Ultimate Buyer’s Guide to Property Associations

Ultimate Buyers Guide to Property Associations Featured ImageThis the ultimate guide to buying a property in an Association, also referred to as a "homeowner’s association", a "condo association" or simply an “HOA”. Follow these instructions BEFORE you purchase a condo, townhome or single family home in an Association. Unfortunately, this is not a quick and easy experience to complete. But if you don’t do it, you could fall into a very serious real estate trap that is extremely expensive to get away from. So take the time to do it! The reality is that most property owners in Associations do not like their Association's rules and restrictions. The list of angry Association members is long and distinguished. But not all Associations are horrible and these days, there aren't as many non-Association options for buyers. Therefore, follow this guide to ensure you make the most informed decision when buying into an HOA. Starting with watching the below explanation video:

Property Association Verification Checklist

After watching the above video, you're next step is to get answers to all of the below questions as well as an full understanding of the ramifications of those answers. To do that, you will need to read all of the Association documents yourself (including addendums and changes), as provided by the property seller or his/her listing agent. You will also need to obtain an Estoppel, which you’re closing company will order for you. And, you will need to correspond with an Association Board Member/Officer or someone who represents the Association.

1. Does the Association have the First Right of Refusal on any sale of any unit in the Association?

2. Does the Association have any rules related to who can buy a property in the development? Do new purchasers of units in the Association require approval to become a Member? If so, what is the approval criteria (i.e. 55 years of age or older, etc)?

3. Do new Members have to pay an upfront fee to join the Association?

4. What issues, if any, have affected a buyer or seller, in the past, when buying a property in this Association (i.e. non-owner occupied buyers, limited to only owning one unit, etc)?

5.What issues, if any, have conventional lending underwriters had with this association?
NOTE! Review the loans recorded against units in the association that have sold within the past few years to see if any have had conventional loans originated against them.

6. Is the association on the FHA approved list? If not, it may still qualify but you must pass these FHA Underwriting Requirements

7. What is the Association's reserve amount and is it under-funded or the correct amount?

8. How is the Association’s reserve funded, by a portion of each monthly due or by an upfront fee that new members pay? If so, how much?

9. Are there any pending or even discussions for the potential of future assessments?
NOTE! Obtain confirmation of this, in writing from an association board member or president.

10. What assessments, if any, have occurred over the past 10 years? If yes, what did they cover? Are any current Association members delinquent on any past assessments?

11. What is the current condition of the common areas/elements (i.e. roof, parking areas, HVAC, electrical, plumbing, etc)?
NOTE! You may have to hire a professional inspector to help you assess this.

12. Does the association have a separate reserve fund for each major common area element (i.e. roof replacement, exterior repainting, resurfacing parking areas, etc)? If so, how much has built up for each replacement reserve?

13. Who owns the common elements? Does the Association have the right to sell the common elements?

14. Are there any pending lawsuits or the potential for legal action involving the Association, the property, Association officers/directors or it’s property management company?

15. Is the property owner, the Association board/officer or the property management firm aware of anything involving the Association which could diminish the value of the property or inhibit an owner’s ability to sell at fair market value within a reasonable period of time as compared to other properties in the area?

16. What percentage of units are leased versus owner occupied?
NOTE! If the Association has short term vacation rentals, you can go to HomeAway.com or AirBNB.com to find out which units are vacation rentals. Then, you can read their reviews to find out what guests have to say about the unit and the development.

17. What are the Association rules on Pets (i.e. animal size, animal type, animal behavior, etc)? Are service animals allowed? 26.) Pets

18. What are the Association rules on Renting (minimum number of nights, tenant age, etc)?

19. What are the Association rules on Contractors (Association approval, etc)?

20. What are the Association rules on Building Materials (roof shingles, paint colors, etc)?

21. What are the Association rules on elements of your unit that are visible to others (i.e. color of blinds, towels on balconies, etc)?

22. What are the Association rules on Renovation (i.e. approvals, times of day, etc)?

23. What are the Association rules concerning HVAC units? Is each unit owner responsible for their own HVAC units within their units? If exterior condensing units are located in a common area, are their any rules related to how and when they can be access?

24. Who is responsible for the plumbing within the walls?

25. What are the rules regarding damages caused by another homeowner (i.e. another unit’s bathtub overflows and collapses your ceiling, are they responsible? Are you responsible for any damage under a no-fault type situation?

26. What does the Association master insurance policy cover?
NOTE! Get a copy of the insurance declaration page and forward to your insurance agent to review.

27. Can members sue the association? In the Association documentation, who pays the attorney fees in the event of litigation?

28. What are the Association rules on Parking (i.e. Vehicle type, Trailers, Boats, owners only or guest too)?

29. Are parking spots assigned to owners? How are they assigned; by Deed to the new owner?

30. If Deeded, is the Deeded parking space transferring in this sale to the new Buyer? If Deeded, can you install a storage unit on your parking space?

31. What are the Association rules regarding the use of common elements (i.e. times of day, number of people, etc)?

32. What are the Association rules regarding moving in or out (i.e. special elevator just for moving day)?

33. What is the current monthly Association fee?

34. Are any members delinquent on their association fees? If so, how many, how much and what percentage of the overall membership and the overall total?

35. What is the history of the Association fee amount?
NOTE! Find out what it started at, how many times it has risen and for how much at each raise.

36. Has there been any discussions, rumors or formal plans to increase the Association dues?
NOTE! Obtain confirmation of this, in writing from an association board member or president.

37. What are the rules concerning termination of the condominium association? What percent of ownership required to approve? Are there state laws that control this?

38. Are there any planned, proposed or discussed changes to the Association rules and regulations?
NOTE! Obtain confirmation of this, in writing from an association board member or president.

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  1. Phill, the sheer amount of knowledge and wisdom that you share with the public is simply astounding. Thank you sir for all of your work and help you provide to both experienced and aspiring RE investors.

  2. Very good information here this just shows more people what trash HOA’s are about that this is what you have to look I to dor these power grabbing bigheads

  3. Oscar Navarro says

    I have some rentals in Tampa Fl in a property association community, I’m so disappointed and frustrated with the abuse they do , they’re all the same some worst than others , arbitrarily and abuse on the owners who has not other alternative than just comply with it , whenever they want they give us an assessments charges which are big on the top of the monthly HOA association fees .
    I regret so much invested in HOA community, on the top of that when I bought my two units I have there it was not written at any part of the by-laws documents and restrictions that we can not rent our unit , Now they are preventing us to rent our units with allegations that they are now enforcing one of the rules that the complex can not be more than 25% capacity rented and according to them (HOA) right now they’re like above that % rented therefore now we are forced to have our units empty without getting not rent at all , paying taxes and paying huge monthly HOA fees,
    This is a total abuse ,
    Thanks Phil

  4. Jeffrey Hall says

    I live in Countryside Proprietary for twenty years now. I needed a new roof and we hired a HCR contractor to replace and install . The association contacted me and said I had the wrong type of shingles and penalized our community passes that we pay 90 a month to maintain the facilities .We recently found out that another house in our community has the same shingles on there house and they have been on their house for a long time.MY wife and I feel were are being single out and we would like to know if we can do anything to the board members that penalized us?

    • Phil Pustejovsky says

      File a lawsuit against them personally, although with the Association. Associations typically have a small budget for legal fees.

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