If you are considering buying a home in a homeowners association it's important to know the health of that Association before finalizing the purchase. The homeowners association maintains consistency with the properties, helps manage communication between homeowners, and has a set of bylaws and rules that all homeowners must adhere to. If it's a condo association or an association that has large amounts of common areas to maintain, a reserve fund is necessary so that homeowners are not hit with a special assessment having to come up with additional fees and costs to replace roofs, repaint, landscaping, siding, or renovation of common areas. For this reason, it's important to understand the health of the homeowners association but how do you do that?
#1. Take a look at the landscaping and outdoor maintenance.
Are the grounds well-maintained and attractive? Are walls, roofs, and fences in good repair? Are the common area buildings in good condition? This typically means that the Association is running well and that they are keeping up on maintenance but that doesn't necessarily tell you how healthy the current reserve fund is.
Read More: What to know before buying a condo
#2. Ask to see the associations budget and reserve study.
Each homeowner is required to pay a certain amount of fees directly to the Association's financial management. Because of this, the community has access to the report and the budget to make sure that the Association has adequate funds to pay for any improvements. These are typically called capital improvements, which can range from replacing expensive common area elements to repairing sidewalks. If the reserve funds are low, it usually means that the burden will be put on the homeowners to come up with the difference. It's important to know if the Association is putting enough aside for major expenditures. However, some areas may not require an association to have a reserve study if the community is fairly small.
#3. Talk to the property management company.
Even in an association with single-family houses, there is usually a property management company that manages and maintains the consistency within the community and follows up on any delinquent accounts. Ask how many insurance claims have been filed as well as of the Association has been involved in any lawsuits. If there are a lot of delinquencies, lenders may have a hard time loaning money on new properties and additional assessments may come out of the homeowner's fees or additional requirements.
#4. Review the covenants, conditions, and restrictions also called the CC&Rs.
This set of documents and bylaws maps out the rules and regulations for homeowners within the Association. Not only do you want to review these but understand that this is the rule you will have to live by.
#5. Talk to current homeowners.
This is probably the best way to determine the health of an HOA. Current homeowners will have an idea of how the company is run and how the Association treats its homeowners. This should give you a good idea as to the health of the Association.
For more information or to get in contact with the property management company or certain Association give me a call. We can talk about certain associations throughout Portland and Vancouver and I can put you in touch with the right connection to answer your questions.