Home : Before Buying Into a HOA or Condo Association...

Before Buying Into a HOA or Condo Association...

Posted by Tina Merritt on 10/15/2009 at 5:13 PM
Posted in Real Estate Investing

It's best to be judicious in your research regarding any Association you may become a part of as a result of a purchase. Most people spend more time researching a stock to purchase than they do researching an Association in which they are buying a home. Don't make that mistake!

The Resale Certificate. This is usually a 2-4 page document which states whether or not the present owner is current on their dues, what the dues are, whether or not there are any planned assessments coming up, if the property being transferred conforms to the architectural guidelines of the community, etc. This certificate will also state whether or not there is any pending litigation by or against the Association.
The Budget. Review this carefully! Is the Association financially healthy? Are they spending more than they are receiving? Have they been going over projected budget on a certain expense or category for a while?
The Reserve Replacement Study. This section will review what the lifespan is for each item the Association is responsible for. Whether it be a parking lot, pool, roof, street lighting, etc., each item should be itemized in this study. The resale certificate should give you the current balance of the reserve fund. Now, compare this to the upcoming expenditures predicted in the Reserve Replacement Study. Are there funds to cover everything and still have a "slush fund" for unexpected expenses?
The Rules and Regulations. Besides the obvious, look for restrictions on the number of investor-owned units and/or tenant occupied units. Some Associations are very strict and others are very lax. I know of one HOA that required all front window treatments to be white or ivory and front blinds to be open 1/2 way during daylight hours. Take a look at pet restrictions as this could impact any future tenant pool for your property.
Insurance. What type of insurance does the Association have and who is the underwriter? Will you be required to get flood insurance or any additional insurance per the rules and regs?
Certification that the Association has filed the appropriate documents and is in good standing with their governing state board.

Sometimes, these documents can be 200+ pages. READ THEM! If the documents state that the current owner is in violation of any guidelines, be sure to get those items taken care of prior to closing or you could be held liable for the violations and/or fines.

In addition, take a walk through the community and speak with the owners. Ask them how they feel about the Association. If possible, attend a board meeting or have a cup of coffee with the Association President. Once you have done all of this, you should have a good feel for whether or not this is a community worthy of your investment.

Tina Merritt is an 11 year veteran Real Estate Agent and Trainer based out of Virginia Beach, Virginia. She holds a degree in economics from Virginia Tech and post-baccalaureate from Virginia Commonwealth in real estate and land development. As an avid social networker and internet marketer, Tina helps real estate agents, loan officers and affiliated industries embrace technology. As a real estate agent, Tina primarily deals with marketing and selling properties deemed "hard to sell" and also works with real estate investors helping them build and/or liquidate their portfolios for maximum profit.

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4 Comments

Posted by member11026791 on 10/16/2009 12:18 AM

When you think you've found the perfect unit, you have your down payment ready, your going to call the mortgage lender and you're ready sign on the dotted line, hold off for a moment. Are you sure you are completely prepared to buy into a community property? Do you know everything there is to know about your future home? One of the best places to look for hidden dirt on your future home is in the minutes of the condo association board meetings. Anyone with complaints will likely come before the board and if you notice several of the same complaints, you may be buying into a lemon or simply a property that is poorly managed. You don't want to be part of either one. You should be able to find the delinquency records for the building. High rates of delinquency, or even moderate ones, are a sign of bad things to come. Owners pay into a repair and reserve fund. Research the fund to see how much it contains. Older properties should have as much as 50% of the estimated costs of refurbishing the building and grounds in the fund for planned improvements, new fixtures or roofing, and emergencies. Newer buildings should have at least 10-25%. Make extra sure you take a look at the insurance on the property. Find out if replacement costs and costs of rebuilding are correct and find out if the property has a building ordinance clause. Utilize the services of a real estate lawyer to work through all the paperwork and condo bylaws of the condo association to be sure everything is up to snuff. To read more: http://personalmoneystore.com/moneyblog/2009/10/06/h1n1-vaccine-risks/

Posted by user28112 on 10/20/2009 1:14 PM

Tina, may your days continue to be as beautiful as your advice. Much happiness to you and yours.

Yes Tina, I agree....read the paper work, do the homework. Be sure to attend an Association meeting once or twice before buying. Is the Association people-oriented or self-oriented? The paper work is very important, and so are the people who enforce that paper work. Do due diligence on everything, which may take a few months before or after deciding to buy and certainly before investing any non-refundable or even refundable money.

Tina, stay terrific.

Sincerely, your friend and "Revolutionary Entrepreneur"
Nimrod (means "Valiant, Strong")

Dr. Nimrod Erech M. Christ Nimrod,
President, Co-founder
Self-Esteem & World Peace Association
Nimrodworldpeace@aol.com.

Posted by user28112 on 10/20/2009 1:30 PM

Tina, a thought just came to me. I do not know if you are a mother of young children, but as you know this H1N1 (Swine) flu is from swine (pigs). The young children that have died, were they being fed swine (pork)? This has not been said. Since there is a swine flu vaccine shortage, if you do have young children Tina, it may not be a good idea not to feed them swine even if they get the swine flu shot.

Swine owners want to protect the swine industry which is why they want us to call the swine flu, H1N1. The swine industry has not publicized that it has stopped its evil habit of cramming big live pigs together in small stalls which started this filthy swine flu. Be proactive Tina. If you have young children keep them, and you, away from eating swine.

Sincerely, your friend and "Revolutionary Entrepreneur"
Nimrod (means: "Valiant, Strong")

Posted by member1982261 on 10/21/2009 1:20 PM

I almost bough a condo once, but after my real estate lawyers looked over the documents, I decided against it. The condo fees were high and they were about the get much higher due to roof repairs that needed to be done in the near future.

John,
http://www.canadabanks.net/Banks.aspx

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