10 Questions to Ask The Homeowner's Association Before Buying a Condo

The HOA, sometimes called POA or Condo Board, can make life wonderful and carefree, or utterly miserable. Everything depends on the rules, the organization, and unfortunately the personalities of the board members.

Taken from a brochure provided by the Board of Realtors, here is an excellent guide to checking out the Homeowners Association of a Myrtle Beach condo that you might be interested in:

1. In Myrtle Beach, this is a VERY big issue. What percentage of the units are occupied and lived in by owners? Are more than 50% of the units used as rentals or investments? Are they year round rentals or seasonal? The answer to this can make a big difference in your mortgage rate, whether PMI insurance is required, or even whether your mortgage will be sold to second-line company afterwards. Rental rates can even determine the marketability of the unit when you choose to re-sell.

2. What are the covenants, bylaws, and restrictions governing the property? What grandfather clauses are in place? This could be anything from buyers being prohibited to rent out the units if purchased after a certain date, to whether pets are allowed for older owners and not for new buyers. Be sure you will be provided with a hard copy of the bylaws at purchase, and request to see them before you buy, to determine if you can live within them. Have your attorney look at the bylaws for questionable discrepancies.

3. How does the HOA fee compare to similar nearby condominium complexes?
Does the budget run fully in the green for the entire year? How much does the association keep in reserve? Is that money being invested? How do they determine who decides on expenditures? This can be a big issue down the line.

4. What recent assessments have been required, and for what purpose? Insurance rates are a big issue everywhere these days, and most condos in resort areas, and especially oceanfront condos in Myrtle Beach and Florida have been heavily assessed. But what other assessments were recently required? Do they have a painting or roofing need coming up soon? A buyer could be tapped out for months after making a huge down payment. You don’t want a surprise assessment as soon as you take possession. Are they keeping pace with the annual rate of inflation? Smart boards raise assessments a certain percentage each year to build reserves to fund future repairs. Compare assessments made with comparable developments.

5. What does and doesn’t the assessment cover? Pool renovation? Common area maintenance? Storm damage? Insurance hikes?

6. How many special assessments have been mandated in the past five years? How much was each owner responsible for? Some special assessments are unavoidable. But repeated, expensive assessments could be a red flag about the condition of the building or the board’s fiscal policy.

7. How much turnover occurs in the building? Are a large number of units up for sale at this time? This can be another indication of hidden problems.

8. Is the project or homeowner’s board in litigation? If the builders or homeowners are involved in a lawsuit, reserves can be depleted quickly. Sometimes the board is forced to suit the builder for poor construction or obvious problems. You should be aware of this, and take it into consideration in your determination to buy.

9. For new projects or preconstruction condos, is the developer reputable? Find out what other projects the developer has built and visit one if you can. Ask present owners and residents about their perceptions. Request an engineer’s report for conversion units to determine what shape the building is in. If the roof, windows, and bricks aren’t in good repair, they become your problem once you buy.

10. Are multiple associations involved in the property? In very large developments, umbrella associations, as well as the smaller association into which you’re buying, may require separate assessments. This is not usual in our area, but could apply in the very large high-rise resorts.

We always urge buyers to investigate the HOA boards before deciding on which resort they decide to become a part of. Rules and conditions vary wildly in this area…from what’s included in the HOA fees (utilities, cable, etc.) to situations where insurance premiums are billed separately once a year. It’s an extremely important area to consider before you buy!

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