Things to Analyze with an HOA When Buying a Condo
Buying a condo to live in can be a great type of home to choose for many people; however, it is always important to make sure you choose a condo that is located in a well-run community. If you have never lived in a home that has a homeowner's association (HOA) before, you may have no clue what to look for as you investigate the home and its HOA. Here are several important things you should look at when choosing the right condo for your needs.
The Cost of the Monthly Dues
While every community with an HOA may charge a different rate for the monthly dues, you should try to avoid a community that has really high or really low rates compared to similar communities in the area.
If the rates are really low, it could mean that the community is not being properly cared for or that they are desperate to find homeowners. If the rates are much higher than other rates in similar communities, it could mean that the HOA does not have enough money to operate. If this is the case, the HOA may charge the homeowners higher fees to cover the costs they need to complete normal maintenance. High rates on HOA fees can also mean that the community is not managing its funds wisely.
Your real-estate agent should be able to help you gather this information so you can compare the rates at various communities.
The Budget and Financial Statements
Taking a good look at a community's budget is also an important step to take when analyzing the financial state of the community. The budget and the financial statements will show you several important details, which include the following:
1. The amount of money the community plans on collecting. This is the total amount every homeowner will pay for the entire year.
2. The amount of money that is past due. It's also important to take note of how many homeowners are past due on their fees. When people are not paying their fees on time, it can create problems for the HOA. The main problem is the HOA will not be able to pay for all the maintenance the community needs. This may mean that things are not getting done in the neighborhood, and this can be bad for property values.
3. The expenses the HOA plans on paying. You can also see on the budget how the HOA spends the money it receives. The budget will not only show you normal expenses the HOA pays monthly but will also reveal capital expenditures, which represent bigger types of projects the HOA plans on doing throughout the year.
4. The balance of the reserve fund. Every HOA should have a reserve fund, and this fund should have a large balance in it. The purpose of a reserve fund is to pay for capital expenditures, such as replacing the siding on all the homes. If the reserve fund is low, the HOA will not be able to perform large projects like this anytime in the near future.
A third thing to look into involves the insurance the HOA has. While not every HOA is required to have fidelity insurance, many are, and this is an important type of protection for the homeowners in the community.
Fidelity insurance protects the homeowners against money laundering, stealing, and inappropriate uses of funds in the HOA. Finding a condo that has fidelity coverage is very important as you look for a condo to buy.
If you would like to learn more about condos for sale and how to choose the right one, contact a real-estate agent today.