If you’re buying a condo, you can’t afford to overlook the financial strength or weakness of your homeowners association. This is more important than getting the right mortgage, in many ways.
Today, many associations are struggling with unpaid assessments and deferred maintenance. Why? Because so many of your would-be neighbors don’t have the bucks to pay their dues – so they don’t.
As a result, your homeowners association may not have the money they need. If your homeowners association faces financially troubled waters, it could leave a very bad taste in your mouth.
The reason is, they’ll likely pass those problems on to you in the form of special assessments or continued deferred maintenance. Both drive the value of your condo down. Bottom line? Don’t buy a condo if the association is in trouble. You want a trouble-free life. How can you find out if your homeowners association is on firm ground?
1. Review state laws.
States require homeowners associations to provide certain disclosure documents. Find out what they are and make sure you get them.
Talk to the association and ask lots of questions. Find out as much as you can about the financial health of the organization. Ask to see the minutes from the board meetings. You may not get the association to cough these up, but the seller can provide them – if you insist. If the association is having a hard time, you’ll probably see mention of it in the board minutes. Pay special attention to any hint of inadequate reserves and unpaid dues.
Remember, the association can’t tap the reserves for operating problems. The reserves are…reserves. They’re meant to pay for specific upcoming projects.
Find out if there are any special assessments coming up and if the association uses an outside manager or is governed by residents. This information should all be available in the disclosure documents.
Have you purchased a condo and then regretted it? What additional steps should good Wealth Pilgrims take? (If you are buying a condo because you don’t have a good enough credit score for a larger purchase, read “How to Improve Your Credit Score To Buy A House.”)