Checking the financial health of a condo association is an important step if you’re thinking about buying a condo. It’s imperative to buy into a financially stable community that has board members who are fiscally responsible and serve as good stewards of the association.
In this post, we’ll share some areas to pay attention to as you evaluate the financial health of a condo association so you can feel confident moving ahead with your condo purchase.
What to Look for in a Financially Stable Condo Association
There are several areas to look into when checking the financial health of a Chicago condo association. Here are a few big ones:
● Review the financial statements – Request copies of the association’s financial statements, including the income statement, balance sheet and cash flow statement. The association may or may not grant you access to the documents as a non-unit owner, but because you’re a prospective buyer, you may gain access. These documents provide a snapshot of the association’s financial position. It will outline its revenue, expenses, assets and liabilities. Pay attention to any significant deficits, increases in expenses or signs of financial mismanagement as you review the statements.
● Assess reserve funds – The next place you should look is the association’s reserve funds, which are funds set aside for future repairs, replacements and major capital projects. You’ll want to ensure that the association is regularly funding reserves and has a clear plan for addressing upcoming expenses.
● Evaluate the budget – Another area to understand is the association’s budget for the current year and previous years. Assess how expenses are allocated, including regular maintenance, utilities, insurance and any ongoing capital improvement projects. Look for indications of increasing assessments or potential special assessments that may impact your financial obligations as an owner.
● Check for delinquent payments – Inquire about the association’s collection policy and check if there is a high number of delinquent payments from unit owners. This can indicate financial instability or difficulties in collecting assessments, which could impact the association’s ability to cover its expenses. If the condo community partners with a Chicago association management company, they may assist in collecting payments and assessments.By conducting a thorough review of the association’s financial information, you can gain a better understanding of its financial health and stability. This in turn will help you make an informed decision when purchasing a condo and help you feel good about joining a fiscally responsible community.