{"id":360191,"date":"2025-12-20T15:49:20","date_gmt":"2025-12-20T15:49:20","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/360191\/"},"modified":"2025-12-20T15:49:20","modified_gmt":"2025-12-20T15:49:20","slug":"how-to-read-an-hoa-budget-and-spot-red-flags-before-you-buy","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/360191\/","title":{"rendered":"How To Read an HOA Budget and Spot Red Flags Before You Buy"},"content":{"rendered":"

Residences with homeowners associations <\/a>(HOAs) offer many benefits, including manicured landscaping, amenities such as pools, lakes, and tennis courts, and a slew of other perks. Yet, HOAs<\/a> can also come with a substantial price tag.<\/p>\n

The average HOA<\/a> fee in the country ranges from $200 to $400 monthly, but can exceed $1,000, depending on the region and amenities, according to HOA Start<\/a>.<\/p>\n

And they’re on the rise; in 2024, 65.7% of homes, the second-highest percentage in the survey\u2019s history, were built within an HOA, according to the National Association of Home Builders<\/a>.<\/p>\n

With these becoming increasingly common, buyers considering property in an HOA should carefully assess several factors to evaluate the association\u2019s financial health. Experts agree that spotting red flags early could avoid headaches and additional costs down the line.<\/p>\n

Jane Lin, a real estate expert and marketing manager at Bayshore Residences<\/a>, says she always tells her clients that an HOA\u2019s budget is like a map of the community\u2019s finances.<\/p>\n

\u201cA good point to start is to examine the source of funds. These include: monthly dues, special assessments, or fines. Now is also the time to review spending areas. These include maintenance, utilities, insurance, or management fees,\u201d she says.<\/p>\n

Common red flagsReserve funds<\/p>\n

Lin explains it is essential to monitor reserves, as these are where funds are allocated for major repairs such as roof and pool maintenance. Small or inadequate reserves could lead to upcoming assessments and higher costs for owners, as well as unstable or rising insurance premiums.<\/p>\n

\u201cToo many special assessments in the past few years could mean poor planning,\u201d she says.<\/p>\n

Of note, a whopping 70% of HOAs in the country have inadequate reserves, according to Real Estate News<\/a>.<\/p>\n

Yonatan S. Levoritz, Esq, of The Levoritz Law Firm<\/a>, agrees, noting that if reserve funds are running low, they will need to be replenished through refinancing or higher HOA Fees.<\/p>\n

\u201cEither way, this is a red flag that management is not doing its job properly,\u201d he says.<\/p>\n

Another point buyers should keep in mind is that the more complex and amenity-rich the development, the more it will cost to maintain and the greater the reserve funds should be, according to Michael Sherrill, founder of real estate holding company Techno City Holdings<\/a>. In addition, he says that many newer complexes underprice HOA dues and run thin reserves, which burdens later buyers with special assessments.<\/p>\n

Repair costs<\/p>\n

Another critical area to focus on is maintenance and repair costs.<\/p>\n

\u201cRead this carefully. If they are too expensive, you have to wonder why,\u201d says Bobbi Rebell, a consumer finance expert at CardRates.com<\/a>.<\/p>\n

On the other hand, says that if they are lower than you would expect, it could be a red flag that the HOA is deferring maintenance.<\/p>\n

Debt and lawsuits<\/p>\n

\u201cBe aware of any debts owed to the HOA. That could signal that some members of the community are not able, or are choosing not to pay their dues, and those unpaid bills could become a cost to the community in the future,\u201d she adds.<\/p>\n

Rebell says that another red flag to look for is any legal activity or lawsuits. That can be costly and may signal other issues that should be disclosed to a potential buyer, she says.<\/p>\n

Poor maintenance<\/p>\n

Of course, experts also recommend that, in addition to reviewing budgets, you inspect buildings to determine whether they are well-maintained.<\/p>\n

Doris Sussman Goldstein, an attorney, HOA president, and owner of California HOA guide CondoWonk.com<\/a>, suggests avoiding a building where the board is not paying attention to maintenance or members are unwilling to pay what it costs to keep the building in good condition.<\/p>\n

Tips for evaluating HOA financial health and questions to ask the board<\/p>\n

Fortunately, experts say there are several steps that can help buyers assess an HOA’s financial health.<\/p>\n

Ask for documents<\/p>\n

Levoritz recommends that prospective buyers review the upcoming year’s budget and assess how the board is allocating funds under its control.<\/p>\n

Finally, see what percentage of the HOA budget is allocated to debt relative to cash flow, he advises.<\/p>\n

Lin says buyers should review at least three years of financial statements and assess the assessment delinquency rate.<\/p>\n

\u201cAnything past 10% is a red flag,\u201d she says.<\/p>\n

Look at the governance of the HOA as a whole<\/p>\n

Lin suggests carefully studying the HOA\u2019s governing documents, as they set regulations that affect daily life.<\/p>\n

\u201cTalk to current owners for important information. They can point you to information such as poor maintenance that you do not know about,\u201d she says.<\/p>\n

Understand insurance coverage<\/p>\n

CondoWonk.com\u2019s Sussman Goldstein notes that insurance is also one of the largest budget items and that increases are unpredictable and largely beyond the HOA’s control.<\/p>\n

\u201cAn HOA that shows low insurance costs may be one that just hasn\u2019t been hit by a big increase\u2026yet,\u201d she says.<\/p>\n

That\u2019s why it\u2019s crucial to understand the details of what that insurance covers.<\/p>\n

While some states have uniform insurance policy rules, others rely on requirements set by the HOA\u2019s covenants, conditions, and restrictions (CC&Rs).<\/p>\n

In addition, she says that due to current upheavals in the insurance market, some HOAs have lost their insurance altogether. In turn, verify that the HOA has insurance coverage and confirm the deductible amount.<\/p>\n

Additional tips<\/p>\n

Sherrill from Techno City Holdings also recommended obtaining the maps and the original condo plan, and reviewing the unit boundaries and parking to understand what part you own and what is within the common areas.<\/p>\n

And if you have special needs, such as an accessibility ramp or EV charger, make sure that it\u2019s allowed and you qualify in writing before you close, he says.<\/p>\n

\u201cWhen things are truly bad, there’s probably not much worse than a dysfunctional HOA. When things are great, it’s an amazing insight into cooperative humanity working together,\u201d he says.<\/p>\n

Finally, note that the HOA’s composition and order may change at any time.<\/p>\n

\u201cWhat’s ‘great”, “ok, “nice”, can go south if (when) owners, management company, or board composition changes,\u201d he adds.<\/p>\n

In closing, Sherrill recommends taking the opportunities you find and getting involved on the board if you buy into an HOA.<\/p>\n

\u201cAnd be aware that the members and climate of the HOA could change and it may be time to move on if it becomes too stressful,\u201d he adds.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"Residences with homeowners associations (HOAs) offer many benefits, including manicured landscaping, amenities such as pools, lakes, and tennis…\n","protected":false},"author":2,"featured_media":360192,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[39],"tags":[177882,28,63717,28616,177883,177886,177884,147,530,177885,156069],"class_list":["post-360191","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-an-hoa","tag-business","tag-financial-health","tag-hoa","tag-hoa-dues","tag-jane-lin","tag-michael-sherrill","tag-personal-finance","tag-personalfinance","tag-reserve-funds","tag-special-assessments"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/360191","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=360191"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/360191\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/360192"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=360191"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=360191"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=360191"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}