Jul 28, 2010

Buying Into a Homeowners' Association = Buying Uncertainty

Sometimes a personal story is the most powerful way to illustrate the importance of certain tidbits of advice.

For example, if you've read any of Nolo's books on homebuying (such as Nolo's Essential Guide to Buying Your First Home), you've heard us say a million times that it's important to read the fine print in the Covenants, Conditions, & Restrictions provided by the homeowners' association (HOA) of your soon-to-be newly purchased condo or townhouse.

But, as a friend of mine buying a condo recently commented to me, "There were 300 pages of documents -- I'm not sure I ever would have read the whole thing!"

Good thing for her, the condo seller (of this existing complex, built in the 1980s) was not only a member of the condo board, but was upfront in making his seller's disclosures. He revealed that, on top of the regular homeowners' dues, there was a probable special assessment coming down the pike -- alarmingly enough, of an uncertain amount in the neighborhood of $10,000 to $20,000 per homeowner.

The problem is that various of the condo owners' roofs have started to leak, and not just because the roofs are old. (They'd already budgeted into the regular homeowners dues for regular roof replacements.) Apparently when the condos were originally built, someone didn't do the roofs correctly, and the flaws are starting to take a toll.

What's a condo buyer to do in this situation? My friend asked for and received a credit of $10,000 to be put into the escrow account at closing, but she's also researching madly, talking to contractors and people within the HOA about the likely costs of replacing over 100 roofs - or maybe just replacing individual roofs as they leak (a choice that the HOA members are still considering).

She may not get the answer before closing time -- but you can bet she'll be an active member of the homeowners' association, and attend all the meetings, to watch how this plays out!