Accountant can judge health of condo books
A reader writes: "I'm considering buying a condominium. Who can I go to who can examine the condo association's finances? If I could hire someone to do..."
Seattle Times staff reporter
Q: I'm considering buying a condominium. Who can I go to who can examine the condo association's finances?
If I could hire someone to do this investigating, maybe it could save me from a lot of problems.
A: Jim Talaga, president and co-owner of Association Reserves Washington, says yours is "a savvy question" because a condo association's financial health — or lack of it — directly affects a for-sale unit's value. And that, in turn, affects your negotiating position.
"You can have two [condo projects] built in the same year by the same builder, but they may be in very different overall shape because of how they've been maintained," he said.
A well-run association will have sufficient dues to keep up the building and will be proactive in making sure the work gets done.
An association that focuses instead on keeping dues low may be looking at significant deferred maintenance and not enough money in reserve to pay for it.
Then owners get hit with a costly special assessment to fund the work, a scenario about guaranteed to make them unhappy campers.
Unlike other states, Washington does not require condo associations to do reserve studies projecting future maintenance and how much money needs to be banked now to pay for it.
However, many local associations voluntarily do this, and it does present a picture of the community's finances.
Once you make an offer on a condo, you'll get a resale certificate if it's a pre-owned unit or a public-offering statement if it's new. Both contain financial information.
A certified public accountant (CPA) or an accountant who specializes in condo-association books can look at either and tell you if the association is healthy or has the capability to be so.
Several local firms do professional reserve studies; you can contact one about a review of an existing reserve study.
A list of accountants and reserve-study specialists is available on the Web site of the state chapter of the Community Associations Institute, a nonprofit educational organization. Go to www.wscai.org and click on "Member Services" then "Service Directory."
It's advisable to make any offer on a condo contingent on getting a financial review. If you don't like what you see, you can back out and get your earnest money back.
Q: A piece of land shifted a few years ago, so much so that the house on it was condemned and demolished. Now I see the lot is for sale. With its history, can it really be sold?
A: "As long as there's a legal description and a tax parcel number, you can sell any land," said Federal Way attorney Christopher Benson. This includes condemned property and underwater property.
So the real question is, what must the seller disclose?
There are two hard-and-fast rules. Sellers must say so when land contains fill material; that could render it unstable.
And they must disclose "any material defect that's not readily ascertainable to the naked eye or a reasonable inspection," said Benson. "Beyond that it's a little bit of caveat emptor: let the buyer beware."
Benson's advice to buyers: Make the purchase contingent on getting a "Seller Disclosure Statement" for vacant land. Sellers have no duty to provide this, so ask if one is not forthcoming. (A Seller Disclosure Statement for residences is a different form; sellers must provide it to buyers.)
Benson's advice to sellers: "Disclose everything you know about the property." Then it's the buyer's problem if they disregard information, not the sellers for failing to divulge it. Otherwise, the seller could wind up on the wrong side of an expensive lawsuit.
Q: Do you have any rent numbers for houses?
A: Dupre+Scott Apartment Advisors, the firm that generates apartment rent and vacancy numbers, just came out with a similar report for rental houses.
Here are some highlights: The average monthly rent in King and Snohomish counties for a two-bedroom, one-bath house is $1,121, up from $1,046 in 2006. In the past seven years, it's risen just $113.
The average for three-bedroom houses is $1,316 this year, up from $1,245 last year.
These numbers cover wide geographic areas. Houses near major job centers, such as downtown Seattle and Bellevue, usually rent for more.
Still, renting a house has been a bargain recently compared with buying one. In fact, the exodus of renters to homes of their own, propelled by low mortgage-interest rates, is one reason house-rent increases have remained modest.
Home Forum answers readers' real-estate questions. Send questions to Home Forum, Seattle Times, P.O. Box 1845, Seattle, WA 98111, or call 206-464-8510 to leave a question on a recorded line. The e-mail address is email@example.com. Sorry, no personal replies. More columns at www.seattletimes.com/columnists.