Whether a Realtor or a home purchaser, it pays to investigate the personal finances of condominium home owners organizations before taking a listing or even making a purchase bid. Failure to do this can lead to a rude awaking with jolting financial implications. Most people buy condominiums with no real understanding of the monetary burden to which they are carrying out themselves. They have a vision associated with “care free condo residing, ” not realizing that energetic participation in the homeowners organization (HOA) is necessary to protect their own investment. Worse yet, many are unaware of pre-existing financial circumstances which may require them to create big checks shortly after relocating.
In today’s market many condominium things have several units within uptown at farrer. Plus, there may be much more units that are behind inside dues and are likely to drop into foreclosure in the near future. What this implies to a potential buyer is the fact that HOA monthly dues will probably increase because fewer having to pay units will have to cover set operating expenses. Perhaps the scariest situation for a potential condo buyer is inadequate economic reserves to cover required servicing. Many HOAs have followed an attitude of staying away from special assessments or embrace monthly dues because proprietors would not approve these. As a result, many (and maybe the actual majority) of condominium processes have a reserve account balance method below where it should be. This can be a big red flag for purchasers because they are likely to get strike with a hefty special evaluation in the future. Deferring maintenance to maintain monthly dues low and steer clear of special assessments is a self-defeating strategy that always boomerangs upon condo owners.
Many Says now require a full disclosure of HOA reserve money status as part of the purchase procedure. This involves a formal reserve research which determines the life period of major complex elements (roofs, pool, etc . ) and then determines how much book monies should be set aside every year to ensure adequate funds can be found when repairs or substitutes are due. California, like requires unit owner entry to their reserve study as well as full disclosure of hold fund status on an yearly basis. Obviously, these files are an important part of the earnest process.