The property is beautiful, and the apartment or house is just what you have been dreaming about. This place is shouting “welcome to your new home” as loud as possible. It’s what you have always wanted but the question remains; is this a good place to buy?
When you buy a house that is not part of an Association the relationships are between you, the house, and the neighbors. When you buy a property in a Condo or HOA another component is added – you are not just purchasing a house or apartment, you are essentially entering into a business partnership with a bunch of people that you don’t know. So you have to consider the Association’s finances.
You know all about community association life and understand that there are lots of rules and regulations, but that is OK because you want a special authority to maintain the integrity of your neighborhood or building. You may even like the idea.
But what about the financial integrity of the community association where you will be a partner as soon as you close on your unit? Here are some tips about HOA finances for your consideration:
- Are the reserves fully funded? Inadequate reserves will eventually turn into a special assessment when a capital expenditure project is called for. That’s going to hurt. Reserves are the keystone of HOA finances.
- Does the association have too many delinquencies and how do they manage them? What is their success rate when it comes to recovery? You don’t want to be paying for other people’s association dues.
- What is their policy regarding delinquent assessments? Do they let people slide for an extended period before they act? Boards sometimes don’t realize that they are running a business and are averse to taking action against their neighbors.
- Did the association have a lot of foreclosures in the past and did they pursue the old owners to recover the unpaid assessments? Never leave money on the table.
- Have the maintenance fees remained the same for a long period of time or have they not been adequately raised to meet with increased expenses? Yes, its nice that maintenance fees are low and stay low, but consider that expenses often increase and so too should the maintenance fees ever so slightly.
- To keep order in a community association, sometimes it is necessary to assess fines for violations. Look at the budget and determine if your community association is over zealous. Look at the budget and see if the amount collected for fines are exorbitant.
Buying a unit in a community association can be a wonderful experience, but if you are only looking at the property and not the community’s finances it can quickly turn out to be a nightmare.
Caveat Emptor…Buyer Beware.