Homeowner Associations... GOOD, BAD & UGLY

There are so many things to consider when purchasing a home that has a HOA (Homeowner Association). You want to make sure you are asking the right questions before purchasing. The CA Real Estate contract allows the seller 7 days to provide all necessary HOA documentation to the buyer. The information may be overwhelming so these are the main items to focus on:

1) Are the dues monthly, quarterly or annually? And how much?

2) Are there any special assessments or anticipated special assessments for the property and building?

- special assessments are used to focus on main concerns for the building. For

example a HOA may charge a special assessment for the next 15 years to fund the

renovation of each units balconies or bring them up to code.

3) Are there any current violations that the buyer will need to assume?

4) Ask to take a look at the HOA Reserve Study - this will show you how financially stable it is.

- NOTE: if the HOA is "poorly funded" chances are they will run out of funds in the near

future and will need to begin charging the owner's more for maintenance items.

Meaning higher risk of a special assessment.

5) Will FHA or VA financing work for the unit? You can always ask your lender to check for you.

6) Does the HOA allow short term rentals (less than 30 days... think Airbnb)?

7) Lastly - Is there any pending litigation on the HOA itself? If there is this may affect the lender being willing to lend on the unit.

If everything checks out and the HOA monthly payment seems reasonable there are a lot of great amenities that come with living in a HOA. Some communities include use of a clubhouse, fitness center, swimming pool etc... These associations also provide great maintenance services for common areas and the exterior of the property such as painting, roofing and landscaping (all would be a typical expense for the owner in a single family home).

Recently CA passed a law where the homeowner association must allow at least 25 percent of their properties to be long term rentals. In the past, an HOA could prevent any rentals or limit them. This is exciting news for renters and buyers alike who are looking to invest in rental units. [Assembly Bill No. 3182]