Purchasing A Condo? Check Out The HOA First!

July 23, 2010

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Purchasing A Condo?   Check Out The HOA First:

If you are thinking of purchasing a Condo because there are so many inexpensive units on the market – I would advise strongly to do more than just negotiate the best price and/or loan terms. You must make a careful analysis as to the status of the Condo Association.

Ok, what does that mean ? It means you must due diligence on the condition of the common elements of the complex Purchasing A Condo - check out the hoa condo associationand do a thorough analysis of the Association’s records and minutes.

Condition of Common Elements:

In addition to inspecting the Unit you may be purchasing, I would suggest that your Inspector take a tour of the Property with you to get an idea of the overall condition of the Property. It very could be that the Association has been deferring maintenance in order to save cash. This might lead to major Assessments in the future long after you close on the Unit.

Minutes of the Association

I would suggest strongly that you review the Minutes to see if potential expenditures are being discussed and to see if there is current conversations as to futures assessments.

Financial Condition of the Association

You must review the Income and Expense Statements and Balance Sheet to get an idea as to the financial condition of the Association. Find out what percentage of the Units are occupied and what percentage are Owner occupied. Check the Receivables to get an idea how current are the collections of the dues. Are there Payables on the Balance Sheet that need to be paid but are not being paid because of the “cash” situation.

Bottom Line

Be careful that you don’t end up purchasing a pig in the poke.

The same suggestions above apply to purchasing and Property covered by a Homeowners Association.

Errol Phillips – LinkedIn Connection

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