Watch Out for These Red Flags When Buying a Condo in Los Angeles
When buying a condo, it's important to be vigilant for potential red flags that could signal issues or complications. Unlike shopping for a house, you won’t be concerned about the roof or foundation at a condo. Since the HOA takes care of everything outside your unit, looking for condo red flags focuses less on the physical features of the building and more on the management and financial aspects. Here are some common red flags to look out for:
High Monthly Fees: Exorbitantly high monthly homeowners association (HOA) fees can significantly impact your budget and may be signs of mismanagement or upcoming costly repairs. If the building maintenance, amenities, or location don’t seem to match up with the HOA payments, there might be something fishy going on. For reference, the average HOA across Los Angeles is around $500-$600/month. If the building doesn’t offer many amenities, it could be less. Or, if the building is in a historic area, is waterfront, or offers luxury amenities or views, it could be over $1,000/month.
Special Assessments: Check if there are any pending or upcoming special assessments. These can be unexpected and can lead to additional financial burdens for condo owners. It’s a good idea to ask about assessments when first touring the condo. If there are assessments, it’s important to know when they are scheduled to end, and what they’re being used for.
Low HOA Reserve Funds: Inadequate reserve funds can be a sign that the HOA may struggle to cover major repairs or maintenance in the future. If that’s the case, they may levy a surprise assessment.
Pending Litigations: Find out if there are any ongoing or pending lawsuits involving the HOA or the building. This could indicate conflicts or financial issues. If you’re getting financing, your lender may not approve a loan for a condo that has an active lawsuit against it. This is a good question to ask at the very beginning, before even getting the HOA minutes and disclosures.
Restrictive Rental Policies: If you're considering the condo as an investment property, restrictive rental policies imposed by the HOA could limit your options. Many associations in Los Angeles cap rental the number of rental units allowed to 20%-30% of the total units, so if renting is important to you, make sure to ask about this up-front. Also, many associations won’t allow short-term rentals (less than one month). If you are looking to rent your condo on AirBnB, this might be an issue, however if you’re a homeowner who doesn’t wasn’t constant turnover in the complex, this is a sign of relief.
Deferred Maintenance: Visible signs of deferred maintenance like peeling paint, worn common areas, or poorly maintained landscaping could suggest neglect by the HOA. Unlike your own house, you can’t just go and paint the common areas if you don’t like them. Everything has to go through the HOA. So, unless there are existing plans to update the facilities, what you see is most likely what you get.
Inadequate Insurance Coverage: Ensure that the condo association carries sufficient insurance coverage. Inadequate coverage could leave you financially vulnerable in case of a disaster. In Los Angeles, some associations carry earthquake insurance, while others do not. Of course, you’ll also need to carry homeowner’s insurance for your own unit.
Unclear Rules and Bylaws: Lack of clarity or transparency in the rules and bylaws of the condo association can lead to confusion and potential conflicts in the future. It sounds like a chore to read the hundreds of pages in the HOA bylaws, but it’s important to do so during your investigation period. Often times, you might discover something you have questions on. For example, if the bylaws state no one may leave personal artifacts (such as shopping carts) in the hallway, yet many residents tend to do so, you’ll want to check whether other rules are being enforced.
Low Owner-Occupancy Ratio: A high percentage of renters versus owner-occupants in the building can affect the overall stability and atmosphere of the community. There are always some long-term renters in most associations, but this might mean different things for different people.
Building and Safety Code Violations: Check with local authorities or inspectors to see if there are any outstanding code violations against the building.
Aging Infrastructure: An older building may require more maintenance and could have outdated systems that might need costly updates.
Lack of Transparency: If the HOA is not transparent about its financials, decisions, or upcoming projects, it could be a cause for concern.
Limited Amenities or Services: Evaluate if the amenities and services offered by the condo association align with your expectations and needs.
Proximity to Potential Hazards: Consider if the condo is located near flood zones, earthquake fault lines, or other potential hazards. Your NHD (Natural Hazard Disclosure) report will shed light on this.
Remember, working with a reputable and experienced real estate agent can help you identify and navigate these red flags effectively. They have the expertise to guide you through the process and protect your interests. If you have questions about purchasing a condo in Los Angeles, I’m happy to chat. Reach out anytime to schedule an appointment.