To Condo or not to Condo: HOA Dues 101

There's more to HOA dues than most Buyers realize. Many Buyers see low dues as a great thing, afterall every $70 in dues is another $10,000 in mortgage (at 7%) you could have used to buy a bigger place. So a condo with $200 HOA dues should be worth $40,000 more than a condo with $480 dues. But there's more behind the curtain, especially in low HOA buildings, and especially in older Condo buildings. For one, low dues usually means low reserves. Reserves are there for a rainy day, or in San Francisco to take care of the effects of too many rainy and foggy days. When the roof needs to be repaired, the exterior painted, original windows replaced, or any other numerous things that need repair over time. With low dues and low reserves, if it's discovered or decided that the exterior needs to be replaced, it can cost each homeowner $10,000 and higher. A recent owner I know had to pay over $30,000 for one special assessment to replace the rotting exterior of the building. Some buildings being run by HOA Boards that are trying to be cheap for too many years end up with lists of needed repairs that are endless, so the "special assessments" to all owners to pay for the repairs ends up being endless.

If you're lucky enough to time your stay there before such repairs are discovered, you'll have the benefit of having paid less to live in a home. But if those repairs are discovered before you sell, you MUST disclose the problems. I recently heard of a women who bought her condo without the use of a Buyer's Agent who could have advised her about the necessity of getting an inspection and of carefully reading through the Seller provided disclosures. Instead she just contracted through the Listing Agent and ignored that agent's not so strongly pushed recommedations to do the same. Immediately after moving in she discovered a mold smell coming from the closets, and that she could put her finger through the wall near her sliding glass doors. Now she's blaming the Listing Agent, the HOA, and anyone else she can think of. Don't make the same mistake (or other mistakes) yourself by not considering the age of the building, the maintenance (or lack of in her case) of the condo you're buying, the Seller disclosures including the HOA Minutes and the annual budget including reserves.

Obviously this a lot for Buyers to do, which is why Buyer Specialist Agents are so important. This particular buyer also paid the Listing price on a condo that had been on the market for months. I assume she thought she was saving money by not using a "free" agent to represent her, but my guess is she could have bought the condo for a lot less than asking, AND be forewarned about all of the repairs and problems with the unit. For more on my Buyer Specialties visit http://sanfranciscohomes.yourkwagent.com/home

I live in a Condo myself, so I don't mean to discourage anyone from buying one. They tend to be much more affordable than Single Family Homes in San Francisco, and often the only option in the below $700,000 price range. But full awareness of potential problems is a good idea, and reading a few posts over at this site will give you an idea of problems you might find: http://forum.freeadvice.com/archive/index.php/f-106.html

A more favorable write up of the Pros of Condo living can be found here: http://www.realtytimes.com/rtcpages/20051115_hoaliving.htm