Real Estate | New state law requires condo associations to report money set aside for long-term maintenance | Seattle Times Newspaper: "Attention, condominium shoppers: Washington soon will become one of a half-dozen states requiring condo associations to provide a financial-wellness check that can predict whether the place is a potential money pit.
The check, called a reserve study, estimates how much money an association must set aside to pay for expensive long-term maintenance, such as repaving a parking lot, replacing a roof or rebuilding rotting decks."
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It is astounding to contemplate that over 40 states don't require reserve studies to be done. Imagine it--nearly all associations have no specific data to support their assessment levels. Too high? Too low? Nobody really knows.
3 comments:
Sure, this is an important question but I am not sure if it is really suitable when the real estate market is struggling. I am dealing with Vancouver condos and I am always interested about this topic. It is better when I can justify higher price of condo to my customers and this is a good instrument. I believe that many developers keep this in mind nowadays.
"Reserve studies" are primarily another way of bilking the homeowners who must involuntarily pay for them.
What is the point? If there is money in reserves, there is nothing to prevent the money from being embezzled or used as a litigation war chest against residents. Certainly there is no assurance that the money will be used for infrastructure, repairs, etc.
Should someone be happy that there is no money for a litigation war chest? Should prospective purchasers feel secure if there are lots of dollars in reserves? All a reserve does is provide ample resources for HOA attorneys. The HOA is less of a target when there are fewer reserves. Perhaps it would be better to properly account for reasonably anticipated liabilities.
I tried to get a reserve study done several times when I was president of our hoa board but the property mgr argued against it ("waste of money, no one else gets one") and the rest of the board agreed. Same result when I tried to get an independent audit of the books.
Fortunately, we don't have much common property beyond a couple of fences, the entrance sign, small playground, and a few green areas, so we aren't at great risk. And I'm glad that the hoa doesn't have tons of $ to start suing people with. And I'm not on the board any longer (hallelujah).
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