Brenda Kellen: Before you buy, research the homeowners association
July 18, 2008
Q. I am planning to purchase a condo, what due diligence should I be aware of regarding the homeowners association?
A. The Colorado Real Estate Commission approved contract to buy and sell real estate includes a number of provisions specific to properties with a homeowners association. It is the buyer’s responsibility to review the association’s covenants, by-laws, rules and regulations to verify the governing documents of the complex are acceptable. The covenants and usually the by-laws are recorded documents and will be included with the title commitment from the title company. The financial statement offers a balance sheet of the financial health of the association. Low reserves may be a red flag indicating the need for increases in monthly assessments or a special assessment to replenish the reserve account. Confirm the amenities included with your monthly dues. I recommend reviewing 2 years worth of homeowners meeting minutes. Most associations meet once a year or bi-annually and the minutes will mention upcoming repairs that have been discussed; changes to policy that may be in the works.
Be aware of any special assessments, already approved and currently in place, or upcoming future assessments. If a seller is currently paying a $200 quarterly special assessment that will continue for another eight quarters, verify if the seller will be required to pay the entire remaining amount at closing or will the continuing assessment be the responsibility of the new owner. Associations sometimes charge a “new owner transfer fee” and this can be paid by either buyer or seller. Often times an up-front reserve requirement of a couple months of dues is collected at closing. This may or may not be refundable upon reselling.
Knowing the facts of the HOA will help you make an informed purchase decision.
For more insight into the current real estate market, please contact me directly at 970.485.1115, visit my website at http://www.gokremmling.com, or e-mail me at firstname.lastname@example.org. I have been working with Omni Real Estate for over 10 years, helping buyers and sellers in both Grand and Summit County.
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