There are special -- and potentially serious -- risks in buying a condo these days.

During the housing boom, condos were prime targets for investors who expected to flip their apartment or town home for a quick profit.

When prices started falling, investors were stuck with units that were worth less than they owed on their mortgages. Some are scrambling to keep up the payments by renting them out. Others are giving up and allowing lenders to repossess the units.

Either way, an entire building can suffer.

Investors who aren't turning a profit often stop paying the monthly association fees needed to clean foyers and hallways and to fix air conditioning and heating systems.

Collecting that money after a foreclosure is even tougher.

The results are higher fees, a shabbier building and declining home values for everyone else who lives there.

Here are eight smart moves to make sure you don't get roped into a bad building:

Smart move 1. Consider the overall condo market.

You're most likely to make a mistake if you buy in an overbuilt city like Miami or Las Vegas with a depressed real estate market. Prices have fallen so much that buyers are walking away from the preconstruction deals and the deposits they made.

Who knows what your condo will be worth in a year or two? Buildings in those cities are particularly prone to financial and legal problems. Renting is often a better alternative.

Smart move 2. Check recent sales for signs of trouble.

When you find a condo you like, ask your real estate agent to find out:

• How many units have been sold in the last two years and their sales price. If prices are significantly lower now than they were just a few months ago, make sure you know why.
• How many units are up for sale. If more than 10% are on the market, that's another red flag.
• How many units have been foreclosed on in the last couple of years or involved in a short sale, which is where a borrower on the brink of foreclosure is allowed to sell a home for less than they owe on the mortgage. A rash of these is another sign of a troubled building.

Smart move 3. Read reports from meetings of the homeowners association.

This is where everyone gets together to discuss the building's structural and financial health. Look for recurring -- and unfixed -- maintenance problems and plans to raise monthly fees or impose a big special assessment to cover major repairs, such as a new roof.

Don't just ask the manager for minutes from the last few months. Get them for the last few years. They will show you whether the building has been doing well for a long time or taken a recent downturn.

Smart move 4. Review minutes from the association's board of directors' meetings.

The issues a board must deal with will give you a good idea of what it's like to live in the building. Was the manager out to lunch when an emergency struck? Does it take weeks to get a leaky faucet fixed? Is a rude neighbor ruining life for everyone around him?

"That will tell you tons of info and gossip about the people living there," says Dale Siegel, an attorney with New York-based Circle Mortgage Group. "It will let you know if your soon-to-be upstairs neighbor plays the drums at midnight."

These minutes may not be available from the management office. But the seller should have them.

Smart move 5. Walk the building.

Look at more than the unit for sale. Walk the hallways. Visit the clubhouse, laundry room and parking garage. If basic maintenance isn't being done, you'll see it. Look for foreclosure notices on doors, too.

Smart move 6. Talk to residents.

As you inspect the building, stop to chat with anyone you see. Ask how happy they are with their homes, the building management and each other. Do they get along with their neighbors? Do they find themselves paying for repairs the building should do for free? If there are serious problems, it won't take much to prod disgruntled residents into telling you the dirt.

Smart move 7. Review the financials.

If you get to the point of making an offer, you'll receive copies of the association's financial records. From this you can learn how many owners are behind or just not paying their association fees and how much is in the association reserve fund. If more than 10% are delinquent on payments or the building is out of money, you should strongly consider withdrawing your offer.

Smart move 8. Submit a condo questionnaire to the management office.

Most real estate attorneys have the form and your lender might even let you use theirs.

The key thing you want to know is how many units are owned -- and rented out -- by investors. If it's more than 10% of the building, that's a concern. If more than 10% of the building is owned by a single investor, that's a big red flag.

By Jen A. Miller

Interest.com Contributing Editor

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