The homeowners association, or HOA, plays an important role in the upkeep of a community. In most instances, the association works as it should and the community is well run. Unfortunately, this does not always happen. Before you buy a home in a community, here are some tips for determining whether or not the association is living up to its promise.
Tour the Community
The HOA is generally responsible for community areas and ensuring the homes in the neighborhood meet certain standards. One of the best ways to determine if the HOA is properly running the community is to take a neighborhood. If the community areas are not well taken care of, this could be a sign that the HOA is not properly functioning.
If you are buying a condo, you should also take into consideration the condition of the unit. If there are evident signs of a water leak and dirty carpets, the HOA could have problems. The same applies if the walls are not in good condition.
Ask About the Reserve Account
Each HOA should have a reserve account that is used to store emergency funds that are used to tackle unexpected problems. If there are no reserves, necessary maintenance problems could be left to worsen. The HOA could be forced to turn to residents to help raise the funds.
Ideally, the HOA should be taking part of the fees it receives and storing them for a rainy day. The HOA should have a Replacement Reserve Study that details potential expenses that the community could face in the future. The study also has a suggested amount that should be in the reserves. If the reserve account does not have that amount, this could be a sign that you could be faced with sudden increases in fees in the future if something does happen.
Review Special Assessments in Recent Years
Special assessments can occur when an unexpected expense occurs and the HOA has to turn to the owners to help raise the needed funds. The HOA should have a listing of the assessments it has had to impose over the last few years.
The assessment can help pinpoint problems with the HOA. For instance, if there were multiple assessments for repairs that could have been avoided with regular maintenance, this could be a sign that the HOA is not properly taking care of the community.
Talk to your realtor about other ways you can assess the health of a HOA before you make a purchase.