Condo Budget Analysis

[Couch Potato]

Sounds good to me.

Why not raise the educational and experience requirements and make appraisers truly qualified to render their Good Housekeeping Seal of Approval not only on a thorough and realistic analysis of a condo project budget, but based on the millions of dollars of federally related loan transactions that are being made based on their professional valution opinions.

Oh, and pay them a decent fee commensurate with their education, experience and incurred liability.

Why not indeed! :new_all_coholic:

 

[Frederick]

Lets kick this around maybe we can all learn something from each other. I don't analyze condo budgets in conjunction with individual condo appraisals but if it was required and the fee was adequate I would start with the following:

1. Get a written representation from the HOA or Master Deed of what the common elements and amenities are and who owns and maintains them.

2. Get a written representation of the maintenance responsibilities of the condominium from the HOA and/or Master Deed.

3. Research the long lived elements in construction manuals and note cost and life.

4. Ascertain the condition and remaining life of those elements within the condo.

5. Estimate what the annual contribution to the sinking funds should be.

6. Evaluate the current contributions and the size of the sinking funds relative to the condition and remaining life of the long lived elements.

7. Get verification of the existence of sinking funds and amounts from the financial institution where they are deposited.

8. Get written policy on who and how funds are dispensed and authorized.

9. Interview area property managers to compile benchmarks of dollars per unit or per acre and/or any other relevant benchmark for managing and maintaining this type of condominium with these types of amenities and common elements. This would identify everyday maintenance, i.e. landscaping, trash removal etc.

10. Get a written statement from the current manager of the subject condo identifying any physical defects that need immediate correction or the lack thereof.

11. Review budgets going back a number of years for consistency and items which may have appeared or disappeared.

12. Identify Extraordinary Assumptions.

OK, your turn......fill in the blanks

 

[Mike Garrett RAA]

See my first post, LOL!

 

[Frederick]

Well Mike, regardless of whether you would do one or not you did say you have participated on boards and in the construction of budgets, for conversations sake, what do you see as the essential elements or pitfalls?

Pop open a beer, lite up a cigar, relax and take a couple shots at it...just for fun

 

[TJSum]

Lets kick this around maybe we can all learn something from each other. I don't analyze condo budgets in conjunction with individual condo appraisals but if it was required and the fee was adequate I would start with the following:

1. Get a written representation from the HOA or Master Deed of what the common elements and amenities are and who owns and maintains them.

2. Get a written representation of the maintenance responsibilities of the condominium from the HOA and/or Master Deed.

3. Research the long lived elements in construction manuals and note cost and life.

4. Ascertain the condition and remaining life of those elements within the condo.

5. Estimate what the annual contribution to the sinking funds should be.

6. Evaluate the current contributions and the size of the sinking funds relative to the condition and remaining life of the long lived elements.

7. Get verification of the existence of sinking funds and amounts from the financial institution where they are deposited.

8. Get written policy on who and how funds are dispensed and authorized.

9. Interview area property managers to compile benchmarks of dollars per unit or per acre and/or any other relevant benchmark for managing and maintaining this type of condominium with these types of amenities and common elements. This would identify everyday maintenance, i.e. landscaping, trash removal etc.

10. Get a written statement from the current manager of the subject condo identifying any physical defects that need immediate correction or the lack thereof.

11. Review budgets going back a number of years for consistency and items which may have appeared or disappeared.

12. Identify Extraordinary Assumptions.

OK, your turn......fill in the blanks

13. Interview the Management Company, Condo Board members and attend the next meeting to see how close the budget is being followed, many times reality is far different and the budget is more like a wish list. The next condo meeting will reveal the current problems facing the project. Remind your client the next condo meeting is a month or so away, so the turn time might have to be extended a tad on this report.

 

[Zero]

Budgets change all the time, so I don't analyze them.

I do, however, ask the HOA or management if there are any special assessments or pending litigations. If yes, I ask more questions, such as how much, how long, for what, etc. These questions can often tell you much more than a dated budget.

 

[Frederick]

Yes, We have two young men willing to step up and hurl a ball at the stacked milk bottles!

Pending Litigation! Yes, Yes, Yes, forgot that one...excellent!

Attend a meeting and interview the active participants!.... Outstanding!..yes, that will likely reveal conflicts and separate the book answer from the real world answer.

Thanks guys...now we are getting somewhere.

 

[Randolph Kinney]

Lets kick this around maybe we can all learn something from each other. I don't analyze condo budgets in conjunction with individual condo appraisals but if it was required and the fee was adequate I would start with the following:

1. Get a written representation from the HOA or Master Deed of what the common elements and amenities are and who owns and maintains them.

2. Get a written representation of the maintenance responsibilities of the condominium from the HOA and/or Master Deed.

3. Research the long lived elements in construction manuals and note cost and life.

4. Ascertain the condition and remaining life of those elements within the condo.

5. Estimate what the annual contribution to the sinking funds should be.

6. Evaluate the current contributions and the size of the sinking funds relative to the condition and remaining life of the long lived elements.

7. Get verification of the existence of sinking funds and amounts from the financial institution where they are deposited.

8. Get written policy on who and how funds are dispensed and authorized.

9. Interview area property managers to compile benchmarks of dollars per unit or per acre and/or any other relevant benchmark for managing and maintaining this type of condominium with these types of amenities and common elements. This would identify everyday maintenance, i.e. landscaping, trash removal etc.

10. Get a written statement from the current manager of the subject condo identifying any physical defects that need immediate correction or the lack thereof.

11. Review budgets going back a number of years for consistency and items which may have appeared or disappeared.

12. Identify Extraordinary Assumptions.

OK, your turn......fill in the blanks

Review the insurance on the structures and common elements to ascertain if there is enough coverage to replace if damaged or destroyed. That would include replacement cost and insured value.

Review the history for special assessments and the likelihood that any one or all may reoccur. That includes lawsuits, liens and enforcement actions taken.

Review the units for their occupancy and do they conform to the bylaws and insurance requirements and what liability results for those that are not compliant.

Are the current owners of individual units current on their property taxes and assessments.

Any history of criminal or illegal activity such as a meth lab or convicted child molester.

 

[Zero]

Yes, We have two young men willing to step up and hurl a ball at the stacked milk bottles!

Pending Litigation! Yes, Yes, Yes, forgot that one...excellent!

Attend a meeting and interview the active participants!.... Outstanding!..yes, that will likely reveal conflicts and separate the book answer from the real world answer.

Thanks guys...now we are getting somewhere.

I got to appraise a unit in the Ritz condo in DC where Michael Jordan lived. If anybody remembers, there was a huge mold issue. The pending litigations question was very important.

 

[Frederick]

Good stuff....now we are getting quite comprehensive.

I particularly like the idea of making sure the property is adequately insured and what the occupancy is and the amount of assessment delinquency.

Thanks Randolph!