Home buying 101: Questions You Should Ask The Association

When purchasing a an association unit (condo or townhouse), you will end up having to deal with the association and its restrictions, as well as increasing association dues. There is a lot of good benefit in doing your due diligence in evaluating the association. You really want to make sure the association is well funded, has reserve funds, and is stable. Here are some questions to get you started:

1. Names and phone numbers of Association Officers. This is so that you can call and ask them any questions you might have.
2. Is there professional management?  There are big advantages to professional management vs being self-managed. Professional management will have much more experience with different situations because they probably manage a number of different association properties. They will know how to handle storm damage or flooding or other maladies because they have been through it before. A self-managed association is one that is run by the people in the units. They may have a person that has a background from the professional management side, but if that person moves out or quits, there could be a hole in the knowledge. They are also usually slower to get things accomplished, and have less contacts in various industries. However, there is quite a difference in costs with professional management being substantially higher.
3. History of Association dues, near term plans to change in a major way? Association dues usually increase every year. But is there some large assessment coming up? Or is there a shortage of reserves which would require the increase of monthly dues?
4. Any controversies or “issues” within the association?
5. Is the association involved in any pending or current lawsuits? Some associations are involved in lawsuits. It would be good to know how long the time frame would be until resolution. Sometimes financing can’t happen if there is a pending lawsuit.
6. How many units are there in the association; can they be identified by architecture? A larger association is usually more stable
7. Specifics on repairs to exterior of homes: windows, decks, roofs, etc. Who is responsible: the owner or the association? Some associations cover replacement of decks. Most cover roofs, Most don’t cover windows, but require a specific window style.
8. What specific type of insurance do we need? Most of the time, you’ll need what’s called a HO-6 policy to cover your part of the unit and your belongings. There are differences in the association insurance deductibles and coverages. So you’ll need to know what the association covers so that your policy can cover any gaps.
9. Any major infrastructure plans in the immediate vicinity that might affect neighborhood? It is good to know if there are upcoming street projects or sidewalk projects. These may impact your unit’s taxes.
10. What might be the next major project requiring use of reserves? Timing? If a major project is coming up, it is wise to know how it is going to be funded. If the association has cash on hand or if they are planning on adding assessments.
11. How much does the association have in reserves versus the Reserve Study? The association should have at least a bare minimum of 50%, and typically closer to 70% of the reserve study amount as cash in hand to perform repairs and maintenance. See Reserve Funds and What It Means To A Complex.
12. How is the money invested or is it in a checking or savings account? Some associations will put the reserves or extra cash into CD’s, while others may keep the funds in checkings or savings accounts.
13. What special assessments have been mandated over the past 5 years? Are there any coming up? It is good to understand what special assessments have taken place over some period of time. This is an indicator of future special assessments.
14. What percentage of units are owner-occupied vs rented? Some financing programs require at least 51% owner occupied in the complex. This means if it is a 4-unit condo building, at least 75% have to be owner occupied (not rented) in order for the buyer to finance the purchase. In this instance, it is more difficult to get the 4th unit sold if there are 2 rented out.
15. Are there rental restriction? Restrictions are both good and bad. If you are a homeowner, you want less of your neighbors to be renting. However if you are relocating, you may want the ability to rent out your unit if you can’t sell it in a timely manner.
16. How good is the soundproofing between units? Some condo conversion projects are converted apartment complexes. It may not have been on their “most important” list when they do the conversion into condos. Some condo conversion projects have payed special attention to soundproofing, such as 9th street lofts in Downtown St. Paul. They took the time to put a rubber membrane between the existing concrete floors, and the new concrete floors they added. This isolates the floors from each other.
17. What are the amenities? Sometimes it is hard to figure out what each complex has for amenities. It may be easiest to ask the management for a list of amenities and where they are located.
18. Are there pet restrictions? Most associations have restrictions on pets, especially condo buildings.
19. How many units are there in the association? I personally recommend to stay away from small associations such as 6 units or less. They can be a good buy for some people, but the stability of the association is dependent on just a few people. In larger associations, such as 30+ units, there is more stability for instances where there is a foreclosure.
20. What is the guest parking situation? It is very helpful to know where guests can park, or parking restrictions on roads, or whether you can park an RV in a townhouse driveway.
21. Can I get minutes from the past few meetings? Usually board minutes are pretty easy to get. It may give you more of a flavor of how they operate.
22. How often do you increase dues? / What are the current dues for this particular unit?