Buying a Home in a HOA

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With nearly 10,000 HOAs in Colorado, if you’re looking for a new home, there’s a good chance you’ll end up in one. Since most associations have restrictive covenants, your ability to do what you want with your own home may be curtailed. Understanding all of the variables involved with living in a homeowners association is an extremely important part of the home buying process. With some due diligence, you can make sure buying in a HOA is the right choice for you. 

Understanding Section 7 of the Colorado Contract to Buy and Sell

Once you become part of a contract to buy and sell as the buyer, you are entitled to all of the documentation listed in section 7 of the Colorado Contract to Buy and Sell (Residential). The association documents should consist of both governing and financial documents, and their review will provide you with a good understanding of the operations and financial well-being of the HOA. You should ask your broker for assistance in obtaining these documents from the seller.

Colorado Contract to Buy and Sell

Doing your Due Diligence When Buying in a HOA

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Due your due diligence 

Community Association Managers (“CAMs”) act as agents for the executive board of an HOA. The specific duties each manager will perform will vary depending on the community and the language in the management agreement, generally, CAMs assist with the day-to-day operations of the association.  

When considering buying in a HOA, individuals should do due diligence and learn about the HOA’s use of a CAM. Determine if the HOA is professionally managed prior to closing on a home in an HOA. You can find out who the CAM is as the seller is obligated to provide the necessary information to allow a buyer to determine if an association is professionally managed. Research the manager and/or management company, this may include reading online reviews left for the management company by other homeowners.

If you have any specific questions about the manager or management company, you may always contact them directly. While they may not be able to share any confidential information, they should be able to answer general questions about their experience and processes & procedures related to community association management. 

Resources on CAM Management of HOAs

Feel free to contact the HOA Information Officer with any questions you may have regarding the due diligence necessary to determine if an HOA is professionally managed.

Contact the HOA Information Officer

Due your due diligence 

HOAs in Colorado are required to obtain and maintain certain insurance. Per section 38-33.3-313 of the Colorado Common Interest Ownership Act, associations must maintain property insurance on the common elements for

  • broad-form covered causes of loss, and; 
  • commercial general liability insurance against claims and liabilities arising in connection with the ownership, existence, use or management of the common elements. 

When considering buying in a HOA, individuals should do due diligence and learn whether or not an association holds and maintains the appropriate insurance to handle demange to common elements, as this may have a significant effect on homeowners under certain circumstances. In addition, it is wise for you to determine if the association has any requirements for homeowners to carry any additional specific or unique insurance (i.e. flood or other hazard insurance). 

In associations with attached units, it is even more important to determine if appropriate insurance coverage is maintained. For example, in the event of a hail storm or other natural disaster or accident, a condominium or townhome association will almost certainly need to file an insurance claim to address the damage.

Resources on regarding HOA Insurance needs

Feel free to contact the HOA Information Officer with any questions you may have regarding the due diligence necessary to determine if an HOA is insured properly.

Contact the HOA Information Officer

Due your due diligence

When contemplating purchasing a home in an HOA, it's important to do your due diligence to learn about the potential costs connected to association membership. Frequently, those costs include more than just standard association dues. Special assessments (assessments outside of your regular dues), insurance related costs and other unanticipated costs are possible when living in an HOA. If your HOA is not governed properly, you may experience unanticipated increases of your HOA membership dues.

Potential homebuyers need to consider the cost associated with living in a HOA after purchasing. You should determine what, if any, are the costs of membership in any association you are contemplating purchasing property in. Most mandatory HOAs will have regular membership dues in order to fund the operational costs of the association. In addition to regular assessments, you should review the association documents for meeting minutes for the last year to determine if any special assessments may be under consideration.

Resources regarding potential costs associated with living in a HOA. 

Feel free to contact the HOA Information Officer with any questions you may have regarding the due diligence necessary to determine the potential cost of living in a HOA.

Contact the HOA Information Officer

Due your due diligence

There is a common misconception that homeowner associations must immediately perform landscaping and/or maintenance to the satisfaction of every member of the community. In reality, Colorado law is very limited in its direction to HOAs with regard to performing maintenance and landscaping. How and when maintenance and landscaping is performed in an HOA is the purview of the executive board, which can impact you as a homeowner in the HOA. 

Determining if an HOA properly manages its community’s maintenance needs is an important part of the due diligence necessary when contemplating the purchase of a home in an HOA. When contemplating purchasing a home in an HOA, be sure to pay close attention to the way the community is maintained and landscaped. If landscaping is important to you, prior to closing, you should attempt to learn as much as possible about the landscaping service provider.

Be sure to review all of the association documents in order to determine what is considered a “common element” and what is not. While maintenance issues tend to be more common in attached home communities such as condominiums and townhomes, landscaping issues are common in all HOAs. 

Resources regarding HOA maintenance and landscaping. 

Feel free to contact the HOA Information Officer with any questions you may have regarding the due diligence necessary to determine the potential cost of living in a HOA.

Contact the HOA Information Officer

Due your due diligence

Determining the financial health of an HOA is an important part of the due diligence necessary when contemplating the purchase of a home in an HOA. Although there are certain standards in Colorado law with regard to HOA finances, there is no regulatory oversight of HOAs. The financial health of a homeowners association should be of great importance to anyone contemplating purchasing property in an HOA. Like many other aspects of HOA governance, the executive board will be the individuals responsible for most financial decisions. 

As a potential purchaser in an HOA, you should review all of the association documents you are entitled to under section 7 of the Colorado Contract to Buy and Sell (Residential). The association documents should consist of both governing and financial documents, and their review will provide you with a good understanding of the operations and financial well-being of the HOA.

Colorado Contract to Buy and Sell

Resources regarding the financial health of an HOA. 

Feel free to contact the HOA Information Officer with any questions you may have regarding the due diligence necessary to determine the potential cost of living in a HOA.

Contact the HOA Information Officer

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