Blog

Jun 05, 2023 Due diligence is a must for Las Cruces condo buyers

Gary Sandler

No Comments | 0 likes | 67 Viewers

Published 5 June 2023

According to a May 31 report from the Las Cruces Association of Realtors, eleven condominiums changed hands between January 1 and May 31. Another six are waiting in line at the checkout stand. The final sales prices of the eleven units ranged between $164,000 to $265,000, with a median price of $235,000. Monthly condo association fees were scattered between $180.00 and $351.08.

Besides loving Las Cruces, the twenty-two buyers and sellers of those condominiums most likely had a few things in common. Buying a condominium is a great lifestyle choice for many people, from downsizing retirees to busy professionals who don’t have time to worry about maintenance and yard work. Many people tend to think of a condo as a house without much of a yard, but it’s far more than that. In reality, it is a business partnership that’s managed by a board of directors elected by individual owners.

Typically, condo owners enjoy 100 percent ownership of the interior of their unit. The interior includes windows and doors and everything else inside. In some developments, owners are also responsible for replacing their roofs. In addition, each owner also owns a proportional share of the common area, which includes the exterior of the buildings, the grounds, parking areas, roofs, swimming pools, playgrounds, etc. For example, each owner in a 120-unit complex also holds title to an undivided 1/120th of the common area.

Owners are responsible for paying their share of the expenses required to operate the complex, which is where things can get sticky. Let’s say it costs $3,600 per month to cover basic monthly expenses, such as maintaining the grounds, purchasing insurance, operating the pool, providing outside lighting, and performing general maintenance.

In our 120-unit development, that amounts to $30 per month per unit. But wait, there’s more. Let’s also say that projections indicate it will cost $120,000 to replace the roofs, resurface the parking areas and repaint the building exteriors 10 years down the line. To cover those expenses, the owners will have to set aside an additional $100 per month per unit, resulting in a total condo fee of $130 per month per unit.

In a perfect world, projections are accurate and sufficient funds are set aside to cover daily and future expenses. That’s not always the case, however. When expenses exceed income, one of two things must happen. Either the monthly fee is increased or a one-time, lump sum special assessment is levied upon each unit owner. So, how can a condo buyer determine the true fiscal health of a condo complex before deciding to purchase?

The answer is contained in the New Mexico Condominium Act. The act protects potential buyers by mandating that condominium associations furnish to buyers prior to purchase copies of the condo declarations (the documents that created the condominium), the CC&Rs, association bylaws, the rules and regulations of the complex, and a resale certificate. Condominiums formed prior to May 19, 1982, fall under the New Mexico Building Ownership Act.

The resale certificate will reveal the amount of the current monthly fees, if there are any special assessments levied against the owners, if major maintenance or costly improvement projects may be required in the future, and if there are any current disputes among owners or lawsuits the association is trying to resolve. A copy of the association’s balance sheet or financ­­­ial statement detailing the numbers contained in the certificate will also be included.

Imagine if one week after closing on his condo purchase, the buyer of Unit #120 received a one-time, $8,333 per-unit special assessment to settle a million-dollar slip- and-fall lawsuit that had been ongoing for the past two years. Even a cursory look at the certificate would have revealed the liability and potentially saved the uninformed buyer thousands of dollars.

New Mexico law requires that condo owners and their associations provide all relevant financial information to prospective purchasers prior to closing a sale, so take advantage of the opportunity and make sure you’re happy with the financial health of the development. New Mexico law also allows buyers to back out of the deal if they’re not pleased with what they learn.

See you at closing.

Gary Sandler is a full-time Realtor and president of Gary Sandler Inc., Realtors in Las Cruces, New Mexico. He loves to answer questions and can be reached at Gary@GarySandler.com or 575-642-2292

About author