When buying a condo, we should be checking something else that is not visual but then we are all seduced by the decor, the ambiance, the view, and other visual effects.
Most of the time, the Home Owners Association or HOA plays a very nondescript part in the whole process of choosing a condo especially for first-time condo buyers. However, the HOA can play a very large part in using up your finances if you hit an unlucky situation after moving in.
If you want to avoid a surprise, then try to ask a few questions about the HOA. “Who’s running the show” is in fact one of the most important factors. When it comes to a very small condo complex, it may be run by residents but a professional management company is preferable, especially in a condo of any size.
Professional management companies do charge for their services, but they can often save this fee by obtaining lower quotes for repairs, because they will use the same company many times. It is also possible for the company to use their influence on resident votes, so they may be construed as more fair. Finally, it is a business to them, and it the HOA will be run as such, instead of as a part-time rush before each meeting is due!
Asking to see the rules of the HOA, the financial report, the by-laws and the minutes of the last several meetings is something you should always do. The conditions, covenants and restrictions (CC&Rs) will affect your lifestyle, so make sure they ‘fit in’ with it.
What the financial report will do is tell you if there are any big increases in the fees coming up, or if there are any ‘emergency’ fees due soon. This raises the important question, what will happen if there is a big emergency? Also, how is it paid and just how much money is in the HOA?
The maintenance reserves will be important; there will hopefully be approximately one third of the gross annual fees charged to all residents in the reserves. Although it is manageable, a favorable minimum amount would be $4,000 per condo.
The percentage of rental units allowable is also another aspect that the HOA manages. Under 20% is passable, but any more and the re-sale of the condos becomes risky. Renters often do not have the same respect for property or neighbors, so they decrease desireability. Not to mention that mortgage companies are aware of this and are reluctant to give out mortgages to high-rental complexes.
You can consider whether you would like to get a professional inspection done once you have ironed out all of these questions. These inspections include the common areas as well as the condo you are interested in. Once all these precautions are in place, you will feel more secure to go ahead and make an offer.
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