I’m often told by buyers “I won’t look at anything with high condo fees.” Often this can be a mistake. We need to look at what condo fees cover, and why some buildings may be higher (or lower) than others.
What’s included in condo fees varies—sometimes widely—from building to building. First you need to be sure that you’re looking at a condominium, rather than a co-operative. While they may appear similar, in legal terms that are very different (see my page on condos vs co-ops here.) When it comes to fees, co-ops appear much higher because they include property tax and occasionally an underlying mortgage, which results in fees that look much higher on paper, but when a buyer calculates their all-in housing expense, can actually be a bargain compared to condos.
Condo fees generally include a master insurance policy for the dwelling. You will need to have an HO-6 (aka “condo rider” or “walls-in”) policy, but this is much cheaper than the policy you would need to purchase for a townhouse or single family home.
Units in older buildings generally are not individually metered, meaning that certain utilities are often included in the condo fee. Heating and air conditioning bills can add up!
Are there expensive amenities like an indoor pool or a staffed front desk? These drive up fees quickly.
Is the building new construction and still being managed by the builder? Builders are notorious for underestimating fees (and often not adequately funding reserves.)
Finally, a buyer needs to look at reserves. There is no right or wrong answer on funding reserves. Condo boards make decisions annually about the amount they need for their annual operating expenses, and the amount they want to put aside for future capital repairs and improvements (new roofs, new windows, redecorating common areas, etc.) Board members are owners that are elected by other owners. Just like some owners save for a rainy day, so do some Boards. And just like some owners live paycheck-to-paycheck and pray that nothing breaks, so do some Boards. So having fees that are too low could indicate that a building is not properly funding its reserves, which could lead to future special assessments.