Buying Condo with HOA Delinquency

2 Replies

Looking to buy my first home, in a trendy area in LA (Toluca Lake). The Condo is a great updated turn-key unit that I can live and later turn into a rental property. 

The issue is the HOA management recently changed hands to a new management company as the old misappropriated funds and currently, the new HOA company has an auditor trying to figure out where the money went - which means potential litigation. The building had a large past-due utility bill which they had to take a loan our to pay (still paying off loan), they had a previous tax lien placed on the property which they recently paid off, the reserves are a low the roof and parking structure needs to be replaced/renovated which means special assessments are coming, and not to mention that there are $40k+ in delinquent dues. I believe the rental occupied to owner-occupied is somewhere between 60%-70% owner-occupied.

Now we did our homework to dig up this info and personally spoke to the new HOA management company and based on the information felt that it may be a rough year or two but afterwards - blue skies and strong equity in a very desirable area.

We made an offer well under asking price based on the situation as we feel if overcome the purchase price in the area and growth potential is there.  We are currently waiting on a counter offer. 

Has anyone dealt with a situation like this before or can offer any advice to this situation?

@Justin Dabiri

Personally, I would avoid this deal. The biggest issue at this point is that people are not paying their dues and those funds will most likely never be collected. If the delinquent dues were very minimal then the HOA could raise the monthly fee and start to build up savings for the capital expenditures in the near future (and the utility loan) but how do you get people to pay their dues? Put a lien against their condo? The good news is the new management company seems to be heading in the right directions but you really need a steal on a unit to make this all worthwhile.

Originally posted by @Charles Carillo:

@Justin Dabiri

Personally, I would avoid this deal. The biggest issue at this point is that people are not paying their dues and those funds will most likely never be collected. If the delinquent dues were very minimal then the HOA could raise the monthly fee and start to build up savings for the capital expenditures in the near future (and the utility loan) but how do you get people to pay their dues? Put a lien against their condo? The good news is the new management company seems to be heading in the right directions but you really need a steal on a unit to make this all worthwhile.

Thank you, for the input Charles - I am most definitely going to take it into deep consideration. 

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