Buyer Beware – HOA Underfunding is a Widespread Problem

I hate to be the bellringer but am proud to be a resource and sometimes there is good news and sometimes there is bad news. The good news abour condos and homeowner associations is that they offer amenities that people could not otherwise afford like pools, parks, and (sometimes) tighter enforcement leading to better aesthetics (although this can be a double edged sword).

But are they affordable? Given the economic and funding issues, it is harder than in the past to secure a condo loan. A large percentage of condo boards are not taking the time or making the effort to get FHA Certification simply because the barriers suggest the effort may be futile.  And even when funding can be secured, there is another thing to be concerned about and that is whether the association is financially healthy, or it just  looks that way on paper. Years ago I purchased a condo in an associtiation that looked as if it was fairly financially healthy – but lurking underneath was dry rot that had been covered up by painters, serious dry rot, which lead to the problem that all of the cosmetic work had to be done again, after all the dry rot was repaired, at a per unit special assessment of $10,000 each unit, which was passed the year after my purchase. Yes, it can happen to anyone!

And the underfunding of HOAs is now a serious enough problem that the DRE in California has published a paper on it. The link is below.

If you want to know more about how to assess a situation, my book THE CONDO OWNERS’ ANSWER BOOK is available through Amazon. Here is the link to my Publications Page where you can purchase it. There is a whole chapter on buying a condominium.

And CLICK ON the link to the rather frightening, but very real, article on the UNDERFUNDING OF HOAs in California.

Like I said, I hate to be the bearer of bad news, but believe that it is important to know, when you are considering your life’s biggest investment, what it is important to know going in.

 

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