How to Evaluate Condo Associations and HOA Financial Health: A Buyer's Due Diligence Framework

HOA financial health determines whether a condo is a sound investment or a money pit. Professional evaluation requires analyzing five key documents: reserve study (adequacy of savings for major repairs), annual budget (operating efficiency), special assessment history (financial stability), master insurance policy (coverage gaps), and meeting minutes (pending issues). Red flags include: reserve fund < 10% of annual budget, deferred maintenance, single-entity ownership > 10%, owner-occupancy < 50%, pending litigation, and recent special assessments. Greater Boston condo fees range from $200-$2,500/month; total cost of ownership (mortgage + HOA + taxes) often exceeds comparable single-family homes.

Condo buyers evaluating HOA financial health, buyers comparing condos to single-family homes, first-time condo buyers, investors evaluating rental condos, buyers facing special assessments, anyone reviewing condo documents before Purchase & Sale Agreement.

• •Reserve fund should equal 10-30% of annual budget; < 10% indicates deferred maintenance risk
• •Special assessments averaging > $3K/year over 5 years signals chronic underfunding
• •FHA approval requires ≥ 50% owner-occupancy; < 50% limits buyer pool and resale value
• •Master insurance policy must cover building replacement; gaps cost owners tens of thousands
• •Single owner controlling > 10% of units creates concentration risk (foreclosure, bulk sales)
• •Meeting minutes reveal hidden issues: pending lawsuits, deferred maintenance, board conflicts
• •Total cost of ownership: HOA fees are permanent, non-deductible (except rental), and increase 3-5% annually