Buying a Condominium? Think Again!

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In a previous post, I talked about how I purchased my first house with money saved from graduate school. That was one of the achievements I made after graduation. Buying a house is a big thing after all. The downside is, it was a condominium. That means there was HOA dues every month. What was more, the HOA association had the right to issue special assessment any time. These were the two things that I really disliked.

Because of these issues, I strongly urge people who want to have control of their personal finances to stay away from condominiums. This article is solely based on my personal experiences and preferences.

HOA dues is a monthly charge by the Homeowners Association of the property community you live in. The money is deposited into a bank account that belongs to the HOA and is managed by a separate property management company. The HOA then use money from this account to hire people to remove snow, to maintain the landscape, to trim trees and bushes, and etc. This is overall fine to me because I do not need to mow the lawn or remove snow by myself. The amount of HOA dues depends on what services are included. Some communities may have a swimming pool or a gym, in such cases it means they need more money to maintain the communal facility. The monthly HOA dues can easily range from $100 to $600.

My biggest frustration is about special assessment. It basically means if anywhere in the community (the communal part, not within the walls of your unit) needs any type of repair, the HOA can ask each home owner to pay extra money (besides the regular monthly HOA dues) if they think what they have in their account is not enough to cover the cost. They can ask for $1,000, or $10,000. They decide on the amount. Scary, isn’t it? Imagine, you are doing your normal business and taking care of your house, and suddenly a bill arrives at your mailbox asking $5,000 as a special assessment payment. Once you get the bill, you have to pay.

You may wonder how they decide to issue special assessment. Well, when any member of the HOA board notices any urgent (or not urgent) problem of the community, they will discuss in their board meetings about the necessity to issue special assessment. If the board votes to issue special assessment, they will then announce it to the home owners, and an HOA meeting will be held soon, giving home owners the chance to vote. Remember, at this point, the HOA board already reached their decision, and they will try everything to persuade home owners that it is necessary and urgent. If they do not repair now, it will cost more later. Many home owners will eventually be persuaded. A bill will be sent out soon after the successful vote.

In my case, I never ignored the problem they reported in such meetings. And I tend to agree that if they did not fix it sooner, it would only be more difficult and costly to fix later. What I disliked was how little financial control one has when living in a condominium community. You never know when the next repair project will come up and how much it will need.

Honestly, if I knew about special assessment, I would have not purchased a condominium. Unfortunately, my realtor did not warn me about this. Talking about realtor, that deserves another article.

I still own the unit because of two reasons. Firstly, the house value is increasing rapidly. Deducting the special assessment, it still brings good profit. Secondly, after the first special assessment, it seems things have been normal and healthy. If they do not issue special assessment within the next five years it will give me more confidence to keep it. But if they do, I may put this unit on the market immediately.

So you are interested at buying a condominium? Think again!