Condo Reserve Study: Just How Much Money Is There?

How much money is there in the reserve account? This question is, and should be, one of the first questions asked when buying property in a community with a Homeowner’s Association (HOA).

The question that’s even more important than “how much?” is:  “Is the reserve amount adequate enough for future, or unanticipated, repairs?”

This most important question can be answered with a Condo Reserve Study.

In California, according to McCaffrey Reserve Consulting, condo reserve studies are required by law. Not only are they required, they must be done at least every three years.

In addition, a yearly budget package and adjustments must be made to the reserve study.

A typical reserve study will include a budget, component inventory schedule, reserve funding options, and a cash flow summary to name a few. All of these components provide critical information to help associations build reserve funds for maintenance, and better overall operation.

In a real estate transaction, sufficient funds in the HOA reserve account is an essential component when selling your condo. Buyers and lenders alike will review the most current reserve study, which, by the way, can make or break a deal.

If a buyer feels like the reserves are low, and an assessment is imminent, they may get cold feet and cancel the deal. More importantly, if the reserves are not high enough, there are lenders that may not provide funding.

The solution to protecting yourself is often found in: getting involved. For instance, you can join your Homeowner’s Association, be active in the decision making as much as possible, and protect one of your biggest assets. No need to let others control your future!

You can visit the California DRE Reserve Study Guidelines for additional information.

Or, for information on reserve consulting, visit McCaffrey Reserve Consulting.

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