the maintenance is $1 million and there is a shortfall of $24,000, then that shortfall could be divided among the other owners,” he says.

Caveat emptor

Moulton recommends that potential buyers obtain a copy of the condo’s financials before they buy. They should also examine the minutes of the association’s meetings, looking for pending litigation or any upcoming major repairs scheduled for the grounds of the building.

Keep up with your wealth and mortgages and follow me on Twitter: @JudyMartel.

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