Wednesday, July 29, 2015

The Importance of Reviewing Financials of a Homeowners Association

8/11/14 - In the sale of a condominium or townhouse it is especially important to obtain the most updated version of the documentation from the Homeowners Association (HOA).

While the cost to obtain these documents may appear to be high, it is important that the Buyer receive these documents for their review and approval. This ultimately protects all parties from any possible future concerns or issues which may arise after the close of escrow.

The HOA package will include the CC&R’s (Covenants, Conditions and Restrictions) filed against the property, the Articles of Incorporation of the complex, its Bylaws, Rules and Regulations, Budget, Minutes of Board Meetings and the Financials.

In today’s economic environment it is especially important to carefully review the Financials of the Homeowners Association, which will indicate the financial strength of the Homeowners Association and its ability to maintain and pay its overhead. The HOA’s ability to pay insurance policy premiums, utilities for common areas, etc. plays a key role in determining whether this complex is right for you (and whether your new Lender will also find this complex a good investment to make a loan on.)

TIP. When reviewing the financials of a Homeowners Association it is imperative to determine whether there are any units which are delinquent in paying their HOA Dues (or units in foreclosure). Paying close attention to how many months any particular unit is behind in their payments (and especially the total amount of units in arrears as well as the cumulative amount of the combined unpaid HOA Dues) is of significant importance when considering a purchase in any particular complex. Unpaid dues can place an unwelcome financial burden on the rest of the homeowners.

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