How to Avoid a Bad Condo or Co-Op

Although board approval is waived for an apartment owned by the building's sponsor, the downside is that, in New York at least, the buyer has to pay the seller's transfer tax and certain other fees.

Ideally, you should know as much about a buildings finances as the board knows about yours. "You need to be comfortable with the financials of the co-op," says Steven B. Schnall, the president of New York Mortgage Co. "And you need your realtor and attorney to help you assess that. If the building is only 20% owner-occupied, it still could be a sound building financially."

In an older building, one thing to look for is the reserve fund. "An older building will need repairs sooner than a new building will," Schnall says. "You need to be sure the building is reserving for future capital improvements."

Some other things to be aware of: An older co-op that has paid down its underlying mortgage significantly might have lower maintenance. On the other hand, Schnall says many new condos have tax abatements, which can keep your real estate taxes down for a certain number of years.

Coming up next: How to save money on homeowner's insurance.

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