Yesterday I had the opportunity to review the CC&R’s for a client who is purchasing a condo in Eastlake.
The first thing I look at is the condominium resale certificate. This provides you with a bunch of different items including if there is a first right of refusal, current monthly assessment or HOA dues, any special assessment (big repairs to the condo building), delinquent assessments(for all units), delinquent obligations(unpaid bills for the building), fees and fines(lists what you could be fined for), anticipated repairs or replacements (anything that the reserve fund has been allocated for), judgments or lawsuits(what and why), pending lawsuits (how much and why), if there have been any alterations or improvements to the unit, occupancy (number of primary, second homes, rentals, and commercial), code violations (health or building), leases (should be fee simple) , completion of construction (is there any additional phasing planned), conversion (from new construction or apartment), financing approval (FNMA, FHLMC, VA, or FHA) non-conforming use (should not be non-conforming).
So after I go through all of these items I want to make sure that there is nothing funky to hinder the resale of the unit for my buyer. Lucky for me all of the items are in good working order. I can definitely say that I have seen much worse including my own HOA.
Next on the list to review are the CC&R’s and this lists the governing documents that dictate how the homeowners association operates and what rules the owners, and their tenants and guests must obey. These documents and rules are legally enforceable by the homeowners association, so you must make sure there is nothing too wild to make your home ownership experience into a big headache. For example can you turn you condo into a rental? Most places with have a set number in the bylaws. After getting through the CC&R’s there was not anything out of the ordinary.
Moving on to the financials of the HOA. You will get to see all the reserves and how they spend your hard earned money. How the budget is set and the profit and loss for the last couple of years. If the building is in the red and losing money each year you will want to get out the deal immediately. Good for my client the building is run well and is in the black.
Finally I took a look at the minutes for the HOA meeting for the last couple of years. Here you get to see what people are complaining about and how the decisions were made to make improvements. It is good to see that everybody seems to be getting along because who wants to move into a place where everybody hates each other. You will also want to check to see if there have been any break ins or thefts to make sure the building is being secure.