Answering Condo Reserve Questions
No two condo associations are the same…much like snowflakes.
1) How much money does my condo association have in the kitty?
You really are not going to know the answer to that question until you purchase the condo and review the condo docs. The state of Pennsylvania allows for a five day review of condo docs for you to make an informed decision. Some buildings stockpile a boatload of $$ – and others simply just assess when needed. I usually find that the very small buildings and the very expensive / exclusive buildings in town don’t keep that much $$ on hand- their way of making improvements is to simply assess owners when needed.
2) How much does Fannie Mae Require to go into reserves every month for the building to be “warrantable?”
Although there is no set amount (for the ability of buyers who want to buy in your building) probably a good idea to be setting 10-15% aside every month for capital improvements.
3) What are capital expenditures?
Reserves for deferred maintenance (performed less frequently than yearly in order to maintain the asset’s useful life) and capital expenditures (purchasing or replacing assets that have a useful life over one year) are required for certain building components unless the board votes annually to waive and/or reduce reserve funding.
4) WTF is a capital contribution???
Buyer pays two months worth of condo fees to the ASSOCIATION- this does not go to the seller and this helps to build the kitty for future improvements. This contribution is now applicable for almost ALL condo sales in town like the Barclay Condominium.
5) How much should my association have in reserves?
This really is a function of the board’s goals and the current condition of the entire parcel including the roof, windows, elevators, etc. Most folks I speak with suggest 10% -15% of the TOTAL annual intake of condo fees to help build the kitty. A professional reserve study may be in order to best guide an association- call for details and I may be able to help with this. Maybe not 🙂
And I sell a lot of Philadelphia condos….so I may get a hint more wiggle room for weekend appointments, or last minute appointments. Or just get waltzed right past the doorman when I walk into a building.