Understanding elements when buying, or owning a property under the jurisdiction of a Homeowner’s Association (HOA) is critical. This is way more than “How much are the HOA dues?” It can affect quality of lifestyle, or the economic viability of the unit.
I always tell buyers when you own a property with a HOA be sure you get on the HOA Board. As a minimum go to the meetings. You need to be cognizant of any changes, and have a vote in what’s transpiring. Don’t get broadsided and complain.
How a HOA is set up and it’s ongoing financial viability will have a huge impact on getting a mortgage on the property, the property’ value, and dues/special assessments.
How’s a HOA being managed? Professionally, or by a non-professional that has nothing better to do without experience? How a complex is handled can be critical.
“Current” HOA documents and financials should be disclosed by the seller during a transaction. First thing is to make sure the financials and such are recent. Old documents may not give you adequate information, or if the financials or audits haven’t been updated for a while, could be a red flag for poor management.
Insurance in California has become a major issue. Recently the Master Insurance Policies for complexes have jumped substantially in price year over year. To the point where owners have pushed back at higher dues and special assessments. Higher dues can have an immediate financial affect on an owner, but if the decision is to go with a policy with inadequate coverage to save cost, the complex may not meet lender’s standard guidelines and not qualify for “A” paper mortgages. That means higher down payments, higher interest rates, smaller buyer base, lower values.
Lenders have questionnaires for HOAs. These questions should also be asked by a buyer.
The specific questions on a mortgage lender’s homeowner association questionnaire can vary depending on the lender and the requirements of the homeowner association (HOA). However, generally, these questionnaires aim to provide the lender with essential information about the property’s HOA, as it can impact the borrower’s ability to obtain a mortgage. Here are some common questions you might find on such a questionnaire:
- Is the property part of a homeowner association (HOA)?
- What is the name of the homeowner association?
- What are the contact details for the HOA (address, phone number, email)?
- What are the monthly or annual HOA dues?
- Are there any special assessments or pending litigation against the HOA?
- Are there any delinquencies in HOA dues for the property?
- What amenities and services does the HOA provide (e.g., pool, gym, security)?
- Are there any restrictions or covenants that could affect the property’s value or marketability?
- Are there any architectural or design guidelines homeowners must follow?
- Are there rental restrictions within the HOA?
- Does the HOA have sufficient reserves for maintenance and repairs?
- Has the HOA approved any recent or planned special projects or renovations?
- Are there any restrictions on short-term rentals or Airbnb-type arrangements?
- Are there any pending or ongoing legal disputes involving the HOA?
- Has the HOA filed for bankruptcy or been involved in any financial difficulties?
- What is the ratio of owner-occupied units to rental units within the development?
- Are there any environmental or safety concerns related to the HOA?
- Is the HOA involved in any major construction or renovation projects?
- Are there any restrictions on exterior modifications to the property?
- Are there any pending rule changes or amendments to the HOA’s governing documents?
Keep in mind that this is a general list, and the actual questions may differ depending on the lender and local regulations. The lender uses this information to assess the financial stability and risk associated with the HOA, as well as any potential restrictions or liabilities that may affect the property’s value and the borrower’s ability to repay the mortgage.
On the positive side, if the complex is FHA approved, the complex may qualify for lower down payment loans, and Reverse Mortgages. That would add value to the property.
If you are in the Los Angeles area, and have any questions or real estate sales or financing needs, feel free in contacting me
Ron Henderson GRI, SRES, SFR, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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