Dear Sue,
I am in the market to buy my first home.
I have noticed that really nice condominiums in my area are priced below $100,000. They look like really good deals.
I haven’t considered living in a condo community before now because of the monthly homeowners association (HOA) fees. They seem to run between $150 to $350 depending on the association.
I wonder why there is such a variation. I also heard that the high fees might be because of lawsuits.
What should I watch out for?
~ Betty Condo Buyer
Dear Betty,
Condominiums, like every other asset, have come down substantially in value.
Condominiums are selling from $40,000 on up. Those once priced for more than $200,000 are selling today between $65,000 and $100,000.
A condominium is like an apartment building except that the units are owned individually. The unit owners contribute to a general fund (homeowner association dues) that is used to maintain the common areas.
The homeowners association (HOA), whose members are the unit owners, manages the condominium community through an elected board of directors.
Their job is to assess unit owners for the cost of maintaining the common areas and they have the legal power to collect. They also establish rules and regulations providing specific details of restrictions and conduct of unit owners.
Typical rules include mandatory maintenance fees, pet restrictions and color or design choices visible from the exterior of the units. Generally these guidelines are made available to residents as a matter of public record via an HOA website or through public files.
The monthly association fees typically go toward a master insurance policy for the buildings, liability insurance, exterior maintenance — including paint, roof, landscape and common area maintenance.
Excess fees are held in a reserve account and used for big-ticket items, such as roof replacements etc.
The more an association has to offer its unit owners, the higher the fees.
For example, an association with a swimming pool and fitness center will be more costly to maintain so the fees will be higher.
The current economy has wrecked havoc on some homeowners associations. Many distressed unit owners can’t afford to pay the monthly fees. Due to the shortage in funds some associations aren’t able to maintain the buildings adequately.
Financing the purchase of a condominium can also be tricky business. Lenders are unwilling to loan on condos whose associations are embroiled in litigation. They are also unwilling to loan on condos if 51 percent or more of the units are not owner occupied.
Requesting the last six months of an association’s meetings minutes may provide clues to any future or current issues which may impact your decision to buy.
Researching the status and condition of a homeowners association can be a matter of good Home $$$s and Sense.
Sue Thompson is the owner of HomeTown Realtors in Auburn. She can be reached at seesue@mac.com, or on the Web at www.homedollarsandsense.com
