Follow this Simple Checklist when Buying a Condo

3/24/2015

Photo courtesy: www.realestatetodayblr.com

It goes without saying that you should not go into any real estate deal “blind”. I have encountered a lot of buyers who, having heard that condo investments are “good”, just goes on and gives their money to shady developers without thinking about it.

I can’t blame them… or at least, not too much. Most buyers like that are looking for great deals, great returns for their hard earned money. Bad luck makes them come across real estate brokers or developers that are just there to steal their money.

Sometimes, even investors who already have a few properties under their belt get tricked, too. They sometimes forget to do the most basic checks when buying properties when presented with a good enough deal. If even these investors can get tricked, what more the inexperienced, first time, condo-buyer?

Checklists…checklists…checklists…

When even our memories fail us, the simplest solution is to NOT RELY ON IT.

And that’s where the checklists come in. In his phenomenal book, the Checklist Manifesto: How to Get Things Right, author Atul Gawande demonstrates the incredible power of the simple checklist. In that book, with a single piece of paper, doctors were able to save about twice more lives, just by following the steps they usually forget in high-pressure situations.

We have a less noble goal. But for a real estate buyer or investor, preventing loss is also an important objective.

So here we give you a relative short list of things to check on when you are making your condo investment.

Just a word of warning: this is not an exhaustive list of things you need to check. Instead, my aim here is to get you thinking about potential problems in certain key areas. Not every deal is exactly the same. I suggest you tweak this list to suit your particular purchase decision.

The Simple Condo Investment Checklist…For Serious Investors and Buyers (version 0.1)

The Condo Developer

At least more than 10 completed projects in their portfolio
With experience in developing a similarly sized and complex property development
Currently no significantly delayed project
Information about the project is openly provided
No legal trouble experienced by the company or the project. Cases filed against the company are not material in nature
Financial statements of the company may be obtained to establish performance over the past 3 to 5 years

Now if the Developer has similar, completed projects with the one being built, I suggest you ask your broker if you could look at any of this similar properties to get a feel of their craftsmanship and performance.

The Condo Building and Unit

The whole building is reasonably clean and well maintained
Nearby properties have no reported/visible structural problems
No problems with the access (doors), plumbing, electricity, lighting and/or ventilation
Internal layout of the property is suited for the purpose you want it to have

The Condominium Certificate of Title (when obtained)

Details in the contract to sell or deed of absolute sale are the same with the CCT
No liens or other annotations beyond those disclosed by the developer (such as the Master Deed of Restrictions)
Title is printed in the correct paper
Details of the CCT match the certified true copy obtained from the Registry of Deeds

Loan and Loan Documents

Terms and condition in the Contract to Sell regarding the financing (installment payments, interest rates, events of default, and consequences of default) are clear and acceptable
Limitations on the assignment of the property/contract to sell during its term is acceptable
The partner banks where you will be referred to have acceptable terms and conditions regarding the loan takeout
The regular cash flow to support payments of the loan can be supported by your income or your savings

About the Deal and the Market

Similar properties in the neighborhood are selling higher or about the same as your property
Area where the property is or will be built is a developed or fast developing neighborhood, with businesses and services located or locating in the area

This checklist remains to be a work in progress, as we add more crucial questions that would help you systemically figure out if you’re buying into a good deal.

If you have suggestions on how to improve this checklist, let me know in the comments, or contact me via the contact form HERE.

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