If you’re thinking about buying a condominium, you need to find out whether the Homeowner’s Association (HOA) plans on any special assessments and if so, for what type of project. You need to understand how these HOAs work so that you know what your financial risks may be.
You need to know is that every condominium complex has an HOA, which is fully responsible for handling all maintenance and upkeep of the common areas of the property outside each unit, including landscaping. The HOA gets its funds from the monthly dues collected from the condo owners. It’s important that you know the financial condition of the HOA before buying. If the monthly dues are low and the HOA has very little money in reserve and the complex has tons of deferred maintenance, you could be at financial risk.
HOAs usually obtain money for maintenance projects by assessing each condo owner through a special one-time assessment. Depending on how massive the maintenance backlog is, these assessments can get very expensive. Not only do you need to be concerned about the interior condition of the unit you’re considering, you need to know what condition the entire building or complex is in, the financial health of the HOA and the extent of any special assessments.
You should not necessarily be deterred from buying a condo just because a special assessment may be planned. Some HOAs like to keep the monthly dues low and periodically make a special assessment to pay for a maintenance project. Picture it this way: You are buying a condo worth $220,000 and plan on paying a $25,000 special assessment for your unit. In the end you only pay $170,000 for the unit. That’s a good deal, right? Special assessments are not all bad, but they do make it a more difficult to determine the value of the unit you’re buying.
When you set out to buy a condominium, you should ideally team up with your Realtor to read every detail of the Resale Certificate so that you have some facts on which to evaluate the overall condition of the condominium building or complex you’re about to buy into. To get the full picture, you should have a home inspector conduct a full condo inspection.