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looking at purchasing a foreclosed townhouse - will the HOAs go up and what causes them to go up?

  • September 28 2010 - Brainerd
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Answers (3)

There are 5 things you and your agent need to check:

1-Are the HOA fees listed current.

2-Review minutes for any language regarding major repairs.

3-How many units are currently delinquent.

4-Are the reserves funded at the level recommended by their audit.

5-Walk the property, is clean and well maintained.

If you find no problems with these issues, you should be able to assume only reasonable increases. With that said, I always encourage my clients to budget assuming small increases to cover inflation.
  • September 29 2010
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Profile picture for bagnn
I will say the higher impact on association fees will be reserves and new projects.

Example: Building(s) need new roof. Let's think, 7 buildings, well, either increase the reserves each year for prevention or create a special assesment every year.

Create a small park for the community. Same, either create a reserve or a special assesment based on sq ft or just even to every unit.

And the other, utilities included in the association, water and maybe gas.

Costs related to the operatin of the association.
  • September 29 2010
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The Home Owners Association fees shouldn't change upon purchase. The HOA fees are usually determined by the square footage of the condo/townhouse and are shared proportionately with the other owners.

Whether HOA fees go up depend on what your association fees are paying and whether the cost of those services increase. HOA fees can also used to fund special projects like repairs to common areas, roofs, exteriors, etc. HOA fees can also go up if there are a number of other owners who are not paying their HOA fees.

The other way to finance that capital expense maintenance is through 'special assessments'.

As you are buying the unit from the bank, make sure the bank is paying for all past due HOA fees and any pending assessments. Pending assessments are those assessments outside of HOA fees that fund repairs. When an assessment is pending, the association has formally notified the homeowners of the cost of this assessment and has possibly already billed for the pending assessment.

You should also find out if there are 'proposed assessments' These are assessments that are in the works, but the homeowners have not been formally notified of the assessment. As a rule, the bank won't cover proposed assessments as there is usually no dollar amount set at  the time of purchase. Proposed assessments will be your responsibility.

I recently negotiated the sale of three foreclosed condos where the bank paid for all past association dues as well as most of the pending assessments. So it can be done.

In Minnesota you have 10 days from receipt of documents to review condo documents. I urge you to read the documents to ensure that the association is in good health and whether there are pending or proposed assessments.
  • September 28 2010
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