URGENT!!! Need advice on rather to purchase condo???

You've done your homework, which is a great thing. Whether you should buy or not really depends on your comfort zone as far as the finances go. I would be concerned about the foreclosures and auctions because I'm not a fan of investor would concern me, because I personally am not a fan of investor -owners. They buy houses dirt cheap at auctions and then rent to anyone with a pulse. Some are very good neighbors, others...well, you know

Regarding reserves, lots of condo and townhouse communities have that problem(I live in a townhouse community and although we've made progress, we're still far behind for a 50 year old community. I would consider how well the community is being maintained and what the board is doing to control costs - operating at a loss makes me nervous. Assessments should be keeping up with inflation and reserves should be funded according to the reserve study recommendations or at least close to them.

look for the story behind the numbers - get copies of the last six months or so of board meeting minutes and see what the current issues are. It's ok to walk around the neighborhood and talk to a few residents. We like to talk lot about HOA board's and how wretched they are, forgetting they re homeowners too.

Maybe the reason the boards are so dreadful is because of the owners. You get what you put up with. I would be worried about homeowners who don't have a clue what's going on in their community just as much as the ones who complain all the time but haven't attended a meeting in decades, know who the board members are, etc.

By the way this includes the seller - if he/she doesn't know if care what's going on, I'd wonder what else isn't being said about the condo. Get a home inspector and walk through the place with him or her - you may be enlightened.

Take your time and be sure you walk into your next home she's wide open instead of eyes wide shut. People aren't perfect, but you should be assured issues are being addressed instead of being ignored for whatever reason. Good luck!

In case nobody noticed, Elvis left the building as soon as they posted.

Denise,

Could you provide additional information?

Condo - yes

How many units? When formed via the CCRs? Bylaws in order - have you read them? Multiple buildings or spread out? Common areas of special interest - pools, buildings, landscaping, entrances, signage, playgrounds or parking garages?

Denise

You say pool by memberships which implies an optional charge but no where in the financials does it show Pool Revenue (Income) thus I conclude the pool is not optional, it is included.

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Thanks for input. What is your opinion about the balance sheet not balancing out to 0?

Also the 241 thousand number is under liabilities with (loss) in parenthesis and liabilities are exceeding current assets. However I am misinterpreting that and the HOA is not operating at a loss?

BTW, their accounts receivable might be as high as $263,000 which could be a concern, especially with this COVID-19 situation.

I am sure Augustin has more experience in managing HOA's than others, so I would take what he/she has suggested.

Good luck in making the right decision.

Oh BTW, I have 240 college course credits, but darn, have only a high school diploma.

The above is from real life. If a HOA Board and/or its manager feel that either the life expectancies or expenses a Reserve Study company used are not appropriate, then the correct response is to ask the Reserve Study company to change them and re-crunch the numbers. Instead, what I have witnessed is a Board and manager ignoring the Reserve Study. The Board and manager just tells members that the Reserve Study is way off, because, say, the board and manager feel the roofs will last 30 years and not 20, due to xyz, and the expenses for new roofs really should be ___, because of abc. Reserve Study companies are happy to accommodate such adjustments. The companies just list their assumptions along with some thoughts on the assumptions. Else the Reserve Study has zero value other than so the Board can say, "Yes, we had a Reserve Study done!"

In my opinion, maybe 0.1% of board directors and managers understand Reserve Study spreadsheets with their estimated timeline of events, adjustment for estimated inflation, estimates of cost to replace whatever, the meaning of "percent funded," and so on.

If, in your opinion, only 0.1% of board members understand Reserve Study, that just make a stronger case to build even a high percentage of HOA's and really bring that number even lower.

So roofs were done on at least some of the buildings in last 5 years. Not sure on how many buildings though. Lots of rotten wood on exterior of buildings currently. In the resale certificate the question about any planned major capital expenditures was left blank. For the reserve study, at the time of the study 2017 they were severely underfunded at about 20%. 2 million is what they recommended then. The condos do have balconies. They have under 50% of what was recommended then but higher amount at least then the amount in 2017. No special assessment currently but that is my concern getting one in the near future. Balance sheet does not equal out to 0 and trying to get minutes to see the story behind the numbers...thanks to all who recommended reviewing minutes in particular! Should give the numbers more meaning. Thanks for all the useful comments so far! I appreciate the input.

Thanks for the advice SheilaH!! Definitely a lot of renters and since they are not owning, less care/responsibility on their part and this area has a higher number of landlords who accept section 8 vouchers than I would like to see. Overall area is decent, quiet, and diverse and it is very reasonably priced however you get what you paid for. Seller was an investor and trying to get them to get me minutes. Sure the investor didnt attend meetings or get a copy of minutes. That would definitely fill in some blanks. From what I have seen relatively friendly community. Visited a few times, night and day. Meeting materials will help. Thanks for your time/input! Much appreciated.

The difference in the numbers is the accounts receivable being included on the asset side. It appears the association went through a management change and the owner balances haven't been updated. Minutes won't give you the answers to that question.

The term “under water” in real estate usually refers to a property that has no equity. That is to say that the money owed on it is more than what it can sell for. Seldom do we hear about an entire HOA or Condominium Association being “under water.”

The brutal truth is that your entire community association can be under water. Unfortunately in many communities, nobody in authority acknowledges it until it’s too late. Too late is when homeowners are hit with a large special assessment for a capital improvement project. A special assessment so large it actually endangers your family’s economy.

So the question is: How do you know if your HOA or Condo is Under Water?

Under water means your community association has not budgeted for its expenses accurately

So let’s start by defining what it means when we say a HOA or Condominium Association is “under water.” It’s quite simple. Under water means your community association has not budgeted for its expenses accurately.

The situation compounds itself by allowing this to happen year after year. The result is a negative cash flow. The effects are a reduction in services and lack of preventative maintenance. Then there is the matter of an absence of capital improvement projects. These are signs that your HOA or Condominium association is going under water.

A special assessment to try to fix a situation will be placed

Signs Your Association is in Financial Trouble
The symptoms are:

Lack of preventive maintenance
Absence of capital improvement projects
Reduction in property values
Deterioration in curb appeal
Erosion of amenities, lowering the quality of life
Reduced staff or cancellation of vendor contracts
Distressed looking property
Municipal fines and violations
Increased complaints to the management office
Special assessments
A special assessment may be placed by your board to try to fix the situation. A special assessment that should never have happened. Now nobody is happy and to a certain extent it’s the fault of the membership for not being vigilant.

Everybody in the association has the ability to diagnose the symptoms. You don’t need to be an accountant or an engineer. You need to know what to look for.

Take a walk around and see if your HOA or Condominium Association is looking a little worn out. Is the paint fading, are the common areas clean, is the pool closed more often than it is open? Are there fewer security personal around? Do you see less personal servicing the property’s common areas? These are easy things to determine and now you need to drill down and see what is causing these problems.

What Causes a Community Association to Go Under
The main culprit is an inadequate budget and you don’t even need to leave the house to see if you have one. If your Association has not increased the fees by a small amount every year then something might be wrong. As a member of a community association you have a right to see the budget and the financial reports. No state in the union prevents community association owners from accessing this information. Ask for a document inspection.

The first thing you should look for is if the association has had a reserve study. Then you should see if they are funding the reserves. Reserves are usually kept in a separate bank account so look at the bank statements. See if the board has been making withdrawals. Only withdrawals for capital improvement projects are allowed. The reserves are not a cushion to pay for budget shortfalls. Review the budget and see how it performed last year.

Did they budget 100k for water and paid 150k? Did they spend an inordinate amount of money on attorney collections. Only to recover a fraction of what they paid the lawyer? What about delinquencies? Is the association carrying non-paying owners without sending them to a collections agency? Delinquencies and bad debt can make a big difference. If your HOA or Condo is under water find out how you can know it.

What You Can Do if Your Condo or HOA is Under Water
When there is going to be a budget meeting this is the time for you to stand up and ask the hard questions. Make the board accountable for the decisions they have been making and are about to make. If they are trying to keep the maintenance fees low, that may feel good in the short run, but, the long term effects can be very painful.

If the board keeps fooling itself, soon enough you will feel the pain. Why should your quality of life be affected by penny pinchers? When for a few more dollars each month your property can be beautiful and at the same time more valuable.

It is important for every member to be a part of the budget process. Don’t allow another “cooked” budget to get passed. Don’t allow your association to be “under water.”

Hey Forum! Recent update. So turns out this community has like 265k in delinquent accounts...from condo questionnaire so bank will not approve loan. Any insight ? Didnt see that coming as everything at least looked decent from budget/balance sheet.

Are they in a 'strong position' still?

I am glad a bank is actually protecting someone (the OP).