Financial Evaluations

Condo & HOA Accounting, LLC offers a unique service in which we provide a detailed analysis of the financial condition of any condominium or homeowner’s association in which you are considering purchasing a unit.  Our goal is to warn you of possible maintenance increases, special assessments, or lawsuits.  An unexpected special assessment or drastic increase in maintenance fees can be devastating to a new unit owner and decrease the value of your investment.  The results of our findings could save you tens of thousands of dollars, or at a minimum, could allow you to negotiate a lower purchase price.

 

We’ve seen too many new owners surprised by a special assessment or drastic increase in maintenance fees that should have been apparent from a thorough review of the association’s financial statements.  Special assessments can be caused by the need to fund a large project, the need to fund a deficit from previous years, the need to settle a lawsuit against the association, or many other reasons. 

 

Our experience will allow us to read between the lines of board minutes, audits, and financial statements in order to provide you with an analysis of the likelihood of a necessary special assessment before the Board of Directors of the association might even be aware of it, and certainly before you are made aware of it. 

 

Even if the minutes of the association’s board meetings indicate that the association will be entering into a repair contract for millions of dollars, and a special assessment is imminent, your attorney will not advise you of this unless the special assessment has already been passed.

 

They are actually investing in a multi-million dollar corporation.  A unit owner not only owns the unit, but also a percentage of the entire association, including the building itself and all its assets and liabilities.  The research that should go into making this investment decision should be similar to the research that should be performed before investing hundreds of thousands of dollars in any other type of corporation.

 

We can point out matters that are critical for you to understand the true financial condition of the condominium association in which you are considering investing in.

 

There are many other risk factors that you may not be aware of such as:

 

• Is the association’s cash position and fund balance adequate?  An inadequate fund balance may be a violation of laws/statutes, and could result in an urgent need for a special assessment.

• How likely is a maintenance increase?

• Has the association been fully funding the reserve fund?  Associations that don’t fully fund reserves tend to have special assessments very often.

• Has the association had a reserve study?  If so, how recent is it?

• Does the association have the funds to make the repairs that are reflected in the reserve study?  If not, how do they plan to obtain these funds and how will it affect you?

• What was the auditor’s opinion of the association’s year-end financial statements?

• What are the delinquencies of the association and likelihood of collections?

• Is there a large percentage of units owned by one investor?  If so, and the investor defaults, the remaining unit owners will likely need to cover the maintenance charges on these units in order to provide the funding needed to cover operating expenses. 

 

As you can see, there are many financial matters that should be considered, but rarely are.  In cases where we believe that a special assessment will be passed in the near future, or maintenance fees will be increased significantly, we will do our best to quantify the amount needed.  This will allow you to decide if you want to back out of the purchase, proceed with the purchase, or present the findings to the seller of the unit in order to negotiate a discount on the purchase price.  We can’t tell you what decision to make, but we can help you make an educated decision and possibly provide information that will allow you to negotiate a better price on the unit.

 

We recommend that you contact us as soon as you find a unit that you are considering purchasing.

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Our rates are reasonable.  Contact us for a free consultation.