Many prospective buyers of properties that are located within a common interest development blindly rely on their real estate agent to thoroughly review the association’s finances and other documents that they are supposed to review in order to make an intelligent decision about whether or not to complete the transaction.
Nearly every purchase transaction has a contingency period during which the prospective buyer should investigate the physical condition of the property, the financial condition of the homeowners association and other issues that would have a material impact on the decision about whether or not to complete the transaction. Frequently, buyers are not provided with all of the information they are supposed to receive from the association, or they don’t bother to review the information that they are given. Buyers should be aware of what they are supposed to be given and they should make sure that information is timely received and reviewed. Buyers should question their realtors to confirm that required documents have been received and reviewed and they make sure action is taken to obtain items that have not been delivered. If required items do not exist, the buyer is taking a big risk by completing the transaction. Most buyers are not looking to buy a future lawsuit that will bring nothing but stress. A lack of proper records is a red flag that the prospective buyer should be aware of.
A buyer should inspect the separate interest they will be purchasing and the common area. Common area that is not properly maintained is going to be a problem for the homeowners who ultimately have to deal with the ramifications of improperly maintained property. An association’s financial information will give a prospective buyer an idea of what expenses are being paid and whether or not the association is maintaining proper reserves for the repair and future replacement of the various common area components. Insufficient reserves will result in malfunctions, disrepair, and ultimately special assessments that the homeowners will have to pay.
A buyer should also inspect minutes of the meetings of the association’s board of directors and members for a least the past 12 months. Minutes that are properly maintained will give a prospective buyer insight into the issues the association is dealing with. Those issues could involve common area problems that a buyer would want to know about, and also issues pertaining to the property or unit that the buyer is contemplating purchasing.
Many of the horror stories that people hear about living in a common interest development that is governed by a homeowners association probably would have been avoided had the purchaser been more careful about investigating the property and association before completing their purchase.
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