Five things every buyer should consider when purchasing a condo or townhome with a Homeowners Association (HOA)

Most buyers considering purchasing a condominium or townhouse within a Homeowners Association (HOA) think to look at the HOA’s balance sheet, rules, and finances. They may have the foresight to check the reserve fund and look for an HOA with lower-than-average monthly dues. But here are five things that buyers and their agents may have overlooked. These could impact the marketability and cost of owning your townhome or condo within an HOA. 

1. Does the property qualify for financing with Fannie Mae and Freddie Mac? Fannie Mae and Freddie Mac offer good terms with as little as 3% down, but sometimes properties won't qualify for these loans. These are referred to as non-warrantable. Since FHA and Fannie Mae are popular with first-time home buyers. Even if the buyer plans to pay cash, this impacts the home's marketability.
2. Does the property have a percentage of commercial space that is too high? For instance, in Boulder, some HOAs include Condominiums, offices, restaurants, daycare centers, and more. A high percentage of commercial space may prevent the units from conforming and qualifying for the best loan terms. This means buyers must pay higher rates to purchase with a mortgage.
3. Pending litigation, such as the HOA filing suit against the developer, builder, or subcontractors. There could be lawsuits against the HOA.
4. A significant capital expense that is foreseeable and needs to be adequately funded may lead to special assessments and or increases in dues. This may cause units to not qualify for some government-sponsored load programs.
5. The HOA may have had its insurance canceled, or its insurance rates doubled or more.