Buying or Selling Advise and Information About Condominiums, Town Homes, By the Department of Real Estate and Scott Harrison of Coldwell Banker, a Realtor for over 23 years.
When buying a Condo or Townhome the California Department of Real Estate points out some important areas you should not overlook.
Condominium and Planned Development Project
"Each year, the Department of Real Estate (DRE) receives a number of inquiries regarding who is responsible for maintenance of common areas within a condominium or planned development. Sometimes, answering this question is not as easy as it seems and may involve the review of the maintenance provisions in the governing documents for the project.
The responsibilities for maintenance of areas owned by individual purchasers and those owned in common are normally set forth in the recorded restrictions and do not necessarily correlate with fee ownership. Each project is different and that difference is reflected in the recorded covenants, conditions, and restrictions (CC&R's) for the project. Maintenance responsibilities may be assigned to be consistent with the architectural characteristics of the project. For example, certain common areas of a condominium project may be the responsibility of an individual unit owner if there are no shared party walls (e.g. exterior painting of freestanding units). Also, the roofs of units with discernible roof lines could be the responsibility of the individual owners. In these cases, the restrictions normally provide that an affected unit owner is granted an easement over the common area and owners have maintenance responsibility for these common areas.
It is extremely important that the budget be constructed to support the homeowner association's maintenance responsibilities. DRE carefully reviews each item to be included in the initial budget for a new project, because due to its newness, often the initial budget is only a best assessment project of operating costs. It is based on rates and formulas of the anticipated costs of operating and maintaining the common areas. Adjustments are sometimes needed due to actual experience.
After DRE approval of the budget, the assessment amount is disclosed in the final subdivision public report and a copy of the budget is provided to all buyers. A portion of the assessment will be allocated to a reserve fund for long-term repair and replacement of major common area components.
Thus, if you have questions regarding maintenance responsibilities in a condominium or planned development project, you should first review the governing documents and budget for the project. If those documents do not resolve your concerns, an inquiry should be made to the homeowners' association."
For More information about buying selling and owning a condominium, planned unit development PUD or townhouse
Townhouse and Condominiums Home Owners Associations have been hit by this wave of foreclosures. Lender regulations have tightened up making it difficult to purchase one unless your a cash buyer. If you are thinking about buying consider the following issues likely to arise if you need a loan.
1. FHA ( Federal Housing Administration) loans require condos to have a project approval to be eligible for all of their programs including the 3.5% down program. Since FHA requires each condo project to get re-approveded each year the list is changing constantly.
2. Investors are buying them and renting them out for a cash flow positive and a return on their investment. Causing the owner occupancy ratio decreasing below most lender acceptable levels. Check the Ratio and ask your lender if it fits their guidelines.
3. Many times HOA fees are not paid by owners who are in a financial pinch. Many Associations reserve projections did not anticipate a multi year drop in revenue resulting in the likelihood of raising monthly fees and (or) special assessments to replace those funds in-order to perform scheduled maintenance and common areas. This could surprise you as a new home owner but before ask your lender if the % of units that are delinquent on their HOA payments fits their guidelines..
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Some associations are lacking the proper paperwork and try to save money and manage them selves. the increase of lender regulation has put additional requirements on Associations and insurance policies alike. If you see a condo or town home that has no HOA fee this is a big red flag that the proper paper work to meet today's lender scrutiny may be lacking.
Try to get a Homeowner's Association (HOA) Certification questioners up front to your loan agent to see if any of these issues are apparent so you can have a less difficult purchase experience. Keep in mind each lender may require it to be completed on their form letter.
Good Luck and if you would like to work with me as your agent please call me 510-388-4536
Scott Harrison
Cal DRE #00966212
Scott G Harrison his history production records are on the web as well as client referrals:
"Each year, the Department of Real Estate (DRE) receives a number of inquiries regarding who is responsible for maintenance of common areas within a condominium or planned development. Sometimes, answering this question is not as easy as it seems and may involve the review of the maintenance provisions in the governing documents for the project.