Condo 101: 5 Critical Questions Every Florida Buyer Must Ask
Buying a condominium is different from buying a single-family home. In Florida, recent legislative changes mean that due diligence on the building's financial health and structural integrity is more critical than ever.
Here are the most important things every condo buyer must understand before signing a contract:
1. What Exactly Am I Buying (and Insuring)?
When you buy a condo, you own the airspace inside your unit, but you co-own the rest of the building as "common elements." It's essential to understand where the condo association’s responsibilities end and yours begin.
HOA/Association Coverage: Generally, the master insurance policy covers the structure (roof, exterior walls, foundation, pool, and elevator) and common areas (lawn, irrigation, gate).
Your Coverage: Your individual policy (HO-6) typically covers everything from the drywall in, including your personal property, flooring, paint, and sometimes the air conditioner unit.
2. Is the Building Financially Sound?
The financial stability of a condo association is arguably the most critical factor for a buyer. You must look beyond the monthly fees and assess the Reserve Fund.
Reserve Fund Defined: This is not a rainy-day fund; it is a dedicated savings account used exclusively for future, non-recurring major repairs and replacements (capital expenditures). Reserves are typically designated for items with defined life spans, such as:
Structural Elements: Roof replacement, exterior painting, foundation repairs.
Major Equipment: Replacing elevators, updating community HVAC systems, pool resurfacing.
Grounds: Road resurfacing or replacement of common area irrigation systems.
The Risk of Underfunding: In Florida, if the association's reserves are not fully funded (often aiming for 30% or more of the projected cost), and a major expense suddenly arises—like a leak requiring a new roof—the association has two options:
Raise Regular Fees: Increase the monthly HOA dues significantly for everyone.
Issue a Special Assessment: Charge every homeowner a large, one-time, mandatory fee. This can range from a few hundred dollars to tens of thousands of dollars per unit, which the new buyer must pay immediately upon closing.
When reviewing the condo documents, we are looking to confirm that the association is actively collecting money for these future, high-cost repairs so that you, the new owner, are not hit with a massive, unbudgeted bill shortly after closing.
3. What Documents Must I Review?
Your inspection contingency should include a review of the association documents. These documents are typically available through public records or provided by the HOA management company.
The Big Four: You must receive and review the Declaration of Condominium, the Bylaws, the Rules of Association, and the most recent year-end Financial Info.
Essential Disclosures: Always look for the Master Flood Insurance Policy Dec Page and the Structural Integrity Reserve Study (SIRS) summary.
Pending Issues: Ask specifically about any Pending Assessments or Pending Litigation, as these can dramatically impact your finances the day after closing.
4. Navigating Milestone Inspections
Due to recent Florida legislation, building inspections are mandatory to ensure structural integrity and prevent tragedy.
Milestone Inspection Requirement: If a condo has three or more habitable floors, it requires a Structural Integrity Reserve Study (SIRS) to be completed by December 31, 2025, if it was built before July 1, 1993.
Inspection Timeline (Coastal): If a building is located within three miles of the coastline, the first Milestone Inspection is required when the building reaches 25 years old, and then every 10 years thereafter. If it's located further than three miles from the coast, the inspection is required at 30 years and every 10 years thereafter.
5. Financing and Underwriting
Your ability to secure a great mortgage rate is directly tied to the financial health of the condo association. When an association operates effectively, it becomes a major asset for you as a buyer.
FHA/VA Approval is a Green Light: Many government-backed loans (FHA and VA) require the entire condo community to be "warranted" or approved. If a condo complex meets this high bar, it signifies financial stability, well-managed reserves, and fewer legal concerns. This widens your options for favorable low-down-payment loans.
Conventional Confidence: Lenders offering conventional loans prefer to invest in associations with strong financial footing and healthy reserves. When reserves are consistently funded, it gives the bank confidence that your investment is secure and reduces the likelihood of costly special assessments in the future.
The Power of Fully Funded Reserves: Healthy reserves are the buyer's best friend! This predictability makes your home purchase a much safer long-term investment.
As your real estate professional, I can guide you through the process of obtaining and reviewing these complex documents to protect your investment. Let's chat if you're interested in buying a condo!