Living inside a community that belongs to a homeowner's association (HOA) can offer a lot of great benefits, but you should always fully evaluate an HOA before you buy a house that is part of it. Here are several good ways to evaluate an HOA to help you find a house that is located in a community with a well-managed HOA.
Find out if the HOA is currently being sued
Homeowners can sue the HOA of the community they live in if they have problems with the HOA, and these types of problems usually involve finances. When this happens, it is often due to an HOA neglecting its duties or mismanaging its funds. The important thing to know about this is that you may want to consider this a red flag if you find an HOA that is currently involved in a legal process.
HOAs can also be sued by contractors if they do not settle the bills they owe. This too is a red flag to be aware of, and you can find out if an HOA is involved in a lawsuit by reading the minutes from the meetings. You may also be able to find this out by talking to a lawyer in your area.
Keep in mind that some lawsuits are frivolous in nature, though. This means that even if this can come across as a red flag, it does not necessarily mean the HOA did something wrong.
Look into the cash reserves
A portion of the money an HOA collects from the monthly dues should be placed in a special account known as a reserve fund. This fund has one important purpose, and this purpose is to allow the HOA to save money for major capital expenditures. If the HOA does not have any money in a reserve account, you should find out why. Without enough cash reserves, an HOA may not be able to keep up with the maintenance needed for the homes in the community. In addition, when the reserve balance is low, it could be an indication that the HOA will be raising the fees in the near future to compensate for this.
These are the best ways to find out what the financial status is of an HOA, but your real estate agent might be able to help you evaluate an HOA further. To learn more about this, contact a local real estate agency to talk to an agent today.