How to buy a condo with confidence
Check for healthy financial reserves
In a condo development, individual unit owners are jointly responsible for common maintenance, operations and repairs. Owners pay monthly homeowners association (HOA) fees for these expenses.
An association that doesn’t collect enough might be deferring maintenance and failing to build reserves for future needs.
The result can be a special assessment, an unexpected bill sometimes in the tens of thousands of dollars.
Insufficient monthly dues can also mean a large future increase in HOA fees.
Buyers should carefully review the complex’s recent board minutes, replacement reserve study and financial statements for potential issues, says Eric Solomon, associate broker with Century 21 Redwood Realty, which serves the Washington, D.C., area.
The right monthly HOA fee pays for monthly operating costs and creates a reserve fund that can cover 70% to 100% of anticipated major maintenance costs, like a new roof.
Be wary of complexes where less than 30% of the anticipated costs are funded.
Condo buyers should also note the building’s overall condition, as aging systems, worn-out amenities and deferred maintenance could all be signs of a future special assessment, Solomon says.