A buyer looking at a condo, townhome or HOA community can easily focus on the monthly dues. That number matters, but it does not tell you whether the association has enough money to maintain the property or whether a large future bill may be developing in the background.
Colorado's Division of Real Estate specifically tells buyers to review an association's governing and financial documents. Useful records can include the current budget, annual financial statements, reserve amounts, audits or reviews, insurance information and meeting minutes. The goal is not to find a perfect HOA. It is to understand what the association owns, what it must maintain and how it plans to pay for that work.
Reserves are money set aside for larger or less-frequent expenses. Roof replacement, exterior work, roads, elevators, mechanical systems and other common components can eventually require substantial spending. Colorado law does not require every HOA to conduct a reserve study, but associations are required to have a policy addressing reserve studies. If a study exists, compare its recommended work and funding plan with the actual reserve balance.
Special assessments deserve close attention because they are charges outside normal dues. A pending assessment should be understood, but so should the possibility of one that has not yet been formally approved. Review recent meeting minutes for discussions about major repairs, insurance deductibles, litigation, deferred maintenance or projects that exceed available reserves.
Low dues are not automatically good. An association can keep dues artificially low while postponing repairs or failing to build reserves. Higher dues are not automatically bad either if they adequately fund maintenance, insurance and long-term capital needs. The better question is whether the financial structure makes sense for the property the HOA is responsible for maintaining.
For attached housing, HOA financial health can affect more than the buyer's future budget. Insurance, deferred maintenance and project financial condition can also affect financing and resale. Sources: Colorado Division of Real Estate, Buying a Home in an HOA; Colorado HOA Information and Resource Center guidance on HOA finances, reserves and special assessments.
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