HOA Financials afforded to potential buyer

5 Replies

Hello BP community. I have what I think is a pretty straight forward question, and would appreciate any feedback before I write the HOA back.

I am looking at a place in North Carolina that is managed by an HOA. It's basically an old motel that has been converted into separately owned units with an HOA that takes care of the exterior, pool and whatnot. Before I take time to go visit the place I asked the HOA a pretty basic question, "Can I see your financials? Specifically, the HOA's balance sheet, yearly revenue from HOA dues, the reserve fund balance, notice of any pending lawsuits and information on recent assessments, as well as what percentage of units are behind on their dues."

He told me that the HOA's financials are for owners only, and that if I buy a place he'd share that information with me. What!? That throws huge red flags for me. Am I missing some sort of law or policy? I couldn't imagine someone would invest not knowing if the next assessment is around the corner or only 50% or the residents are paying their HOA's.


Nick Fegley

He's sort of right. HOA is not obligated to share its non-public financials outside of their HOA members. However, each state has unique rules that if you go under contract using the standard state contract language, that you have a condo doc contingency that allows you to review the HOA financials for a set period of time like 7 days for example and have the option to back out of the contract for whatever reason. If NC doesnt have these rules, I would just add condo doc review as a contingency to your offer so you have that option to back out upon reviewing the condo financials and rules& regs/bylaws. So you have to commit to purchasing, but you have recourse if their financials are in worse shape after your review. Some HOAs also make you pay to prepare a report containing condo docs for you as well. Just make sure you have this condo doc review contingency in your purchase contract. I have found ways to call the property manager in advance of making an offer and ask nicely some broad questions to fish for general sentiment regarding financials. Questions I ask are: Do you have any deliquencies or know your deliquency percentage? Are you able to pay all of your operating costs each year? Do you contribute to a reserve fund and is it adequetely funded for capex repairs? Any lawsuits against the association? Are assessments enough to cover association expenses? Have fees remained the same for a while or do they increase incrementally each year? If they dont want to provide any of this, I would maybe think red flag, but also I have dealt with managers that are not cooperative and have no reason to be nice to non-owners. Your unit seller will also be a resource to obtain this information for you from management and pass these along so consider asking them before making a formal offer. They would understand that you would need this to perform due diligence.

Good luck!

@Nick Fegley The HOA will release the financials once you're under contract for the property. You're other concern regarding the delinquency of owners dues, actually gets addressed by asking for the HOA Report. This is the report the bank will use to verify the HOA/building is insured, it provides Owner Occupancy rate as a percentage to verify the 51% requirement, it will show owner HOA dues delinquency at 30 days, 45 days (some), and the 60 day mark, these are all things you're entitled to, your agent should be able to get the report easily. Keep in mind there are two separate reports 1) HOA financials - can't get unless you're under contract. 2) HOA Report - I have my agent get them for me before making an offer, some HOA's will charge a small fee for this as administrative work from the HOA, I've gotten them for free from some and have been charged up to $40 for the report.
@Nick Fegley @Jeff Bridges mentioned the reserves, and CapEx, you'll want to ask to see the Repair and Reserves Analysis report, this is the report that justifies the HOA dues. I purchased a condo in DC that was charging $225 a month for the HOA dues, when I asked for the report they told me they didn't have one, I immediately got involved in the HOA, turns out they were overcharging the owners by guessing what the reserves should be.

Thank you Jeff Bridges, your response was both appreciated and informative. I didn't know that hoa's were not required to disclose their financials.

Ray, why are you leaving a website on my thread? How does this help anyone?

Hi there. I’m a licensed CAM in Florida. We never give financials to anyone other than owners. Not even resident renters are entitled to see them. However, nothing stops an owner from sharing them with you as a potential buyer. Happy hunting!

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