Six Warning Signs Your HOA Is Poorly Managed
If you’re looking for a home, you’ll see plenty of condominiums and homes managed by homeowners’ associations—there are about 370,000 homeowners’ associations in the United States, and about 75% of all newly built homes are part of a homeowner’s association. condominium association or homeowners association (HOA). This means you’ll have to factor in any fees, as well as periodic assessments of unexpected repair or maintenance costs when you crunch the numbers to determine how much home you can afford .
There are many reasons to be wary of HOAs and condo boards, but many of them are “ required ” associations that you cannot avoid joining when purchasing a home. While horror stories of overly draconian HOAs abound, many HOAs and condo boards are well run by rational people and do a lot of good work in managing the overall finances and spaces of the community.
But if you buy a neighborhood that is run by an incompetent community association or one that is borderline criminal, you will likely have hidden financial problems. This means that even if you like the house and the neighbors, and the membership dues are reasonable, you could be facing hefty fees once you close the deal on the home. If you’re thinking about buying an association-managed home, here are some tips that you’re about to buy in the future with huge appreciations.
Low stocks
A well-run homeowners association should have “reserves”—money set aside for unexpected expenses, such as emergency repairs. If the HOA or condo board doesn’t have money in reserve , every problem that arises will result in a special assessment. And if you happen to buy an apartment or house just before the hammer falls, you may find yourself having to fork over a bag of cash shortly after making one of the biggest purchases of your life.
Any time you are considering purchasing a home that is managed by an association, you should review the financials to ensure that the home is being managed competently. If you notice that reserves are very low, that’s a sign that you’re essentially buying a home with an upcoming appraisal because the association will need to increase its reserves somehow – or it will have to put its hand in your pocket. when something serious goes wrong, such as a leaking roof or a lawsuit against the community.
Without repair
Part of your due diligence on any community association should include a review of maintenance and repair records. The lack of recent repairs may indicate that there is a whole list of problems that will soon become yours .
For example, roofs are expensive. If you’re buying a condo in a building that hasn’t had a new roof in decades, it will only be a (short) matter of time before a new roof is needed, and an assessment will likely be carried out before that happens. . What you want to see is a clear record of regular preventive maintenance and repairs. Of course, all maintenance and repairs cost money, but it’s better to pay a reasonable recurring fee that you can afford than to deal with a sudden demand for money.
Different states have different records requirements, and even a healthy association may not have more than a few years’ worth of repair and maintenance records, but they should have them , and they should be able to tell you when expensive items like roofs or large public spaces were last renovated, replaced or updated. Any signs of deferred utility maintenance should be viewed, with the price hanging over them, as a vision of a very expensive future.
Lots of litigation
One big sign that you’ll have to pay a hefty amount soon after closing on your new home is a lawsuit: If your association is embroiled in a major lawsuit (or a long list of them), not only will the legal costs increase, but so will the settlement or judgment against associations will come out of your pocket in the form of increased fees or dues.
Court records are public records (often a simple search of your city name and “court records” will lead you to the right starting point), so you should be able to look up local records for the name of the association. If the board or HOA gets sued or is sued by everyone involved, not only does it imply a poorly managed community, but it also means you’ll have to pay legal bills once you take possession.
The Destroying Commons
One of the main functions of a public association is to maintain “common” territories. In some communities this is quite simple – primarily roads and sidewalks or landscaping outside the building. But some communities have clubs, playgrounds, swimming pools, rooftop terraces and other common areas that attract homebuyers.
When considering an apartment or house under an HOA, inspect the common areas. Is the party room in great condition or is it shabby and the sound system is out of order? Was the pool drained five years ago? If common areas were last renovated in 1985, repairs or renovations will eventually be required, and this bill is on its way.
No documents
One of the best ways to determine the health of a community is to review several years of meeting minutes and other documents. They will tell you almost everything you want to know, from how well the association is running to how they approach repairs and maintenance.
One big red flag? If the board or HOA will not or cannot share these protocols with you. It should be obvious that neither scenario is good: if they simply refuse to give you access, they are probably hiding something (something that could prove extremely expensive to you if you become the owner), or an association works poorly and is useless. the records are actually saved. In any case, you should assume that no minutes = big valuation coming, because secrecy or incompetence never equals good financial management.
No recent meetings
If you can’t get board meeting minutes and documents going back several years because there haven’t been board meetings in a long time, that not only tells you that the entire community is poorly managed, it also tells you that there may be a lot of problems going on lurking beneath the surface. Even if the house or apartment is in excellent condition and the rent is reasonable, if no one has bothered to hold a condo board or HOA association meeting in years, that means no one is paying attention to things like maintenance, repairs, etc. cost. But problems never stay hidden forever, and it’s likely that the moment you close your device, all those chickens will be coming home to roost.