Understanding HOA Financials
I’ve noticed a lot of people lately immediately see high HOA dues and assume that’s why a property isn’t selling. It can absolutely be part of the reason, but if other properties with similar HOA fees are selling, then that usually is not the real issue. You need to look at the HOA financials.
A lot of people ask how I even get HOA financials. The annoying answer is that most of the time they’re in the MLS disclosures. If they are not, you usually have to ask the listing agent, and unfortunately some can be very difficult or slow when it comes to sending everything over.
Now to the actual documents.
The first thing I look at is reserves. Skip everything else at the start. What percent funded are they at? 70%+ is solid. 30%-70% percent is a bit sketchy. Under 30% and you should pretty much expect special assessments or higher dues in the near future.
Next is the budget. As we all know, insurance has gone up a lot in California, so if you see jumps there that is perfectly normal. But if the budget is getting squeezed elsewhere to make up for it, that is a problem. You also want to see whether the HOA is actually maintaining the property properly or just trying to keep dues artificially low.
Now delinquency rate. If a chunk of owners are not paying, lenders can walk. That can shrink the buyer pool fast and create even more issues for resale.
Special assessments are another big one. Not just current ones, but hints in the meeting minutes too. A lot of people overlook the meetings, but they can tell you a lot. They often hint at future costs and also give you a pretty good sense of whether the HOA is competent or a total mess.
Litigation matters too. If there is active litigation, that can kill financing and drain reserves quickly.
Bottom line, high HOA fees do not automatically mean that is why the property is not selling, and low HOA fees can absolutely be a red flag too. Always check the HOA docs yourself and actually go through them properly.
I’ll also post some step by step examples of what to look for in real HOA documents.