ChitownLiving | Chicago Real Estate + Life

Buyers, Ronald Reagan’s famous quote, ”trust, but verify” should be at the forefront of your mind when navigating  attorney review, a key piece of the home purchase process. First Trust Ask some key questions of the seller, board of directors, and management company and trust that the information provided is accurate.  Very timely article in the Chicago Tribune this week, Ask seller about assessments, board about future expenses. 

• Ask the seller (or seller’s agent) about any special assessments in the past two years or any talk of future special assessments and the current balance in the reserve fund.  When a special assessment is officially passed it is typically documented in writing and unit owners are notified.
• Request that the board formally disclose any current and future capital expenditures.  This formal request comes during attorney review in the form of a  22.1 disclosure to be completed by the condo board of directors.

Then Verify The next step is to verify what you have been told is accurate.  There are several key documents that can be used.

• The first is the meeting minutes kept from each board meeting.  Best to ask for at least a year back if possible.  Read the minutes looking for any discussion of assessments or proposed capital expenditures.
• The second is the condo operating budget.  Review the budget to make sure the amount in the reserve is consistent with what you have been told and that the building is not operating in the red.
• The third is the condo declaration and rules and regulations.  While these will not shed any light on assessments, these should be reviewed to ensure there are not any rules that conflict with your ownership objectives such as the ability to rent the unit or install a satellite dish. 

Now connect the dots.  As a simple example, assume there is talk of the roof needing to be replaced at a cost of $60,000 but there are only $20,000 in the building reserve fund.  Clearly the funds are going to have to be raised and in many cases this can signal a potential special assessment.  As another example, assume there is no mention of any future capital expenditures but a large tuck pointing project was recently completed, depleting the reserve fund.  Could indicate the need raise monthly assessments or pass a special assessment to build up the reserve. Read all documentation provided by your agent and review with your agent and attorney if you have questions.  In the end, you just want to be an informed purchaser.